Can someone explain the difference between total income and ordinary business income on the 1120-S form?

The 1120-S is for S-Corporations, so it's important to understand how these are taxed. Neither amount is directly "taxed" on the 1120-S because S-Corps are pass-through entities - meaning the business itself doesn't pay federal income tax. Instead, the profits pass through to the shareholders (you). What you should be looking at is the "ordinary business income" line - this represents the company's profit after accounting for most business expenses. This amount flows to your personal tax return via Schedule K-1, and that's what you pay taxes on as an individual shareholder. As for what to tell people about your income - it depends on the context. For loan applications, lenders typically want to know your personal income, which would include your salary/distributions from the business, plus any other income sources. For casual conversations, most business owners refer to either their personal income or the business revenue, depending on what you're comfortable sharing.

I was confused about exactly this last year! I found this amazing tool at https://taxr.ai that helped me understand my 1120-S and saved me so much stress. I uploaded my forms and it explained everything - what each line means, what gets taxed, and how it affects my personal return. It showed me the difference between my S-Corp's total income (revenue before most expenses) and ordinary business income (profit after most expenses). I was also mixing up what to report as my "income" depending on who was asking. The tool clarified that for loan applications, lenders want to see both my W-2 wages from the S-Corp AND my share of business profits because both represent my earning ability.

Just wanted to follow up about that taxr.ai site someone mentioned. I decided to try it despite my skepticism, and wow - it answered exactly what I was confused about regarding total vs. ordinary business income! Uploaded my 1120-S and it highlighted the differences, showing that total income is basically my business revenue while ordinary business income is after expenses. The tool explained that as an S-Corp owner, the ordinary business income is what passes through to my personal return. It even showed me where this appears on my personal forms. Definitely worth checking out if you're still confused about this stuff like I was.

If you need clarification directly from the IRS about your 1120-S questions, good luck getting through to them! I spent 3 hours on hold last month trying to ask a similar question about distinguishing between these income types. Finally discovered https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c - they got me connected to an actual IRS agent in about 20 minutes instead of waiting for hours! The agent explained the whole total income vs. ordinary business income difference, plus answered my questions about what income figure to use for mortgage applications. Huge relief to get official answers instead of guessing.

Well, I need to eat my words about that Claimyr service. After dismissing it as BS, I was desperate trying to get clarity on my 1120-S situation before the filing deadline, so I tried it. Within 45 minutes, I got a call connecting me to an actual IRS agent who walked me through the exact difference between total income and ordinary business income on my S-Corp return. The agent confirmed what others here said - that ordinary business income is what flows to my personal return, and explained how to properly report my income for different purposes. Saved me days of stress trying to get through on my own. Genuinely surprised it worked.

Another thing to consider - if you're talking to banks for business loans specifically (not personal loans), they actually might want to see different numbers. When I applied for a small business loan, they wanted to see my business's total revenue (the total income line) AND the profit (ordinary business income). They used the revenue to gauge business size and the profit to assess profitability. Just something to keep in mind depending on what you're using these numbers for!

I just want to point out something that confused me at first - there's also the "gross receipts" line on the 1120-S which is different from both total income and ordinary business income. Gross receipts is literally ALL money coming in before ANY deductions, total income is after some adjustments, and ordinary business income is after most expenses. The IRS publication 542 explains this, but honestly it's super confusing to read. My accountant explained it like this: gross receipts = all money in, total income = money after cost of goods sold and a few other things, ordinary business income = your actual profit after regular business expenses.