Form 1120 Tax Year 2018 Checklist
Why 2018 is Unique
2018 Form 1120 incorporates Tax Cuts and Jobs Act (TCJA) provisions adequate for tax years beginning after December 31, 2017. Key changes include Section 965 transition tax reporting (line 32), elimination of corporate alternative minimum tax, new Section 250 deductions for FDII and GILTI (Form 8993), new business interest limitation rules (Form 8990 required for certain taxpayers), Section 245A foreign dividend deduction, and repeal of the Domestic Production Activities Deduction (DPAD), all mandatory for 2018 filings.
Year-Specific Programs Applying to This Form
2018 Form 1120 must report Section 965 transition tax liability on lines 32 and Schedule J, Part II if the corporation held interests in specified foreign corporations. Corporations with $500 million or more in gross receipts in any of the three preceding tax years must complete Form 8991 (Base Erosion and Anti-Abuse Tax). For tax years beginning after 2017, all corporations with business interest expense must consider Form 8990 filing requirements unless they are exempt.
10-Step 2018 Form 1120 Checklist
Step 1: Verify Filing Requirements and Document Gathering
Confirm the corporation is domestic and filing for the tax year 2018. Gather EIN letter, prior year return, financial statements, W-2 schedules, 1099 forms, Schedule K-1s from partnerships/S-corps, and capital asset transaction records. If the corporation held any foreign corporation interests, obtain Form 5471 documentation for the Section 965 computation.
Step 2: Determine Schedule M-1 or M-3 Requirement
Complete Schedule M-3 (Form 1120) if total assets at the end of the tax year exceed $10 million. File Schedule M-1 if gross receipts or total assets exceed $250,000 but are below $10 million. Corporations with both receipts and assets under $250,000 may skip Schedules L, M-1, and M-2 only if they answer “Yes” to question 13 of Schedule K.
Step 3: Complete Income Lines 1a-10 (Identify Section 965 Inclusion)
Report gross receipts on line 1a; returns/allowances on line 1b; balance on line 1c. If a Section 965 inclusion applies, include the full amount in line 7 (other income) per the 2018 Instructions section 965 guidance. Write “SEC 965” on the dotted line to the left of Line 7. Attach supporting worksheets or Form 965-B if applicable.
Step 4: Report Deductions Lines 12-26 (Officer Compensation with Form 1125-E)
If total receipts exceed $500,000, attach Form 1125-E reporting all officer compensation (name, SSN, percent ownership, compensation total)—report officer compensation on line 12 only as shown on Form 1125-E 2018. Include only ordinary and necessary business expenses; note that certain deductions (e.g., business meal expenses limited to 50%) and penalties or fines are not fully deductible.
Step 5: Compute Taxable Income Before Special Deductions (Lines 27-29)
Total deductions (line 27) = sum of lines 12-26. Subtract line 27 from line 11 (total income) to reach line 28. Enter NOL deduction on line 29a per Form 1120-G NOL carryover guidance. Report special deductions from Schedule C line 24, column (c), on line 29b.
Note: The Tax Cuts and Jobs Act eliminated NOL carrybacks generally, but the CARES Act retroactively restored a five-year carryback period for NOLs arising in taxable years beginning in 2018, 2019, and 2020. Only certain farming losses and non-life insurance companies can carry back NOLs arising after 2020.
Step 6: Complete Schedule C, Dividends and Special Deductions
Report dividends/inclusions in column (a). Apply the percentage in column (b) per the 2018 rules. Compute the special deduction in column (c) = (a) × (b). Include any Section 965(a) inclusions. If a corporation received dividends from 10%-owned foreign corporations, it claims a 100% deduction under Section 245A (new for 2018). Total special deductions (line 24) flow to Form 1120 page 1, line 29b.
Step 7: Assess Form 8990 (Business Interest Limitation) Requirement
If the corporation deducted business interest expense and has gross receipts exceeding $25 million (2024 threshold; the 2018 threshold differs—consult Instructions for Form 8990 2018 revision), complete and attach Form 8990. Do not file Form 8990 if only business interest from excepted trades or businesses (electing real property trades, farming, utilities) is present. Disallowed business interest expense carries forward indefinitely.
Step 8: Determine Form 8991 (Base Erosion Minimum Tax) Applicability
If the corporation had gross receipts of at least $500 million in any one of the three tax years preceding the current tax year (2015, 2016, or 2017), complete Form 8991 to compute the base erosion minimum tax. 2018 applies a 5% threshold (increasing to 10% in subsequent years). Report the result on Schedule J, Part I, line 3.
Step 9: Compute Section 965 Tax and Payment (Schedule J, Part II)
If Section 965 inclusion was reported in line 7, compute Section 965 net tax liability using Form 965-B (not provided in standard 1120 package; refer to separate Instructions for Form 965-B). Elections are available for payment in eight annual installments per IRC Section 965(h). Report the 2018 net 965 tax liability paid on Schedule J, Part II, line 12, and on Form 1120, page 1, line 32.
Step 10: Sign, Assemble, and Verify Schedules and Attachments
The return must be signed and dated by the president, vice president, treasurer, assistant treasurer, chief accounting officer, or other authorized corporate officer. For paid preparers: The preparer must sign and include their PTIN, date, and firm information.
Assemble in order: Schedule N, Schedule D, Schedule O, Form 8050, Form 1125-A, Form 4136, Form 8941, Form 3800, other schedules alphabetically, other forms numerically, and supporting statements.
Enter the corporation name and EIN on all attachments. If Form 8990, 8991, 8993, Schedule M-3, or Schedule UTP applies, attach it to the address specified in the corporation’s location and asset threshold as per the IRS 2018 “Where to File” page.
2018 Schedule/Line Changes for Form 1120
Addition: Schedule J, Part II (Section 965 Payments)
2018 introduced a dedicated line 12 for reporting the 2018 net tax liability of $965, reflecting the new Section 965 transition tax rules effective for 2017 inclusions and payable/reportable on 2018 returns.
Update: Schedule C Special Deductions
The 2018 Form 1120 Schedule C clarified Section 965(a) inclusion treatment and added reference to the Section 245A participation exemption dividend deduction (100% deduction for the foreign-source portion of dividends from specified 10%-owned foreign corporations).
Addition: Schedule K, Question 22
New for 2018: Question asking whether the corporation had gross receipts of at least $500 million in any of the three preceding tax years (triggering the Form 8991 requirement).
Addition: Schedule K, Question 23
New for 2018 instructions: Clarification regarding Form 8993 (FDII/GILTI deduction) attachment for domestic corporations claiming Section 250 deduction.
Compliance Notes and Final Guidance
Required Attachments and Documentation
The 2018 Form 1120 requires complete documentation of all income, deductions, credits, and special computations. Corporations claiming Section 965 transition tax benefits must attach Form 965-B with detailed calculations of Section 965(a) inclusions and Section 965(c) deductions. For corporations with foreign operations, Form 5471 must be filed for each controlled foreign corporation, and Form 8993 is required when claiming Section 250 deductions for FDII or GILTI.
Business Interest Limitation Considerations
The new Section 163(j) business interest limitation has fundamentally changed interest deductibility for tax years 2018 and later. Corporations must carefully evaluate whether Form 8990 is required, considering their average annual gross receipts and the nature of their business activities. Excepted trades or businesses (real property, farming, regulated utilities) may elect out of the limitation but must follow specific depreciation rules under the Alternative Depreciation System.
Base Erosion and Anti-Abuse Tax (BEAT)
Large corporations meeting the $500 million gross receipts threshold must evaluate BEAT liability using Form 8991. The 2018 base erosion percentage threshold is 3% (5% for banks and securities dealers), increasing to 3% generally in later years. BEAT applies a minimum tax rate to modified taxable income, potentially eliminating the benefit of certain deductions and payments to foreign-related parties.
Section 245A Dividends Received Deduction.
The 2018 participation exemption under Section 245A allows a 100% deduction for the foreign-source portion of dividends received from specified 10%-owned foreign corporations. This change in legislation represents a fundamental shift from worldwide to territorial taxation. Corporations must maintain detailed records documenting foreign source income and applicable holding period requirements to substantiate this deduction.
This checklist reflects the 2018 Instructions for Form 1120 and referenced IRS publications. Refer to the current year guidance for subsequent filings.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
