What Form 1120 Is For

Form 1120 is the standard federal income tax return that C corporations use to report their yearly finances to the Internal Revenue Service (IRS). Think of it as the corporate equivalent of the individual 1040 form. Unless your corporation qualifies for an exemption under section 501 of the tax code, you must file Form 1120 regardless of whether your company made a profit or suffered a loss during the tax year.

This form serves multiple purposes: it reports your corporation's income, gains, losses, deductions, and credits, and it calculates how much federal income tax your corporation owes (or is due as a refund). The form includes several schedules that provide detailed breakdowns of dividends, tax computations, balance sheets, and reconciliations between your accounting books and tax return. IRS.gov

Corporations filing consolidated returns (parent companies filing for multiple subsidiary corporations) must also attach Form 851 and additional supporting statements. For 2012, the IRS made important changes requiring many capital asset transactions previously reported directly on Schedule D to now be reported first on Form 8949 before transferring to Schedule D. IRS.gov

When You’d Use Form 1120 (Regular, Late, and Amended Filings)

Regular Filing

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 your corporation uses a fiscal year (any 12-month period ending on the last day of any month except December), the deadline is the 15th day of the third month after that fiscal year ends. If the deadline falls on a weekend or legal holiday, you can file on the next business day.

Extension Filing

If you need more time, you can request an automatic six-month extension by filing Form 7004 before the original deadline. This extension gives you more time to file but does not extend the time to pay any taxes owed—you must still estimate and pay your tax liability by the original deadline to avoid interest charges.

Late Filing

If you miss the deadline without filing an extension, you'll face penalties. The IRS charges 5% of the unpaid tax for each month (or partial month) your return is late, up to a maximum of 25% of the unpaid tax. For returns more than 60 days late, there's a minimum penalty of $135 or the total tax due, whichever is smaller.

Amended Returns

If you discover errors after filing, you'll need to file Form 1120X (Amended U.S. Corporation Income Tax Return). Generally, you must file an amended return within three years from the date you filed the original return, or within two years from the date you paid the tax, whichever is later. IRS.gov

Key Rules or Details for 2012

Several important rules governed Form 1120 filings for the 2012 tax year:

Who Must File

All domestic corporations must file unless specifically exempt under section 501. This includes corporations in bankruptcy, limited liability companies (LLCs) that elected to be taxed as corporations, and entities that filed Form 8832 to be treated as associations taxable as corporations. Single-member LLCs are generally disregarded entities unless they elect corporate status.

Electronic Filing Requirements

Corporations with total assets of $10 million or more that file at least 250 returns annually were required to e-file Form 1120 in 2012, even if they had technical difficulties or other exceptions. However, these corporations could request a waiver from the electronic filing requirement.

Form 8949 Requirement

A significant change for 2012 was that capital gains and losses from sales or exchanges of capital assets had to be reported first on Form 8949 (Sales and Other Dispositions of Capital Assets) before being summarized on Schedule D. This added an extra layer of documentation for investment transactions.

Estimated Tax Payments

Corporations expecting to owe $500 or more in tax (after credits) had to make quarterly estimated tax payments on the 15th day of the 4th, 6th, 9th, and 12th months of the tax year. These payments had to be made via electronic funds transfer using the Electronic Federal Tax Payment System (EFTPS).

Schedule UTP

Corporations with certain asset thresholds had to file Schedule UTP (Uncertain Tax Position Statement) detailing tax positions that might not be sustained upon IRS examination. IRS.gov

Step-by-Step (High Level)

Step 1: Gather Your Financial Records

Collect your corporation's financial statements, including income statements, balance sheets, and general ledger. You'll need documentation of all income sources, expenses, deductions, estimated tax payments made during the year, and your Employer Identification Number (EIN).

Step 2: Complete the Basic Information

Fill in your corporation's name, address, EIN, and date of incorporation. Indicate whether this is an initial return, final return, name change, or address change. Check applicable boxes if you're filing a consolidated return, are a personal holding company, or are a personal service corporation.

Step 3: Report Income (Lines 1-11)

Enter gross receipts or sales, cost of goods sold, and calculate gross profit. Report dividends, interest, rental income, royalties, capital gains or losses (from Schedule D and Form 8949), and any other income. The total becomes your corporation's gross income.

Step 4: Report Deductions (Lines 12-29)

List all allowable business deductions including compensation of officers, salaries and wages, repairs and maintenance, bad debts, rents, taxes and licenses, interest, charitable contributions, depreciation, depletion, advertising, pension and profit-sharing plans, employee benefit programs, and other deductions. Subtract total deductions from gross income to get taxable income.

Step 5: Complete Schedule C (Dividends and Special Deductions)

If your corporation received dividends from other corporations, complete Schedule C to calculate the dividends-received deduction, which allows corporations to deduct 70%, 80%, or 100% of qualifying dividends depending on the percentage of ownership.

Step 6: Calculate Tax and Credits (Schedule J)

Use Schedule J to compute your tax liability. Apply any applicable tax credits (general business credit, prior year minimum tax credit, etc.). Determine your total tax after credits.

Step 7: Complete Supporting Schedules

Fill out Schedule K (Other Information), Schedule L (Balance Sheets), Schedule M-1 (Reconciliation of Income), and Schedule M-2 (Analysis of Retained Earnings). These schedules provide essential information about your corporation's financial position and reconcile differences between book and tax accounting.

Step 8: Calculate Payments and Amount Due

Total your estimated tax payments, amounts applied from the prior year, and any other payments. Compare this to your total tax to determine if you owe additional tax or are entitled to a refund.

Step 9: Sign and Submit

An authorized corporate officer (president, vice president, treasurer, assistant treasurer, or chief accounting officer) must sign and date the return. Attach all required schedules and forms in the proper order, and file by the deadline to the appropriate IRS service center address. IRS.gov

Common Mistakes and How to Avoid Them

Mistake #1: Missing the Filing Deadline

Many corporations forget that the C corporation deadline is different from the individual tax deadline. Remember: it's the 15th day of the third month after year-end, not April 15. Mark your calendar and consider filing Form 7004 for an automatic extension if you need more time.

Mistake #2: Forgetting Form 8949

In 2012, the IRS began requiring Form 8949 for reporting capital asset sales. Many corporations mistakenly reported these transactions directly on Schedule D as they had in prior years. Always file Form 8949 first, then transfer the totals to Schedule D.

Mistake #3: Incorrect Estimated Tax Payments

Corporations that underpay their estimated taxes face underpayment penalties. Calculate your estimated tax liability accurately using Form 1120-W as a worksheet, and make sure payments are made electronically through EFTPS by the quarterly deadlines.

Mistake #4: Math Errors and Transcription Mistakes

Simple arithmetic errors and incorrectly transferring numbers from worksheets or supporting schedules are surprisingly common. Double-check all calculations and consider using tax software to minimize computational errors.

Mistake #5: Incomplete or Missing Schedules

Form 1120 requires numerous supporting schedules (Schedules C, J, K, L, M-1, M-2). Failing to complete and attach all required schedules will result in an incomplete return that the IRS may reject or that could trigger penalties.

Mistake #6: Not Reconciling Book and Tax Income

Schedule M-1 requires you to reconcile the difference between net income shown on your books and taxable income on your return. Many corporations skip this crucial step or complete it incorrectly, raising red flags with the IRS.

Mistake #7: Failing to E-File When Required

Large corporations (those with $10 million+ in assets filing 250+ returns annually) were required to e-file in 2012. Filing on paper when e-filing is mandatory can result in the return being rejected or penalties being assessed. IRS.gov

What Happens After You File

Processing Timeline

Once the IRS receives your Form 1120, it enters the processing queue. Electronic returns typically process faster than paper returns. During processing, the IRS checks for mathematical accuracy, verifies that all required information is present, and matches the return against third-party information reports (like Forms 1099).

Refunds

If your corporation is due a refund, you can request direct deposit by attaching Form 8050 (Direct Deposit of Corporate Tax Refund) to your return. Refunds generally arrive within 6-8 weeks for paper returns and 2-3 weeks for e-filed returns. If you overpaid estimated taxes, you might also file Form 4466 (Corporation Application for Quick Refund) to receive a refund before completing your return.

Payment Processing

If you owe additional tax, the IRS will process your payment and send a confirmation. Failure to pay the full amount due results in interest charges that accrue from the original due date, plus potential penalties for late payment (½% of unpaid tax per month, up to 25%).

IRS Review and Correspondence

The IRS may send you a notice requesting clarification or additional documentation if something on your return requires explanation. These are not necessarily audits—they're often routine requests to verify specific items. Respond promptly to all IRS correspondence to avoid escalation.

Audit Selection

Some returns are selected for audit based on various factors, including unusual deductions, significant losses, or random selection. Corporate audit rates vary, but larger corporations face higher scrutiny. If selected for audit, the IRS will notify you by mail and request specific documentation to support items on your return.

Record Retention

Keep all supporting documents, worksheets, and copies of your filed return for at least three years from the date you filed or the date the return was due, whichever is later. If you substantially understated income, keep records for six years. Property basis records should be kept for as long as they're relevant to determining basis.

Amended Returns

If you discover errors after the IRS processes your return, you can file Form 1120X. The IRS will review the amended return separately, and processing typically takes longer than original returns—often 8-12 weeks or more. IRS.gov

FAQs

Q1: What's the difference between Form 1120 and Form 1120-S?

Form 1120 is for C corporations that pay corporate income tax on their profits. Form 1120-S is for S corporations, which are pass-through entities where profits and losses flow through to shareholders' personal tax returns. If your corporation elected S corporation status by filing Form 2553, you must file Form 1120-S, not Form 1120.

Q2: Can I file Form 1120 myself, or do I need help?

You can file Form 1120 yourself if you're comfortable with corporate tax concepts and accounting. The IRS provides free instructions and Form 1120 can be prepared using various methods. However, corporate tax returns are significantly more complex than individual returns, so many corporations seek assistance to ensure accuracy and maximize deductions.

Q3: What if my corporation had no income or activity during 2012?

You still must file Form 1120 even if your corporation had no income, no expenses, and no activity. The IRS requires all domestic corporations (except those specifically exempt) to file an annual return regardless of whether there's taxable income. Enter zeros where appropriate and clearly indicate this was an inactive year.

Q4: How do I know which IRS service center to mail my return to?

The mailing address depends on your corporation's principal business location and total assets. For 2012, corporations with less than $10 million in assets and not filing Schedule M-3 generally mailed to Cincinnati, OH if located in the eastern U.S., or Ogden, UT if in the western U.S. Corporations with $10 million or more in assets mailed to Ogden, UT regardless of location. Check the complete address chart in the Form 1120 instructions for your specific situation. IRS.gov

Q5: What happens if I can't pay the full amount of tax I owe?

File your return on time even if you can't pay the full amount—this avoids the failure-to-file penalty, which is much steeper than the failure-to-pay penalty. The IRS offers payment plans and installment agreements. Contact the IRS immediately to discuss options. Interest and late-payment penalties will still apply, but they're less severe than the combined penalties for late filing and late payment.

Q6: Do I need to attach my financial statements to Form 1120?

Generally, no. You don't need to attach your corporation's full financial statements unless specifically requested by the IRS. However, you must complete Schedules L, M-1, and M-2, which provide balance sheet information and reconciliations. Corporations with $10 million or more in assets may need to complete the more detailed Schedule M-3 instead of Schedule M-1.

Q7: Can I deduct 100% of my charitable contributions?

No. Unlike individuals, corporations can only deduct charitable contributions up to 10% of taxable income (computed without the charitable contribution deduction, dividends-received deduction, and certain other items). Contributions exceeding this limit can be carried forward for up to five years. Report charitable contributions on line 19 of Form 1120 and maintain documentation of all donations. IRS.gov