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An S Corporation is not a type of business entity. It is a federal tax classification available to qualifying corporations and LLCs that elect to have their business income pass through to shareholders for tax purposes.
The S Corp designation is governed by Subchapter S of the Internal Revenue Code. When you elect S Corp status, the business itself generally does not pay federal income tax. Instead, income, losses, deductions, and credits flow through to shareholders, who report them on their personal returns.[13]
In Indiana, an S Corporation files Form IT-20S, the Indiana S Corporation Income Tax Return. Indiana does not impose the 4.9% corporate adjusted gross income tax on S Corp income at the entity level; that tax applies to C Corporations. Instead, the S Corp income passes through and shareholders pay the Indiana individual income tax on their pro rata share.[1]
Indiana also offers an elective Pass-Through Entity Tax (PTET), enacted by Senate Enrolled Act 2 of 2023 and made retroactive to tax years beginning on or after January 1, 2022. The PTET lets the S Corp pay Indiana income tax at the entity level, preserving the federal SALT deduction for shareholders. The election is reported on Form IT-20S.[7]
For business owners earning $60,000 or more in net business income, the S Corp election can provide meaningful self-employment tax savings. Only the salary you pay yourself as a W-2 employee is subject to Social Security and Medicare taxes; distributions beyond reasonable compensation are not.
| Action | Deadline | Notes |
|---|---|---|
| File IRS Form 2553 | Within 2 months and 15 days after the start of the tax year | For a January 1 tax year, the deadline is March 15. Late election relief may be available under IRS Rev. Proc. 2013-30.[3] |
| File Form IT-20S (Indiana) | April 15 (calendar-year filers) | Due the 15th day of the 4th month after the close of the tax year. Indiana S Corps attach Schedule IN K-1 for each shareholder.[1] |
| File Form 1120-S (Federal) | March 15 (calendar-year filers) | Distribute Schedule K-1s to shareholders.[3] |
| File Form IT-20S extension | On or before April 15 | A valid federal extension extends the Indiana filing deadline. Payment of any balance due is still required by the original due date.[1] |
| Elect Indiana PTET (Form IN-PTET, reported on IT-20S) | By the original or extended due date of Form IT-20S | The PTET election is annual and is reported with the IT-20S return.[7] |
| Pay estimated tax (PTET / composite withholding) | 15th day of the 4th, 6th, 9th, and 12th months | Estimated payments apply where the S Corp elects PTET or owes composite withholding for nonresident shareholders.[7] |
| File Business Entity Report (biennial) | By the end of the anniversary month, every 2 years | Filed with the Indiana Secretary of State through INBiz. This is biennial, not annual.[5] |
| Set up payroll | Before paying yourself a salary | Register with the Indiana Department of Workforce Development for unemployment insurance and with the Department of Revenue for withholding before issuing W-2 wages.[11] [9] |
An S Corp is a tax classification, not a standalone entity. You must have an active Indiana corporation or LLC on file with the Secretary of State before you can elect S Corp tax treatment with the IRS.
If you want to form an LLC first, check this guide.
If you want to incorporate as a C Corp first, check this guide.
Already have an existing LLC or corporation? Move to Step 1.
Form 2553, Election by a Small Business Corporation, is the IRS form that officially elects S Corp tax treatment at the federal level. It must be filed no later than 2 months and 15 days after the beginning of the tax year the election is to take effect. For a calendar-year corporation electing S Corp status for 2026, the deadline is March 15, 2026.[3]
Form 2553 collects the following information:
All shareholders must sign the consent portion of the form before submission. An unsigned form will be rejected by the IRS.
You can submit Form 2553 by mail or fax. There is no filing fee.
Because Indiana is in the Kansas City group, businesses with a principal office in Indiana mail Form 2553 to: Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999.[8]
Fax number for Indiana businesses: 855-887-7734.[8]
Faxing is typically faster than mailing. Keep your fax confirmation receipt. The IRS will issue a CP261 acceptance notice to confirm your S Corporation election.
Indiana follows the federal S Corp classification automatically. Once your federal Form 2553 is accepted, Indiana treats your business as an S Corp for tax purposes when you file Form IT-20S. There is no separate Indiana election form to submit.[1]
Keep a copy of your IRS CP261 acceptance letter with your records. Your S Corp must still file Form IT-20S each year and issue a Schedule IN K-1 to every shareholder.
As an S Corp shareholder-employee, you are required to pay yourself a reasonable salary through W-2 payroll. The IRS scrutinizes S Corps that pay unreasonably low salaries to avoid payroll taxes.
The IRS expects your salary to reflect what someone performing similar work, in the same industry and the same region, would typically earn. There is no fixed formula, but the IRS flags S Corps where compensation is well below market and most of the owner pay comes through distributions.
Setting your salary too low risks the IRS reclassifying distributions as wages, making them subject to payroll taxes plus penalties and interest.
If you do not already have an EIN, apply at no charge on the IRS website (irs.gov). An EIN is a nine-digit federal ID used for tax filings, hiring employees, and opening business accounts.
Note: After obtaining your EIN, open a dedicated business bank account to keep your personal and business finances separate. This is essential to maintain your limited liability protection.
Indiana corporations and LLCs do not file an annual report. Instead, they file a Business Entity Report with the Secretary of State every two years through the INBiz portal. The report is due by the end of the month in which the entity was formed. Online filing costs $32 for corporations and $31 for LLCs, while paper filing costs $50. Failure to file can lead to administrative dissolution.[5]
File IRS Form 1120-S and distribute Schedule K-1s to all shareholders by March 15 (calendar-year filers). File Indiana Form IT-20S by April 15, the 15th day of the 4th month after the close of the tax year, and issue Schedule IN K-1 to each shareholder.[1] [3]
Indiana accepts a valid federal extension. If you file federal Form 7004, the Indiana Form IT-20S filing deadline is extended automatically. No separate Indiana extension form is required, but payment of any balance due is still owed by the original April 15 deadline.[1]
If your S Corp elects the Pass-Through Entity Tax or owes composite withholding for nonresident shareholders, estimated payments are generally due on the 15th day of the 4th, 6th, 9th, and 12th months of the tax year. Indiana applies a safe harbor based on prior-year liability.[7]
Indiana imposes a penalty for late filing and late payment, generally 10% of the unpaid tax, along with interest on the balance due. A pass-through entity that fails to file Form IT-20S can also face penalties tied to shareholder reporting. Confirm current penalty amounts with the Department of Revenue.[9]
If you fail to file Form 2553 with the IRS on time, your S Corp election will not take effect for the current tax year. Your business will be taxed as a C Corporation (or as a sole proprietorship or partnership if the underlying entity is an LLC) for that year, costing you the self-employment tax savings until the next tax year.
The IRS offers late election relief under Revenue Procedure 2013-30. To qualify, you must file within 3 years and 75 days of the intended effective date, demonstrate reasonable cause for the late filing, and confirm that the entity has consistently filed as if the S election were in effect.[3]
Because Indiana follows the federal S election automatically, there is no separate state late-election process. Once the IRS grants late election relief, Indiana treats the entity as an S Corporation for the same tax year and the business files Form IT-20S accordingly.[1]
At the federal level, the S Corp election can be revoked by filing a statement of revocation with the IRS, signed by shareholders holding more than 50% of the outstanding shares. The revocation is effective the first day of the tax year if filed by the 15th day of the third month; later filings take effect the following tax year.[3]
Because Indiana follows the federal classification, a federal revocation automatically terminates the Indiana S Corp status. The entity then files as a C Corp on Form IT-20 for tax years beginning after the federal revocation. Once revoked, you generally cannot re-elect S Corp status for five years without IRS consent.[1]
Indiana imposes a 4.9% corporate adjusted gross income tax under IC 6-3-2-1. The rate was fully phased in to 4.9% as of July 1, 2021. This tax applies to C Corporations. Indiana S Corps generally do not pay the corporate AGIT, because income passes through to shareholders.
| Entity Type | Indiana Entity-Level Income Tax |
|---|---|
| S Corporation | No corporate AGIT; income passes through to shareholders |
| Partnership / LLC (partnership) | No corporate AGIT; income passes through |
| C Corporation | 4.9% corporate adjusted gross income tax |
| Sole prop / disregarded LLC | No entity-level tax; owner pays the 2.95% individual rate for 2026[10] |
Indiana enacted an elective Pass-Through Entity Tax through Senate Enrolled Act 2 of 2023, retroactive to tax years beginning on or after January 1, 2022. The PTET lets an S Corp pay Indiana income tax at the entity level. The PTET rate equals the Indiana individual income tax rate, so it is 2.95% for tax year 2026. The election is made on Form IN-PTET and reported with Form IT-20S.[7] [10]
Income subject to the PTET is generally excluded from the shareholders Indiana individual income tax base, and shareholders may claim a credit. The PTET preserves the federal SALT deduction. The election is made on a year-by-year basis.[7]
Indiana imposes a flat individual income tax that is phasing down: 3.05% for 2024, 3.0% for 2025, 2.95% for 2026, and 2.9% for 2027 under Senate Enrolled Act 1 of 2023. Shareholders pay this rate on their pro rata share of S Corp pass-through income if the PTET is not elected. Indiana counties also levy a separate local income tax.[10]
Indiana state sales tax is a flat 7%. Indiana does not allow local sales taxes, so 7% is the full combined rate everywhere in the state. Register for a Registered Retail Merchant Certificate through INTIME if your S Corp sells taxable goods or services.[12]
| Item | Cost |
|---|---|
| Articles of Incorporation (corporation, via INBiz) | $95 online or $100 paper[2] |
| Articles of Organization (LLC, via INBiz) | $95 online or $100 paper[2] |
| IRS Form 2553 filing | No fee[3] |
| Federal EIN (Form SS-4) | No fee |
| Business Entity Report (corporation, biennial) | $32 online or $50 paper, every 2 years[5] |
| Business Entity Report (LLC, biennial) | $31 online or $50 paper, every 2 years[5] |
| Registered Agent service (typical commercial) | $100 to $300 per year |
| Feature | S Corporation | LLC |
|---|---|---|
| Formation Document | Articles of Incorporation ($95 online) | Articles of Organization ($95 online) |
| Federal Tax Treatment | Pass-through (Form 1120-S) | Pass-through by default (Form 1065 or Schedule C) |
| Indiana Tax Treatment | Form IT-20S; no corporate AGIT | Form IT-65 or no return (disregarded) |
| State Report | Business Entity Report (biennial, $32 online) | Business Entity Report (biennial, $31 online) |
| Self-Employment Tax | Only on W-2 salary | 15.3% on all net earnings |
| Ownership Limits | Max 100 U.S.-person shareholders, one class of stock | Unlimited members, any type |
| Management | Directors and officers required | Flexible; member or manager managed |
| Reasonable Salary Required | Yes | No |
| PTET Election Available | Yes (rate equals individual rate) | Yes if taxed as S Corp or partnership |
| Reporting Frequency | Every 2 years (biennial) | Every 2 years (biennial) |
| Best For | Owners earning $60K+ wanting SE-tax savings | Small businesses prioritizing simplicity |
The S Corp election makes the most financial sense when your net business income is high enough that the self-employment tax savings outweigh the cost of running payroll and the additional compliance burden. Use this guide:
| Net Business Income | Recommendation |
|---|---|
| Under $40,000 | An S Corp likely does not make sense. Payroll and compliance costs typically erase the savings. |
| $40,000 to $60,000 | Borderline. Run the numbers with a CPA. Savings may be modest after payroll-service fees. |
| $60,000 to $100,000 | S Corp election usually save $2,000 to $5,000 per year in self-employment taxes. |
| $100,000 to $200,000 | Strong candidate. Savings often $5,000 to $10,000 or more per year. |
| Over $200,000 | Almost always advantageous unless you have specific reasons (foreign investors, IPO plans) to remain a C Corp or LLC. |
Keep in mind that Indiana payroll setup costs and ongoing CPA fees together add roughly $800 to $2,500 in annual costs. The biennial Business Entity Report keeps state paperwork light, but S Corps still have ownership restrictions that may not suit every business model.
| Requirement | Details |
|---|---|
| Form 1120-S (Federal) | Due March 15. Reports S Corp income. Distribute K-1s to shareholders. |
| Form IT-20S (Indiana) | Due April 15, the 15th day of the 4th month after the close of the tax year. Issues Schedule IN K-1 to shareholders.[1] |
| Business Entity Report (biennial) | Filed with the Indiana Secretary of State through INBiz every two years, by the end of the anniversary month.[5] |
| Form 941 (Federal Payroll Tax) | Filed quarterly. Reports federal income tax, Social Security, and Medicare withheld. |
| Indiana Withholding (WH-1) | Indiana withholding tax returns filed through INTIME on the assigned schedule.[9] |
| DWD Unemployment Insurance Report | Quarterly unemployment insurance wage and contribution report filed with the Indiana Department of Workforce Development.[11] |
| W-2s and 1099s | Distributed by January 31. Filed with the IRS, Social Security Administration, and Indiana Department of Revenue. |
| Estimated Tax Payments | Quarterly estimated tax where the S Corp elects PTET or owes composite withholding.[7] |
| PTET Election (if applicable) | Made annually on Form IN-PTET and reported with Form IT-20S.[7] |
| Registered Agent Maintenance | Keep the agent and physical Indiana address current with the Secretary of State.[4] |
Bibliography
[1] Indiana Department of Revenue. IT-20S S Corporation Income Tax Booklet. Accessed May 20, 2026.
[2] Indiana Secretary of State. INBiz Business Filings and Registration. Accessed May 20, 2026.
[3] IRS. Instructions for Form 2553. Accessed May 20, 2026.
[4] Indiana General Assembly. Indiana Code 23-0.5-4 (Registered Agent of Entity). Accessed May 20, 2026.
[5] Indiana Secretary of State. INBiz Business Entity Report. Accessed May 20, 2026.
[7] Indiana Department of Revenue. Pass-Through Entity Tax (PTET) FAQ. Accessed May 20, 2026.
[8] IRS. Instructions for Form 2553, Where to File. Accessed May 20, 2026.
[9] Indiana Department of Revenue. Tax Rates, Fees, and Penalties. Accessed May 20, 2026.
[10] Indiana Department of Revenue. Individual Income Taxes. Accessed May 20, 2026.
[11] Indiana Department of Workforce Development. Employer Unemployment Insurance. Accessed May 20, 2026.
[12] Indiana Department of Revenue. Sales Tax. Accessed May 20, 2026.
[13] IRS. S Corporations. Accessed May 20, 2026.
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