Form 1120 Tax Year 2010 Checklist – Paper Filing Only
Why 2010 Form 1120 Is Unique
The 2010 Form 1120 includes a special start-up cost deduction election (up to $10,000 under IRC §195(b)(3)), expanded five-year NOL carryback options for eligible small business taxpayers from 2008–2009 losses, and a newly required Schedule UTP (Uncertain Tax Position Statement) for certain tax positions. The domestic production activities deduction remains available at 9% of QPAI, subject to wage limitations.
Year-Specific Programs Applicable to 2010 Form 1120
Section 195 allows corporations to elect a deduction of up to $10,000 in business start-up costs in 2010, with the remainder amortized over 180 months. IRC §172(b) permits most corporate taxpayers to elect to carry back 2008 and 2009 NOLs up to five years (instead of the standard two years) and to waive carryback entirely if elected on Schedule K, line 11. Schedule UTP (Uncertain Tax Position Statement) is required if the corporation has uncertain tax positions under FIN 48 standards and must be filed with the 2010 return, if needed.
Ten-Step Checklist for Form 1120 Tax Year 2010
Step 1: Determine Filing Requirement and Accounting Method
All domestic corporations must file Form 1120 unless exempt under IRC §501(c). Select the accounting method on Schedule K, line 1 (cash, accrual, or other). If you elect the accrual method and average gross receipts exceed $5 million, you must use the accrual method and record the election. Special rules: Farming corporations must use the accrual method per §447; dealers in securities must use the mark-to-market method per §475.
Step 2: Verify and Assemble Required Schedules Based on Asset and Receipt Thresholds
Gather total receipts (line 1a plus lines 4–10, page 1) and total assets (Schedule L, line 15, column d, end of year). If both total receipts AND total assets are less than $250,000, Schedules L, M-1, and M-2 are not required. If total assets exceed $10 million, Schedule M-3 must be used in place of Schedule M-1. Suppose total receipts are $500,000 or more, complete Schedule E (Compensation of Officers). Prepare Schedule A (Cost of Goods Sold) if you have inventory or costs of goods.
Step 3: Complete Income Section with 2010-Specific Items
Report gross receipts or sales on line 1a, less returns and allowances on line 1b, resulting balance on line 1—report cost of goods sold (from Schedule A, line 8) on line 2. Include dividend income (Schedule C, line 19) on line 4. Report domestic production activities only after calculating QPAI; prepare Form 8903 and attach to return (line 25).
Step 4: Apply Domestic Production Activities Deduction (DPAD) Limitation
Form 8903 deduction claimed on line 25 cannot exceed the lesser of (a) 9% of qualified production activities income, (b) 9% of taxable income before the DPAD, or (c) 50% of Form W-2 wages paid to employees engaged in domestic production. If DPAD produces or increases an NOL, no carryback is permitted; the NOL must be carried forward only. Attach completed Form 8903 to your return.
Step 5: Report Deductions and Verify Schedule E Requirement
List compensation of officers on line 12 (from Schedule E, line 4, if total receipts exceed $500,000). Report total deductions on line 27 (sum of lines 12–26). Charitable contributions (line 24) are limited to 10% of taxable income before NOL deductions and special deductions; any excess carries forward for five years. If total receipts are $500,000 or more, you must complete Schedule E, showing the officer's name, Social Security number, percentage of time devoted to business, and compensation amount.
Step 6: Calculate Taxable Income and Special Deductions
Taxable income before NOL deduction and special deductions = line 11 minus line 27 (line 28). Report the net operating loss deduction on line 29a (if applicable; see Step 9). Report special deductions from Schedule C, line 20, on line 29b. Calculate final taxable income on line 30 (line 28 minus line 29c). If a consolidated return, attach Form 851 (Affiliations Schedule) listing all affiliated corporations and their assets.
Step 7: Complete Alternative Minimum Tax Calculation (Form 4626)
Attach Form 4626 if the corporation may owe AMT. For 2010, if the tentative AMT exceeds the regular tax, the corporation owes AMT. List Form 4626 line 3 on Schedule J, line 3. If the corporation has an AMT credit carryforward from prior years, line 5d of Schedule J applies. Do not file Form 4626 if total receipts and total assets are both under $250,000 unless specifically instructed.
Step 8: Report Tax Computation and Estimated Tax Penalty
Complete Schedule J (Tax Computation). On line 2, report the income tax and check if the qualified personal service corporation applies. Add the alternative minimum tax (line 3) to compute the total tax on line 10. On Form 1120 page 1, line 33, report the estimated tax penalty if the corporation failed to make required quarterly payments. Complete Form 2220 (Underpayment of Estimated Tax by Corporations) if a penalty applies and attach it to the return. Required installments of estimated tax are due by the 15th day of the 4th, 6th, 9th, and 12th months of the tax year if the total tax is expected to be $500 or more.
Step 9: Elect to Waive or Carry Back Net Operating Loss (if applicable)
If the corporation generated an NOL for 2010, you may elect to forego the carryback period entirely and carry the NOL forward only. Check Schedule K, line 11, to make this election. The election is irrevocable once made on a timely filed return. If not elected, most corporate NOLs carry back two years (or five years if the corporation qualifies as an eligible small business taxpayer for 2008 or 2009 NOLs under Emergency Economic Stabilization Act provisions). Attach a statement showing NOL computation and carryback/carryforward allocation.
Step 10: Prepare Reconciliation Schedules, Sign, and File
Complete Schedule L (Balance Sheets per Books) at the beginning and end of the tax year if total assets or receipts exceed $250,000. Complete Schedule M-1 (Reconciliation of Income per Books with Income per Return) or Schedule M-3 (if total assets are $10 million or more).
Complete Schedule M-2 (Analysis of Unappropriated Retained Earnings per Books). Round all amounts to whole dollars or use cents consistently—sign and date one under penalty of perjury. If a preparer prepared the return, the preparer must sign and provide an EIN or provide an assembled return in the following order: Form 1120 (pages 1–5), then Schedule N, Schedule O, Form 4626 (if applicable), Form 1125-A (Cost of Goods Sold, if applicable), Schedule A, Schedule C, Schedule E, Schedule J, Schedule K, Schedule L, Schedule M-1 or M-3, Schedule M-2, then supporting attachments (Forms 8903, 1118, 4797, etc.). See the IRS "Where to File" page for Form 1120 2010 to determine the correct mailing address based on the corporation's location.
Form 1120 Line Changes for 2010
Change: Schedule UTP (Uncertain Tax Position Statement) Requirement
Prior year instruction: Corporations reported uncertain tax positions on Schedule UTP only if required by the IRS in specific industries or circumstances.
Current year instruction (2010): For 2010, Schedule UTP is required only for corporations with total assets of $100 million or more (not all corporations), and only if the corporation or a related party issued audited financial statements and recorded a liability for unrecognized tax benefits under FIN 48 standards. The $100 million threshold is specific to 2010; it will be phased down to $50 million for 2012 and $10 million for 2014. Answer Schedule K, Question 14, to determine if Schedule UTP is required. If the answer is "Yes," complete and attach Schedule UTP to the 2010 tax return.
Change type: Added
Change: Start-Up Cost Deduction Election for 2010
Prior year instruction: Corporations deducted start-up costs under IRC §195 according to general rules (three-year amortization period after business begins).
Current year instruction (2010): For tax years beginning in 2010, a corporation can elect to deduct up to $10,000 of start-up costs in the tax year the trade or business begins. Excess start-up costs are amortized over a period of 180 months. Attach the election to the 2010 return. See Instructions for Form 4562.
Change type: Updated
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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.
