What IRS Form 1120-L (2023) Is For

IRS Form 1120-L (2023) is the U.S. Life Insurance Company Income Tax Return used to calculate and report a company’s federal income tax liability. This form applies to life insurance companies that must disclose income, gains, losses, deductions, and credits for federal income tax purposes. It also ensures that all taxable income is recorded correctly and that the correct amount of income tax is paid to the Internal Revenue Service.

Every domestic life insurance company and certain foreign corporations that would qualify as life insurance companies if incorporated in the United States are required to file Form 1120-L. The form establishes how these entities compute taxable income under the Internal Revenue Code and helps the IRS verify the accuracy of reported financial data, including policy reserves, investment income, and capital gains.

When You’d Use IRS Form 1120-L (2023)

Life insurance companies use IRS Form 1120-L (2023) when filing a late or amended income tax return for the 2023 tax year. Below are the most common situations when this form must be submitted.

• Received IRS notices for unfiled returns: The form should be filed after the company gets CP-259 or other IRS notices indicating that a required return has not been submitted.
  
  
• Errors discovered after submission: An amended return must be filed to correct any mistakes or omissions that affect taxable income, deductions, or credits.
  
  
• Missed the original due date: The 2023 version of Form 1120-L must be used if the company failed to file by the April 15, 2024, deadline.
  
  
• Audit adjustments: When an IRS audit results in changes to reported income, reserves, or deductions, the company must file an amended return.
  
  
• Refund claims: The form may be used to claim a refund if the filing occurs within three years of the due date or two years after the tax was paid, whichever is later.

Key Rules or Details for the 2023 Tax Year

Several specific rules applied to life insurance companies filing IRS Form 1120-L (2023). These requirements ensure that taxable income and deductions are calculated accurately for federal income tax purposes.

• Reserves test under Section 816(b): Companies must compute taxable income using life insurance reserves defined by the Internal Revenue Code to determine accurate net income.
  
  
• Accrual accounting requirement: All life insurance companies must use the accrual method of accounting to report income, gains, losses, and deductions.
  
  
• Attachment of annual statement: A complete NAIC yearly statement must be attached to the return unless the company files electronically.
  
  
• Penalty for late filing: The minimum penalty for returns filed more than 60 days late is the lesser of the unpaid tax or $485.
  
  
• Federal income tax computation: Companies must follow Internal Revenue Code rules when reporting income, credits, and deductions to determine their total income tax liability.

Step-by-Step (High Level)

Completing IRS Form 1120-L (2023) involves ensuring compliance and accurately calculating a company’s federal income tax liability. Each stage should be handled carefully to prevent delays or errors.

• Obtain IRS transcripts: Use Form 4506-T to request account transcripts and verify prior filings, adjustments, and payments before preparing the return.
  
  
• Prepare Form 1120-L (2023): Complete all required sections using the accrual method of accounting and ensure that every figure accurately reflects taxable income and deductions.
  
  
• Attached are the required schedules: Schedule M-3, if the total assets exceed $10 million, along with the company’s NAIC annual statement and supporting statements.
  
  
• Mail to the correct IRS address: Domestic life insurance companies should send the form to Ogden, UT 84201-0012, while foreign corporations must use the designated Ogden international address.
  
  
• Retain documentation: Keep copies of the filed return, schedules, and supporting materials for at least three years for future reference or audit verification.

Common Mistakes and How to Avoid Them

Filing errors on IRS Form 1120-L (2023) can lead to penalties, processing delays, or rejected returns; reviewing each detail carefully can help prevent these issues.

• Incomplete forms: Always complete every field on the return and enter “0” for items that do not apply to ensure the form is processed correctly.
  
  
• Missing NAIC annual statement: Attach the company’s complete NAIC yearly statement to all paper-filed returns to verify reserves and income data.
  
  
• Signature errors: Before submission, have an authorized corporate officer, such as the president, treasurer, or tax officer, sign the return.
  
  
• Incorrect assembly order: Assemble schedules and attachments after page 5 of Form 1120-L in the sequence specified by IRS instructions.
  
  
• Improper address changes: Report any change of address using Form 8822-B rather than writing new information directly on the tax return.

What Happens After You File IRS Form 1120-L (2023)

After submitting IRS Form 1120-L (2023), the Internal Revenue Service typically processes the return within eight to twelve weeks, though complex filings may take longer. The agency may send confirmation notices or request additional documentation if further review is needed. If taxes are owed, penalties and interest continue to accrue until complete payment. 

Companies unable to pay immediately may use Form 9465 to request an installment agreement. If the IRS proposes adjustments or assesses additional tax, the company can appeal within the specified period shown in the notice.

FAQs

How do estimated tax payments affect my Form 1120-L (2023) filing?

To reduce federal income tax liability, life insurance companies must report all estimated tax payments made during the tax year. Companies that fail to make proper estimated taxes may owe an estimated tax penalty, which can increase if payments are not timely or complete.

Does the corporate alternative minimum tax apply to life insurance companies?

Most life insurance companies are exempt from the corporate alternative minimum tax, but they must still compute taxable income accurately. Certain exceptions may apply depending on investment income, tax-exempt investments, or dividends received deductions.

What financial information should be included with my tax return?

Companies should attach balance sheets, Schedule L, and supporting statements showing retained earnings, depreciable assets, and policy loans. Complete schedules must accurately reflect total receipts, investment income, interest income, and other amounts paid during the year.

Can life insurance companies e-file IRS Form 1120-L (2023)?

Electronic filing (e-filing) was not available for standalone 2023 filings. Companies were required to file on paper; however, timely filing ensures compliance and helps avoid late filing penalties. Future tax filings may permit e-file submissions under updated IRS rules.

What if my insurance company cannot pay the full tax on time?

If taxes cannot be paid in full, the company should still file on time to avoid additional penalties. The IRS may accept an installment agreement or consider reasonable cause for late payment. Interest will continue to accrue until all taxes are fully paid.