What Form 1120 Is For

Form 1120 is the income tax return that regular corporations (called ""C corporations"") use to report their annual earnings to the Internal Revenue Service. Think of it as the corporate version of the individual 1040 tax form. Every domestic corporation—whether it made a profit, broke even, or lost money—must file Form 1120 unless it qualifies for a special return type (like S corporations, which file Form 1120-S instead).

The form reports everything about your corporation's financial year: gross receipts, cost of goods sold, operating expenses, deductions, credits, and ultimately calculates how much federal income tax the corporation owes. It includes multiple schedules for specific details like dividends received, balance sheets, and reconciliation between book income and taxable income. For the 2010 tax year, corporations also faced new reporting requirements, including the new Schedule UTP (Uncertain Tax Position Statement) for large corporations with assets of $100 million or more.

When You’d Use Form 1120 (Including Late and Amended Returns)

Standard Filing Deadline: Your corporation must file Form 1120 by the 15th day of the third month after your tax year ends. For calendar-year corporations (ending December 31), this means the deadline is March 15. If that date falls on a weekend or holiday, you get until the next business day.

Extensions: Need more time? File Form 7004 by your original deadline to get an automatic six-month extension. This gives you until September 15 (for calendar-year corporations), but remember—an extension to file is NOT an extension to pay. You still owe any taxes due by the original March deadline, or you'll face interest charges.

Late Returns: If you miss the deadline without filing an extension, the IRS considers your return late. You'll face penalties starting immediately (see penalties section below), but you should still file as soon as possible to minimize additional penalties.

Amended Returns: Made a mistake on your original Form 1120? Use Form 1120-X (Amended U.S. Corporation Income Tax Return) to correct it. You generally have three years from the date you filed the original return, or two years from the date you paid the tax (whichever is later) to file an amended return claiming a refund. The deadline rules are crucial—miss them and you forfeit your right to that refund. IRS.gov

Key Rules or Details for 2010

Electronic Payment Mandate: Beginning January 1, 2011, all federal tax deposits had to be made electronically through the Electronic Federal Tax Payment System (EFTPS). Paper deposit coupons (Forms 8109 and 8109-B) were no longer accepted after December 31, 2010. IRS.gov

E-filing Requirements: Corporations with total assets of $10 million or more that file at least 250 returns annually were required to electronically file Form 1120—no exceptions.

Estimated Tax Payments: Corporations expecting a tax liability of $500 or more (after credits) had to make quarterly estimated tax payments by the 15th day of the 4th, 6th, 9th, and 12th months of their tax year. Failing to make these payments on time triggered underpayment penalties.

Start-up Cost Deduction: For tax years beginning in 2010, corporations could deduct up to $10,000 in start-up costs, increased from previous limits.

Schedule UTP: Large corporations (those with assets of $100 million or more) faced a new reporting burden—Schedule UTP, which required disclosure of uncertain tax positions that might be challenged by the IRS.

Step-by-Step (High Level)

1. Gather Your Records: Collect all financial statements, receipts, payroll records, depreciation schedules, and documentation for income and expenses throughout the tax year. You'll need your balance sheet figures from both the beginning and end of the year.
2. Complete the Income Section: Report gross receipts from sales, cost of goods sold, dividends, interest, rents, royalties, capital gains, and other income sources (lines 1-11).
3. Calculate Deductions: List compensation of officers, salaries and wages, repairs, bad debts, rent, taxes, interest, charitable contributions, depreciation, and other ordinary business expenses (lines 12-27).
4. Determine Taxable Income: Subtract total deductions from total income to arrive at taxable income before special deductions (line 28).
5. Calculate Tax Liability: Apply the corporate tax rates to your taxable income. For 2010, rates ranged from 15% on the first $50,000 to 35% on income over $10 million.
6. Apply Credits and Payments: Subtract any tax credits and payments you've already made (estimated tax payments, credits from previous years) to determine your final tax due or refund owed.
7. Complete Required Schedules: Fill out Schedule A (Cost of Goods Sold), Schedule C (Dividends and Special Deductions), Schedule J (Tax Computation), Schedule K (Other Information), Schedule L (Balance Sheets), and Schedule M-1 (Reconciliation of Income).
8. Sign and File: An authorized corporate officer (president, vice president, treasurer, or other designated officer) must sign and date the return before filing. IRS.gov

Common Mistakes and How to Avoid Them

Missing the Deadline: The most costly error is simply filing late. Set calendar reminders well before your March 15 deadline (or fiscal year-end equivalent). If you need more time, file Form 7004 before the deadline—it's simple and automatic.

Incorrect EIN or Basic Information: Using an outdated or wrong Employer Identification Number causes immediate processing delays. Double-check that your EIN, corporate name, and address exactly match IRS records.

Math Errors: Simple arithmetic mistakes trigger IRS notices and delays. Use tax software or have a professional review calculations, especially on complex schedules.

Mixing Personal and Business Expenses: Keep crystal-clear separation between personal and corporate finances. The IRS scrutinizes transactions between you and your corporation—any personal expenses claimed as business deductions are audit red flags.

Incomplete or Missing Schedules: Every applicable line and schedule must be completed. Writing ""See Attached"" or leaving required sections blank causes processing problems.

Improper Income Recognition: Report all income, even if you didn't receive a 1099 form. The IRS receives copies of these forms and will catch unreported income.

Forgetting Estimated Payments: Track your estimated tax payments carefully and report them accurately on line 33. Missing quarterly payments not only triggers penalties but creates cash flow problems when your full tax bill comes due.

What Happens After You File

Processing Timeline: The IRS typically processes electronically filed corporate returns within 21 days, though complex returns may take longer. Paper returns take considerably more time—sometimes several months.

Refunds: If you're owed a refund, the IRS generally issues it within 21 days of processing for e-filed returns with direct deposit. Paper returns with paper checks can take 6-8 weeks or longer.

Notices and Correspondence: If the IRS finds errors or needs clarification, you'll receive a notice by mail. Common notices include requests for missing information, math error corrections, or notices of discrepancies between your return and information returns (W-2s, 1099s) the IRS received.

Audits: While corporate audit rates vary, certain factors increase audit risk: claiming unusually large deductions relative to income, reporting consistent losses, having large cash transactions, or operating in high-scrutiny industries. Corporate audits typically occur within three years of filing, though the IRS can go back further if substantial errors or fraud are suspected.

Record Retention: Keep your records for at least three years from the filing date. The IRS recommends keeping records longer if you filed claims for losses or bad debt deductions. IRS.gov

FAQs

1. Do I need to file if my corporation had no income?

Yes. Unless your corporation is exempt under section 501, you must file Form 1120 regardless of whether you had any income or activity during the year.

2. What's the penalty for filing late?

The late-filing penalty is 5% of unpaid tax for each month (or partial month) the return is late, up to a maximum of 25%. If your return is more than 60 days late, the minimum penalty is the smaller of $135 or 100% of the tax due.

3. Can I file Form 1120 if I'm a single-member LLC?

Not automatically. By default, single-member LLCs are ""disregarded entities"" and report on the owner's return. You can only file Form 1120 if you've elected to be taxed as a corporation by filing Form 8832 with the IRS.

4. What if I can't pay the full tax amount owed?

File your return on time anyway to avoid the late-filing penalty, which is much steeper than the late-payment penalty. Then contact the IRS to arrange a payment plan or installment agreement.

5. How long should I keep copies of my corporate tax returns?

Keep returns and supporting documentation for at least three years from the filing date. Keep records indefinitely for assets, property, and investments to prove basis when you eventually sell them.

6. What triggers a corporate tax audit?

Red flags include: consistently reporting losses, unusual deductions compared to similar businesses, large charitable contributions relative to income, significant changes in income from year to year, heavy cash transactions, and operating in certain high-risk industries.

7. Can I get a quick refund of overpaid estimated taxes?

Yes. If you've significantly overpaid your estimated taxes, you can file Form 4466 (Corporation Application for Quick Refund of Overpayment of Estimated Tax) before filing your full return. This can get you a refund faster than waiting for your full return to be processed. IRS.gov