Skip to content
Independent money guidance
Clear Money Guide
Start here
Menu

Form 1120-S Schedule B Questions 1 to 3 (2025)

Updated October 18, 2026. Quick answer: Schedule B opens page 2 of Form 1120-S with three short items. Question 1 is the accounting method, question 2 is the business activity and product or service, and question 3 asks whether any shareholder was a disregarded entity, a trust, an estate or a nominee. The answers come from the corporation’s books and its shareholder records for the year.

Question 1: accounting method

The form reads “Check accounting method:” and offers cash, accrual and a third box, “Other (specify)”. The instructions open the schedule with “Complete all items that apply to the corporation.” The instructions have no separate paragraph for question 1, so the printed caption is the guide. The corporation checks the method it actually uses in keeping its books.

Question 2: business activity and product or service

The form reads “See the instructions and enter the:” and then asks for the “Business activity” and the product or service. The instructions for this item say to “See Principal Business Activity Codes at the end of these instructions and enter the business activity and product or service.”

For retailers without a store the instructions add “For nonstore retailers, select the PBA code by the primary product that your establishment sells.” The code list at the end of the instructions is the place to look it up.

Question 3: disregarded entity, trust, estate or nominee shareholders

Question 3 reads “At any time during the tax year, was any shareholder of the corporation a disregarded entity, a trust, an estate, or a nominee or similar person?” The form then says “If “Yes,” attach Schedule B-1, Information on Certain Shareholders of an S Corporation.” The instructions have no separate paragraph for question 3, so the question and the Schedule B-1 direction on the form are what the IRS prints for it. Note the words “at any time during the tax year”: the question looks at the whole year, not just the last day.

Where the number comes from

Nothing on these three questions is a dollar figure. Question 1 comes from the accounting method the corporation uses in its books, question 2 from the business activity code list, and question 3 from the stock ledger and the shareholder records, including any trust, estate or nominee that held shares during the year. A shareholder’s own share of income is on the Schedule K-1; see the Schedule K-1 box guide.

Where it goes next

A “Yes” on question 3 means a Schedule B-1 goes with the return. The ownership and stock questions that follow are on the Schedule B questions 4 and 5 page, and the reportable transaction, built-in gain and interest questions after those are on the Schedule B questions 6 to 11 page. The corporation’s election to be an S corporation is covered at Form 2553. This page is part of the Form 1120-S line-by-line walk-through.

Edition and line numbers

This page reads the 2025 Form 1120-S and its 2025 instructions, the current files irs.gov served on 2026-10-18. They are the files for the tax year 2025 return, filed in 2026. The form’s title line reads “U.S. Income Tax Return for an S Corporation” and the period line reads “For calendar year 2025 or tax year beginning”. Check the tax year printed on the form you are filling in and use the line numbers on that year’s form, because a different year’s form can number or word its questions differently.

Common mistakes

  • Skipping the business code. The instructions say “enter the business activity and product or service.”
  • Looking only at year-end shareholders for question 3. The form asks “At any time during the tax year, was any shareholder of the corporation a disregarded entity, a trust, an estate, or a nominee or similar person?”
  • Forgetting the attachment after a “Yes” on question 3. The form says “attach Schedule B-1, Information on Certain Shareholders of an S Corporation.”

Related: Form 1120-S, Form 2553, Schedule K-1 box guide, and Form 1120.

Sources

Read from the IRS documents linked above on October 18, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.

Next step