Form 1120 — when and how to file
If you're a business owner, you may have already heard of Form 1120. Form 1120 is the income tax return form for US corporations, making it one of the most common tax forms for American businesses.
In this article, we’ll explain the basics of Form 1120 — what it is, what it's used for, and who needs to file. We'll also go over some key considerations and tactics that could help you minimize your tax burden.
What is Form 1120?
Form 1120 is the standard corporate income tax form for C-Corps and other corporations.
The information entered on Form 1120 is used to calculate how much the corporation owes in taxes that year. This includes income, gains, losses, deductions, and credits. By the time you complete the document, you’ll know how much you need to pay in income tax.
Who needs to file?
Most domestic corporations need to file Form 1120. The main exception is corporations that are exempt under section 501, which covers schools, religious and charitable organizations, and other nonprofits.
If you operate a for-profit corporation, then these exceptions probably don’t apply. You’ll have to file Form 1120 even if your corporation is in bankruptcy or doesn’t have any taxable income.
Note that LLCs will also need to file Form 1120-S if they elect to file as a corporation. You can make this election by filing form 2553 — more on that here.
How to file
Corporations holding less than $10 million in assets are permitted to file online or by mail. If your corporation holds more than $10 million, note that the IRS requires Form 1120 to be filed online.
The IRS provides a free online filing service, making it relatively simple for you or your accountant to file from the computer.
What you’ll need
Whether you choose to file online or by mail, there are several pieces of information you’ll need to fill out your return.
You’ll first need a handful of basic details about your corporation: your Employer Identification Number, the date of incorporation, and the total assets your corporation holds.
The next part of the form is also straightforward. Here, you must itemize your corporation’s gross income for its most recent tax year. That includes gross receipts, goods sold, gross profits, dividends, interest, rents, royalties, capital gains, net gains, and any other income sources.
Next, add up your deductions. This means employee salaries and wages, repairs and maintenance, advertising expenses, and charitable contributions, plus any other spending that meets the deduction criteria.
A bit of simple addition and subtraction will allow you to calculate the amount your corporation still owes in taxes, or the amount your corporation overpaid, depending on the circumstance.
The bottom of Form 1120 must be signed by the officer of the corporation and the individual who prepared the document.
In addition to your tax return, the IRS also requires several tax schedules that must be attached to your Form 1120.
Schedule C is for reporting dividends and other special deductions. This will apply to your corporation if it receives dividend income or owns stock in an overseas company.
Your corporation’s tax liability is calculated with Schedule J. You’ll already have your corporation’s taxable income from the first page of Form 1120; now, multiply that by the corporate tax rate (currently 21% in the United States).
Schedule K asks you to answer several yes/no questions regarding your corporation’s accounting methods and business activities. Critically, it also asks whether your corporation’s total receipts and total assets at the end of the tax year exceed $250,000. If not, you’re exempt from completing Schedules L, M-1, and M-2.
Schedule L is a simple balance sheet. If you use accounting software to keep track of your books, it should be easy to generate a detailed account of your assets and liabilities.
Schedules M-1 and M-2 are dedicated to settling book differences. M-1 settles book income versus taxable income, and M-2 analyses unappropriated retained earnings.
Refer to Form 1120 for more details, or consider consulting a tax professional.
When do I need to file?
The deadline for Form 1120 depends on what the corporation uses as a tax year. In most cases, the due date will land on the 15th day of the fourth month after the end of your business’ tax year.
But if your corporation uses a fiscal year ending June 30 as its tax year, the due date is the 15th day of the third month after the end of the corporation’s tax year.
You may be inclined to apply for a five-month extension via form 7004. Whatever you choose, don’t be late: the IRS typically charges interest on taxes owed, and late fees max out at 25% of your unpaid tax balance.
Similar or specialized forms
Non-C-Corp corporations still need to file returns, of course, but their tax forms might look a bit different. S-Corps, which differ from C-Corps because they do not pay taxes at the entity level, should use Form 1120-S. Form 1120-A is a simplified version for smaller companies.
Most foreign corporations should file Form 1120-F.
All Form 1120 variants may be found on the IRS website.
At this point, you should have a firm grasp of the purpose of Form 1120 and what you need to fill it out. While it might take some time to gather the required information, Form 1120 is relatively straightforward to complete with a little preparation.
Of course, you should always consult a professional if you’re unsure about your tax obligations. Hit the link below to incorporate your business — you'll even get a free tax consultation from one of our partners.