FAQ / How do I determine whether the corporation meets the 250-return threshold?

All returns filed by a corporation or members of a controlled group of corporations during the calendar year are counted. The total is determined by aggregating all returns, regardless of type, that are required to be filed over the calendar year, including income tax returns, returns required under section 6033, information returns, excise tax returns, and employment tax returns. Corrected returns, amended returns, or forms filed with the 1120, 1120S, or 1120-F tax return, such as Form 5471, are not counted.

Example 1 - A corporation that files a consolidated return has 5 subsidiaries. Each subsidiary and the parent have 25 employees, one of the subsidiaries files100 Forms 1099, and another subsidiary files 3 Forms 720. The corporation filing the consolidated return is deemed to have met the 250-return threshold because:

* Each of the 150 Forms W-2 is considered a separate return.
* Each of the 6 Forms 940 are considered a separate return.
* Each of the 24 Forms 941 are considered a separate return.
* Each of the 100 Forms 1099 are considered a separate return.
* Each of the 3 Forms 720 are considered a separate return.

Example 2 – A controlled group, as defined by IRC §1563(a), has 4 members, 1 C corporation, 2 S corporations, and 1 exempt organization that files Form 990. The C corporation has 50 employees, 1 S corporation has 300 employees and the other S corporation has 200 employees, and the exempt organization has 150 employees. The aggregate number of returns filed for the controlled group is 724. The C corporation is deemed to have met the 250-return threshold because:

* Each of the 700 Forms W-2 are considered a separate return.
* Each of the 4 Forms 940 are considered a separate return.
* Each of the 16 Forms 941 are considered a separate return.
* Each of the 4 Forms 1120/1120S/990 are considered a separate return.

The S corporation with 300 employees meets the 250-return threshold. The S corporation with 200 employees and the exempt organization do not meet the 250-return threshold since the concept of aggregation does not apply to Forms 1120S and 990.

Example 3 – A controlled group as defined by IRC §1563(a) has 3 member corporations. All members file Form 1120S. Corporations A and C have 20 employees and Corporation B has 300 employees. Only Corporation B is deemed to have met the 250-return threshold since the concept of aggregation does not apply when a controlled group does not have at least 1 member who files Form 1120.

Example 4 – A controlled group, as defined by IRC §1563(a), has 5 members, 1 Consolidated C corporation, 2 non-consolidated C corporations, and 2 S corporations. The consolidated C corporation (Corp A) has 50 employees, 1 of the non-consolidated C corporations (Corp B) has 300 employees and 1 of the non-consolidated C corporations (Corp C) has 30 employees. 1 of the S corporations (S Corp D) has 300 employees and the other S corporation (S Corp E) has 200 employees. The aggregate number of returns filed for the controlled group is 910. The consolidated C corporation and both of the non-consolidated C corporations are deemed to have met the 250-return threshold because the concept of aggregation applies to all C corporations in a controlled group:

* Each of the 880 Forms W-2 are considered a separate return.
* Each of the 5 Forms 940 are considered a separate return.
* Each of the 20 Forms 941 are considered a separate return.
* Each of the 5 Forms 1120/1120S are considered a separate return.

The concept of aggregation does not apply to Forms 1120S and 990. The S corporation with 300 employees meets the 250-return threshold. The S corporation with 200 employees does not meet the 250-return threshold.

Entity


Actual Returns Filed


Returns Deemed filed


Required to e-file

Corp A


56

*
1 – 1120
*
1 – 940
*
4 – 941
*
50 – W-2



910

Aggregation applies


Yes

Corp B


306

* 1 – 1120
* 1 – 940
* 4 – 941
* 300 – W-2



910

Aggregation applies


Yes

Corp C


36

* 1 – 1120
* 1 – 940
* 4 – 941
* 30 – W-2



910

Aggregation applies


Yes

S Corp D


306

* 1 – 1120S
* 1 – 940
* 4 – 941
* 300 – W-2



306

Aggregation does NOT apply


Yes

S Corp E


206

* 1 – 1120S
* 1 – 940
* 4 – 941
* 200 – W-2



206

Aggregation does NOT apply


No

Keywords: form 5471, corporation, form 1120s,