What Form 1120 (2014) Is For
IRS Form 1120 (2014) serves as the U.S. Corporation Income Tax Return used by C corporations to report their income, deductions, and credits to the Internal Revenue Service. It determines a corporation’s taxable income, income tax liability, and potential refund for the applicable tax year. Domestic corporations, including those with no operations or in bankruptcy, were required to file unless classified as a tax-exempt organization.
The form provides a comprehensive financial overview of the corporation’s operations, including gross receipts, business income tax details, and balance sheets that show total assets and retained earnings. It also applies to certain business income tax situations involving foreign corporations with U.S. income or domestic subsidiaries within a controlled group of corporations.
When You’d Use Form 1120
Corporations use Form 1120 to file their annual corporate income tax return for a fiscal year or calendar year. Calendar year corporations filed their 2014 tax return by March 15, 2015, while fiscal year filers submitted it by the 15th day of the third month after year-end. If a due date fell on a legal holiday or weekend, the IRS extended it to the next business day.
Corporations could file Form 7004 to request an automatic extension of up to six months, although this extended only the filing deadline, not the payment deadline. Late payment penalties and interest are applied to any unpaid income tax liability. Corporations with an estimated tax liability exceeding $500 were required to make quarterly estimated tax payments during the tax year to avoid additional penalties.
For complete details on wage reporting, withholdings, and unemployment tax filings, see our guide to Business Income Tax Forms.
Key Rules or Details for 2014
The 2014 tax year included several updates that affected how corporations filed and reported their tax returns.
Electronic Filing Requirements
Corporations with total assets of $10 million or more and those that filed at least 250 returns annually were required to file electronically. Smaller corporations were encouraged to file electronically for faster processing and accuracy.
Estimated Tax Payments
If a corporation’s total expected income tax liability exceeded $500, it was required to make quarterly estimated tax payments. Payments had to be made electronically using the Electronic Federal Tax Payment System or through an authorized financial institution.
Tangible Property Regulations
Final regulations under sections 162(a) and 263(a) clarified how corporations should account for expenses related to tangible property. These rules helped determine when repair or improvement costs should be deducted or capitalized, ensuring accurate calculation of taxable income.
Schedule M-3 and Accounting Rules
For the 2014 tax year, corporations with less than $50 million in total assets that were required to file Schedule M-3 could complete only Part I and use Schedule M-1 for reconciliation of book income to tax income. Additionally, most C corporations with average annual gross receipts over $5 million were required to use the accrual method of accounting.
Step-by-Step (High Level)
Filing Form 1120 involves several key steps to ensure compliance with IRS requirements. Corporations should follow these steps carefully:
- Gather all required financial statements, including the income statement, balance sheet, and prior-year income tax returns.
- Report gross receipts, returns, and allowances to determine total income.
- Calculate allowable deductions such as salaries, rent, depreciation, and charitable contributions to determine the corporation’s taxable income.
- Compute tax using the applicable 2014 corporate income tax rates, which ranged from 15% to 35% based on taxable income.
- Complete all required schedules, including Schedule D for capital gains and losses, Schedule L for balance sheets, and Schedule G for shareholder information.
- Verify the corporation’s total income, deductions, and tax credits to determine the final tax liability or refund.
- Ensure the Employer Identification Number is accurate and that an authorized officer signs the return.
- File Form 1120 electronically or by mail by the required due date and retain a copy for future reference.
Common Mistakes and How to Avoid Them
Corporations often make filing errors that delay processing or trigger IRS notices. Reviewing these common mistakes can help reduce the risk of problems:
- Omitting required schedules: Corporations should attach all supporting schedules, such as balance sheets and Schedule D for capital assets, to ensure complete and accurate filings.
- Misreporting taxable income: Corporations should verify all math calculations and ensure consistency between accounting methods to report total income, deductions, and credits accurately.
- Omitting signatures or misordering attachments: Corporations must sign the return and follow the IRS’s required attachment sequence for proper processing.
- Filing or paying late: Corporations should file returns by the due date to reduce late-filing penalties; submitting even without full payment helps preserve compliance.
- Making inaccurate estimated payments: Corporations should use Form 1120-W to calculate accurate quarterly estimated payments and avoid interest or underpayment penalties.
A careful review of all entries, attachments, and deadlines helps ensure timely and accurate filing, reducing the likelihood of IRS correspondence or penalties.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
Once Form 1120 is filed, the IRS reviews the corporate income tax return for accuracy and completeness. It compares reported amounts such as gross profit, total income, and interest income with external records to confirm compliance. If discrepancies are found, the IRS issues a notice outlining adjustments to the corporation’s tax computation or tax liability.
If the return shows a balance due, the corporation must pay by the original due date to avoid penalties. Refunds for overpayments are processed within several weeks, with electronic filing providing faster turnaround. The IRS generally has three years to review and assess additional income taxes. Still, this period is extended to six years if the corporation underreports more than 25 percent of its total income.
FAQs
Who is required to file Form 1120 for the 2014 tax year?
All domestic corporations, including C corporations and certain foreign corporations with U.S. income, were required to file Form 1120 for the 2014 tax year. This corporation income tax return reports taxable income, deductions, and credits to the IRS.
What information must be included in a corporation's income tax return?
Each corporate tax return must include the corporation’s income statement, balance sheets, and financial statements showing total assets, gross receipts, capital gains, and retained earnings. These records support the calculation of net income and total income tax liability.
How do estimated tax payments affect a corporation’s tax liability?
Corporations must make quarterly estimated tax payments if their estimated tax liability for the year exceeds $500. Timely payments help reduce late payment penalties and ensure compliance with corporate income tax and IRS filing rules.
Can a corporation request an automatic extension for Form 1120?
Corporations that could not meet the filing deadline could request an automatic six-month extension using Form 7004. The extension applied only to the tax return filing and did not extend the time to pay income taxes owed.
What happens if a corporation fails to file Form 1120 on time?
Failure to file Form 1120 or pay the full amount of income tax can lead to late payment penalties and interest. Corporations are encouraged to file electronically and consult a tax professional for compliance with IRS tax authorities.
