Form 1120‑SP – Puerto Rico S Corporation Income Tax Return

Last reviewed: 2025‑10‑26

Use the Form 1120sp: Form 1120‑SP – Puerto Rico S Corporation Income Tax Return Tax Form Calculator Form 1120sp: Form 1120‑SP – Puerto Rico S Corporation Income Tax Return as a stand alone tax form calculator to quickly calculate specific amounts for your 2026 1120sp state tax return. Alternatively, you can use one of our Combined Federal and State Tax Estimators to quickly calculate your salary, tax, and take-home pay.

Form 1120‑SP is specifically designed for S corporations operating in Puerto Rico. Although Puerto Rico is a U.S. territory, it maintains its own tax code, and corporations must file local returns separately from federal filings. This form ensures that S corporations comply with Puerto Rico tax obligations under Act 60 and local fiscal laws.

Important aspects of Form 1120‑SP:

Applies only to Puerto Rico: This form is not filed with the IRS but with the Puerto Rico Department of Treasury (Hacienda).
Puerto Rico tax code: S Corporations are subject to special tax treatment under local law, which includes flow-through provisions similar to U.S. federal rules.
Shareholder requirements: Income, deductions, and credits flow through to shareholders, who must report them on their Puerto Rico individual returns.
Separate from federal filings: U.S.-based corporations with Puerto Rico activity must consider dual reporting—this form does not replace federal Form 1120‑S.

List of Foreign Partner Interests in Partnerships
Name of corporation (foreign partner)					Employer identification number (EIN)
Part I List of Foreign Partner Interests in Partnerships
(a) Name of partnership		(b) Address		(c) EIN	(d) For each partnership interest, is the foreign corporation’s distributive share ECI, or treated as ECI, in whole or in part, with a U.S. trade or business determined under section 875 (see instructions)?
A					Yes No
B					Yes No
C					Yes No
D					Yes No
Note: If the corporation has more than 4 partnership interests, continue on a separate page. See instructions.
Part II Foreign Partner Income and Expenses: Reconciliation to Schedule K-1 (Form 1065) See instructions if reconciling to Schedule K-1 (Form 1065-B).
		Schedules K-1
		A	B	C	D	Total
1	Net income (loss) reported on lines 1 through 3, Schedule K-1
2	Gross income included on lines 1 through 3, Schedule K-1
3	Gross effectively connected income (ECI) on lines 1 through 3, Schedule K-1
4	Non-interest expenses on lines 1 through 3, Schedule K-1
5	Non-interest expenses on lines 1 through 3, Schedule K-1, allocated to gross ECI
6	Net income (loss) reported on Schedule K-1, other than on lines 1 through 3
7	Other gross income reported on Schedule K-1
8	Other gross ECI reported on Schedule K-1
9	Other non-interest expenses reported on Schedule K-1
10	Other non-interest expenses reported on Schedule K-1, allocated to gross ECI
11	Total gross income. Add lines 2 and 7
12	Total gross effectively connected income. Add lines 3 and 8
13	Interest expense on lines 1 through 3, Schedule K-1
14	Other interest expense reported on Schedule K-1, lines 13 and 18
15a	Total interest expense. Add lines 13 and 14
b	Interest expense directly allocable under Regulations section 1.882-5(a)(1) (ii)(B). (Note: Include the line 15b total on Schedule I, line 22.)
c	Subtract line 15b from line 15a. (Note: Enter the portion of the line 15c total that constitutes interest on U.S. booked liabilities on Schedule I, line 9, column (b).)
Part III Foreign Partner’s Average Outside Basis Under Regulations sections 1.882-5(b) and 1.884-1(d)(3)
		Schedules K-1
		A	B	C	D	Total
16	Section 705 outside basis
17a	Partner’s liabilities included in outside basis under section 752 that give rise to directly allocable interest expense under Regulations section 1.882-5(a)(1)(ii)(B)
b	All other liabilities included in partner’s outside basis under section 752
c	Add lines 17a and 17b
d	Subtract line 17c from line 16
18	Partner’s liabilities under Regulations section 1.884-1(d)(3)(vi). (Note: Enter the portion of the line 18 total on Schedule I, line 8, column (b) that represents U.S. booked liabilities under Regulations section 1.882-5(d).)
19	Partner’s outside basis under Regulations section 1.884-1(d)(3)(vi). Add lines 17d and 18
20	Partner’s outside basis allocable to ECI under Regulations section 1.884-1(d)(3)(i) and 1.882-5. (Note: The line 20 total should generally be entered on Schedule I, line 5, column (b). However, see the instructions for Schedule I, line 5, column (b) before entering an amount on that line.)
21	Enter “income” or “asset” to indicate the allocation method used on line 20 (see instructions)

Compliance with Puerto Rico tax law requires careful attention to source income rules, local adjustments, and exemptions. Entities operating in Puerto Rico should ensure they meet local requirements for estimated tax payments, tax incentives under Acts 60/20/22, and municipal tax obligations.

Last reviewed: 2025‑10‑26: If you believe this form requires an update, please contact us.

If your S corporation generates income in Puerto Rico or operates through a permanent establishment on the island, filing Form 1120‑SP may be mandatory. Always consult a local tax advisor for guidance on Puerto Rico-specific reporting rules and filing deadlines.

Frequently Asked Questions

Can I estimate the General Business Credit?

Start with Form 3800 and then reflect the credit here.

How much would a 401(k) contribution change my net?

Model it with the 401(k) Calculator then rerun this page with your pre-tax amount.

Considering an IRS Offer in Compromise?

Read through Form 656-B to understand eligibility and steps.

What does FICA include?

FICA includes Social Security and Medicare payroll taxes withheld from employee wages.

Is there a quick pay-frequency comparison?

Yes—switch frequency on this page; for employer filings see 941 vs 944.

Important Notes

All calculations are estimates for guidance only. Always review your return and consider professional advice when submitting official filings.

Form 1120‑SP – Puerto Rico S Corporation Income Tax Return