What Form 1120 Is For

Form 1120 is the tax return that corporations use to report their annual income, expenses, and taxes to the Internal Revenue Service (IRS). Think of it as the business equivalent of the individual Form 1040, but specifically designed for C corporations—the standard type of corporation that pays its own income taxes.

Every domestic corporation operating in the United States must file Form 1120, regardless of whether they made a profit or loss during the year. The form calculates the corporation's taxable income by subtracting business deductions from total revenue, then applies the appropriate tax rates to determine what the company owes—or what refund it may receive.

The form covers all the financial details of running a corporation: gross receipts from sales, costs of goods sold, employee salaries, rent, advertising, depreciation, and dozens of other business expenses. It also includes special schedules for reporting dividends, capital gains, balance sheet information, and reconciling the company's book income with its taxable income. For 2013, corporations filed this form to report their financial activity from the 2013 calendar year or any fiscal year ending in 2014.

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

Regular Filing Deadline

For calendar-year corporations, Form 1120 for tax year 2013 was due by March 17, 2014 (the 15th day of the 3rd month after the year ended, adjusted because March 15 fell on a Saturday). Fiscal year corporations follow the same rule—filing by the 15th day of the third month after their fiscal year ends.

Extension Filing

Corporations that needed more time could file Form 7004 by the original due date to request an automatic 6-month extension. This extension moved the deadline to September 15, 2014 for calendar-year corporations. However, an extension to file is not an extension to pay—any taxes owed were still due by the original March deadline, and interest would accrue on unpaid balances even with an approved extension.

Late Filing

If you missed the deadline entirely and now realize you need to file a 2013 return years later, you can still submit Form 1120 for 2013. While you'll face penalties and interest for late filing (5% of unpaid tax per month, up to 25%, with a minimum penalty of $135 if more than 60 days late), filing late is always better than not filing at all. The IRS has a longer statute of limitations for unfiled returns, meaning they can pursue collection indefinitely.

Amended Returns

If you discover an error after filing your 2013 Form 1120—such as overlooked deductions, incorrect income figures, or mathematical mistakes—you would file Form 1120-X (Amended U.S. Corporation Income Tax Return). Generally, you have three years from the original filing date (or two years from when you paid the tax, whichever is later) to file an amended return claiming a refund. If the IRS made adjustments to your return, you'd also use Form 1120-X to respond or make additional corrections.

Key Rules and Requirements for 2013

Who Must File

All domestic corporations were required to file unless specifically exempt under Section 501 (nonprofit status). This included corporations with no income, corporations in bankruptcy, and newly dissolved corporations. Limited liability companies (LLCs) that elected corporate tax treatment by filing Form 8832 also had to file Form 1120.

Electronic Filing Mandate

Large corporations with total assets of $10 million or more that filed at least 250 returns annually were required to file Form 1120 electronically. Other corporations could choose between electronic and paper filing, though e-filing was encouraged for faster processing.

Payment Requirements

All federal tax deposits, including corporate estimated tax payments, had to be made electronically through the Electronic Federal Tax Payment System (EFTPS) or a similar electronic method. Paper checks for deposits were no longer accepted for most corporations.

Estimated Tax Obligations

Corporations expecting to owe $500 or more in taxes had to make quarterly estimated tax payments by the 15th day of the 4th, 6th, 9th, and 12th months of their tax year. For calendar-year corporations, these dates were April 15, June 15, September 15, and December 15, 2013.

Schedule M-3 Requirement

Corporations with total assets of $10 million or more at year-end had to file Schedule M-3 instead of the simpler Schedule M-1 to reconcile book income with tax income. This more detailed schedule required extensive disclosure of income and deduction differences.

Special 2013 Provision

A unique rule for 2013 allowed corporations to deduct certain charitable contributions made for typhoon relief in the Philippines between March 26, 2014 and April 15, 2014 on their 2013 returns, even though the contributions were technically made in 2014.

Step-by-Step (High Level)

Step 1: Gather Your Records

Collect all financial documents including income statements, balance sheets, receipts for deductible expenses, depreciation schedules, payroll records, and your Employer Identification Number (EIN). You'll need your general ledger or accounting software data showing the year's complete financial activity.

Step 2: Determine Your Income

Calculate your gross receipts from business operations, then subtract returns and allowances. Add any other income sources like interest, dividends, capital gains, rental income, or other receipts. If you sell products, calculate your cost of goods sold using Form 1125-A and subtract it from gross receipts to get gross profit.

Step 3: Calculate Deductions

Total all ordinary and necessary business expenses: compensation of officers, salaries and wages, repairs and maintenance, bad debts, rent, taxes and licenses, interest, charitable contributions, depreciation, advertising, employee benefits, and other deductions. Each category has its own line on Form 1120, and some expenses have special limitations (like the 10% limit on charitable contributions).

Step 4: Complete Special Schedules

Fill out Schedule C for dividends received and special deductions. If you have capital gains or losses, complete Schedule D. Schedule J calculates your final tax liability, including alternative minimum tax if applicable. Schedule K asks dozens of questions about your business structure and activities. Schedules L, M-1 (or M-3), and M-2 reconcile your financial accounting records with tax reporting.

Step 5: Calculate Tax and Credits

Apply the corporate tax rates to your taxable income (rates in 2013 ranged from 15% on the first $50,000 to 35% on income over $10 million). Subtract any tax credits you qualify for, such as the general business credit, foreign tax credit, or other specialized credits.

Step 6: Determine Payment or Refund

Subtract your estimated tax payments and any other credits from your total tax owed. If the result is positive, you owe additional tax. If negative, you're entitled to a refund (which you can apply to next year's estimated taxes or request as a cash refund).

Step 7: Sign and File

The return must be signed by an authorized corporate officer (president, vice president, treasurer, or other authorized officer). Attach all required schedules and supporting forms in the proper order. Mail to the IRS service center designated for your location, or file electronically through approved software.

Common Mistakes and How to Avoid Them

Mistake #1: Missing the Filing Deadline

Many corporations miss the March 15 deadline, triggering automatic penalties of 5% per month on unpaid taxes. Solution: Mark the filing deadline on your calendar early in the year. If you realize in February you won't be ready, file Form 7004 immediately for an automatic extension—it's a simple one-page form.

Mistake #2: Failing to Make Estimated Tax Payments

Corporations that don't pay quarterly estimated taxes face underpayment penalties, even if they pay the full amount by the filing deadline. Solution: Calculate estimated taxes using Form 1120-W at the start of the year. Set up an EFTPS account early to make electronic payments by each quarter's deadline.

Mistake #3: Incorrectly Reconciling Book vs. Tax Income

The IRS carefully scrutinizes Schedule M-1 (or M-3) to ensure your financial statement income matches your tax return income after proper adjustments. Errors here trigger audits. Solution: Work with a qualified accountant who understands common book-tax differences like depreciation methods, meals and entertainment limitations (50% deductible), and municipal bond interest (tax-exempt).

Mistake #4: Misclassifying Personal vs. Business Expenses

Small corporations sometimes deduct personal expenses as business costs, which is illegal and can result in penalties plus fraud charges. Solution: Maintain separate bank accounts and credit cards for business use. Document every expense with receipts and business purpose notes. When in doubt, consult a tax professional.

Mistake #5: Omitting Required Schedules and Forms

Form 1120 requires numerous supporting schedules. Missing schedules make returns incomplete, delaying processing. Solution: Review the Form 1120 instructions checklist. Common required attachments include Form 1125-A (Cost of Goods Sold), Schedule D (if you have capital transactions), and state-specific forms.

Mistake #6: Forgetting About State Returns

Filing federal Form 1120 doesn't satisfy state corporate tax obligations. Most states require separate corporate income tax returns. Solution: Research your state's requirements immediately after completing the federal return. Some states have earlier deadlines than the federal government.

Mistake #7: Not Keeping Adequate Records

The IRS requires corporations to maintain supporting documentation for at least three years, but many records should be kept longer. Solution: Implement a document retention policy. Keep all receipts, invoices, bank statements, payroll records, contracts, and prior tax returns in organized, secure storage.

What Happens After You File

Immediate Processing

If you filed electronically, the IRS typically acknowledges receipt within 24-48 hours. Paper returns take weeks just to be logged into the system. Electronic returns are generally processed within 21 days, while paper returns can take 6-8 weeks or longer.

Refund Timeline

If your corporation overpaid taxes and is due a refund, expect to wait approximately 8-12 weeks for corporate refunds to be issued after the return is processed. Electronic filing with direct deposit is fastest. You can expedite large refunds (over $500,000 and representing at least 10% of estimated tax) by filing Form 4466 before the regular filing deadline for a "quick refund."

IRS Review Process

Every return goes through automated screening where computers check math calculations, verify that income reported matches information returns (like 1099s), and flag returns with unusual deductions or ratios. Most returns clear this process without human intervention. Returns with discrepancies, large deductions, significant losses, or other red flags may be selected for additional review.

Correspondence

If the IRS needs additional information or finds a problem, they'll send a letter to your corporation's address on file. Common notices include requests for missing schedules, math error corrections, or requests to verify specific deductions. Always respond promptly to IRS letters—ignoring them escalates problems.

Audit Selection

A small percentage of corporate returns are selected for audit—a more comprehensive examination of your records. Factors that increase audit risk include consistently reporting losses, claiming unusually large deductions compared to industry norms, having transactions with related parties or foreign entities, and significant year-over-year changes. Corporate audits typically occur 12-24 months after filing and can be conducted by mail (correspondence audit) or in-person (field audit).

Payment Processing

If you owed additional tax and submitted payment with your return, the IRS processes the payment and closes your account for that year. Any overpayments from estimated taxes are either refunded or applied to the next year's estimated tax as you elected on the return. Interest continues to accrue on any unpaid balances until fully paid.

FAQs

Q1: Our corporation had no income in 2013. Do we still need to file Form 1120?

Yes. Unless your corporation is exempt under Section 501 (nonprofit status), you must file Form 1120 every year regardless of income or activity level. File a complete return showing zero or minimal income. Failure to file can result in penalties and may jeopardize your corporate status with your state. Many states also require annual filings to maintain good standing.

Q2: Can we file Form 1120 for 2013 if we've already filed returns for subsequent years?

Yes, you can file a prior-year return even after filing later years' returns. File the 2013 return using the 2013 form and instructions. However, be aware that filing late triggers penalties and interest from the original due date. The IRS will process the late return, assess penalties, and may examine whether the later years' returns need adjustment based on 2013 carryovers or other items.

Q3: What's the difference between Schedule M-1 and Schedule M-3?

Schedule M-1 is a simple one-page reconciliation showing the major differences between your book income (what your financial statements show) and taxable income (what you report on Form 1120). Schedule M-3 is a much more detailed multi-page schedule required for corporations with $10 million or more in assets. It requires granular disclosure of income and deduction items, making it easier for the IRS to identify potential issues but more burdensome to prepare.

Q4: Our fiscal year ended in 2014, but it started in 2013. Which form do we use?

Use the 2013 Form 1120 if your fiscal year began in 2013 and ended in 2014. Enter your specific fiscal year dates at the top of the form. The instructions note that if the 2014 form isn't available when you need to file, you can use the 2013 form but must account for any tax law changes effective in 2014.

Q5: Can we deduct 100% of meals and entertainment expenses?

No. For tax years beginning in 2013, meals and entertainment expenses were generally only 50% deductible, even if they were ordinary and necessary business expenses. There are a few exceptions for employee meals provided for the employer's convenience and certain recreational activities for employees, but most client meals and entertainment are limited to 50% deductibility.

Q6: What should we do if we realize we made an error on our 2013 return?

File Form 1120-X (Amended U.S. Corporation Income Tax Return) as soon as possible. Include an explanation of the changes, corrected financial information, and any supporting documentation. If the error results in additional tax owed, pay it with the amended return to minimize interest charges. If you're claiming a refund, remember the three-year deadline. For minor errors that don't affect your tax liability, an amendment might not be necessary.

Q7: How long should we keep our 2013 tax records?

The IRS recommends keeping tax records for at least three years from the filing date, but many situations require longer retention. Keep records for six years if you substantially understated income (by 25% or more). Keep property records (asset purchases, depreciation schedules) until the period expires for the year you dispose of the property. As a best practice, many corporations keep tax records and supporting documentation for seven years. Keep corporate formation documents, annual returns, and major contracts indefinitely.

Sources: All information is sourced from official IRS publications available at IRS.gov, including the 2013 Form 1120 Instructions.

This guide is for informational purposes only and does not constitute tax advice. Corporations should consult with qualified tax professionals for guidance specific to their situations.