What IRS Form 1120-PC (2017) Is For

Form 1120-PC (2017) is the corporate income tax return used by property and casualty insurance companies to report income, deductions, and credits for federal income tax purposes. Every domestic corporation, foreign corporation engaged in a U.S. insurance business, and nonlife insurance company must file if they had gross receipts or taxable income during the tax year. This form determines the income tax liability, including alternative minimum tax, general business credit, and foreign tax credit, for companies meeting abnormal insurance losses or paying premiums for flood insurance.

When You’d Use Form 1120-PC for 2017 (Late or Amended Filing)

Companies use the 2017 version of Form 1120-PC if they must file a late or amended return for a prior year. This includes situations where unpaid tax or additional income was discovered, or when the IRS issued a penalty notice. Filing after the original deadline may trigger an estimated tax penalty, but payment of all tax due can help limit additional interest. For 2017 filings, refund claims generally expire three years after the original due date or two years after the tax is paid.

Key Rules or Details for 2017

• Corporate income tax rate: Property and casualty insurance companies paid taxes based on the pre-TCJA rates, which were in effect before the 2018 law changes that reduced corporate tax rates.
  
  
• Estimated taxes: Companies with large taxable or net income had to make timely estimated payments to avoid the tax penalty.
  
  
• Capital assets sold: Sales of capital assets, including bonds or other investments, were reported on Schedule D and affected net capital loss carryovers.
  
  
• Foreign corporations: A foreign corporation engaged in U.S. business operations was required to report taxable investment income and apply the correct foreign tax credit.
  
  
• Life insurance reserves: Life insurance companies and casualty insurance companies used different computation methods for unearned premiums and life insurance reserves.
  
  
• Dividends received deduction: Corporate filers claimed this deduction on dividends from domestic corporations, reducing gross income for insurance company groups.
  
  
• Balance sheets: Each return required detailed balance sheets and annual statement data consistent with NAIC yearly statement rules.
  
  
• Controlled group reporting: Members of a controlled group had to share tax information and properly allocate deductions under Internal Revenue Code section 1561.
  
  
• Affordable Care Act provisions: The Affordable Care Act required health insurance entities to report medical loss ratio calculations and subscriber accounts on Schedule PH.
  
  
• Schedule PH and special income: Schedule PH captured special income for mutual fire or commercial-type insurance businesses, adjusting for abnormal losses.
  
  

Step-by-Step (High Level)

Step 1: Gather Transcripts

Collect prior year tax transcripts, including the corporation’s tax year data, to verify reported gross income, total assets, and any previous year minimum tax paid.

Step 2: Complete Form 1120-PC (2017)

Prepare the return using the correct tax computation, ensuring taxable income reflects all investment income, capital gain net income, and other income categories.

Step 3: Attach Required Schedules

Attach Schedule D for capital gains and capital losses, Schedule PH for health insurance reporting, and the NAIC annual statement with deduction accounts and retained earnings.

Step 4: File and Pay

You can mail your return to the address using IRS instructions or file it electronically. Include the full payment for unpaid tax and interest income amounts owed.

Step 5: Keep Detailed Records

Retain copies of all tax information, including balance sheets, book income calculations, and annual statement reports, to verify income and deduction accuracy.

Common Mistakes and How to Avoid Them

• Incorrect reserve reporting: Nonlife insurance companies sometimes miscalculate life insurance reserves or unearned premiums. Use the NAIC annual statement for accurate computation.
  
  
• Missing foreign tax credit forms: Foreign corporations or a foreign person owning U.S. entities must complete Form 1118 to claim proper foreign tax credit amounts.
  
  
• Omitting capital gains details: Many filers fail to report capital assets sold or net capital loss carryovers on Schedule D, resulting in IRS adjustments and penalties, so all sales and carryovers should be accurately reported on Schedule D.
  
  
• Wrong employer identification number: The employer identification number (EIN) must match IRS records for the domestic corporation or attorney-in-fact filing on its behalf.
  
  
• Improper deduction accounts: Overstating or failing to document amounts paid for abnormal insurance losses can delay IRS processing, so companies should maintain clear supporting documentation for each deduction.
  
  
• Balance sheet errors: Inconsistent balance sheets or annual statement data can lead to mismatches between taxable income and book income figures. Ensure consistency between tax returns and annual statement data to align book and taxable income.
  
  
• Affordable Care Act misreporting: Insurance companies offering health insurance must properly complete Schedule PH to report medical loss ratio and subscriber accounts.
  
  

What Happens After You File

After submitting Form 1120-PC, the IRS reviews the insurance company’s tax return and verifies taxable income, gross receipts, and capital gains. Processing may take eight to sixteen weeks. Any additional income tax liability or interest is billed by mail. Companies with unpaid tax can request an installment agreement. Domestic and foreign corporations that disagree with IRS findings may appeal through the Office of Appeals. Maintaining annual statement records ensures a smooth review and protects against future penalty notices.

FAQs

How does IRS Form 1120-PC (2017): P&C Insurance Tax Return affect my investment income?

Investment income, including taxable and interest income, must be reported as part of taxable income on Form 1120-PC. This ensures accurate corporate income tax and prevents estimated tax penalty assessments.

How do insurance companies calculate capital gains for Form 1120-PC?

Casualty insurance companies report capital gains, net income, and capital losses on Schedule D. The IRS uses this data to compute taxable income and apply prior-year minimum tax rules.

What does the dividends received deduction mean for insurance companies?

The dividends received deduction reduces gross income for domestic corporations receiving dividends from other insurance companies. It prevents double taxation and affects the total net income for tax computation.

Why must my insurance company include its employer identification number on Form 1120-PC?

The employer identification number identifies the corporation for IRS records. Missing or incorrect numbers can cause delays in processing or misapplied payments for unpaid tax.

How do controlled group rules impact companies filing Form 1120-PC?

Controlled group members must allocate income, deduction accounts, and general business credit among affiliates. This ensures the corporate income tax is properly calculated under Internal Revenue Code section 1561.

How does the Affordable Care Act apply to insurance company tax returns?

Insurance companies subject to the Affordable Care Act must file Schedule PH to report medical loss ratio, health insurance subscriber accounts, and other ACA-related special income.

How are balance sheets used when completing Form 1120-PC?

Balance sheets show total assets, gross rents, retained earnings, and unearned premiums. These details reconcile book income with taxable income for insurance company reporting accuracy.