What IRS Form 1120-L (2019) Is For

IRS Form 1120-L (2019) is the federal income tax return used by life insurance companies to report income, gains, losses, deductions, and credits for tax purposes. It determines how much tax a life insurance company owes the Internal Revenue Service. This form applies to all domestic corporations engaged in the life insurance business and foreign corporations that would qualify as life insurance companies under the Internal Revenue Code.

The form also details taxable income from investment income, policyholder reserves, and other life insurance operations. Companies use it to account for tax-exempt investments, capital gains, and the dividends received as a deduction when computing taxable income. The information ensures compliance with IRS procedural rules for federal income tax purposes while supporting accurate reporting of retained earnings, total assets, and income tax liability.

When You’d Use IRS Form 1120-L (2019)

Life insurance companies use IRS Form 1120-L (2019) when they need to file or correct their income tax return for the 2019 tax year. This includes situations involving late filings, amended returns, or responses to IRS correspondence.

• Filing a late return: This applies when a company missed the original 2019 filing deadline due to incomplete financial records, accounting discrepancies, or delays in receiving required data.
  
  
• Filing an amended return: This is necessary when a company identifies errors, claims overlooked deductions, or adjusts previously reported taxable income after filing its original 2019 return.
  
  
• Responding to IRS notices: This is required when the IRS issues a notice concerning unfiled, inaccurate, or incomplete returns that must be corrected to maintain compliance.
  
  
• Addressing unpaid tax obligations: This helps companies report any remaining balances, reconcile prior underpayments, and update the total income tax liability for the 2019 tax year.

Key Rules or Details for Tax Year 2019

IRS Form 1120-L (2019) introduced several procedural and reporting changes that life insurance companies had to follow. These updates affected how taxable income and reserves were computed for federal income tax purposes.

• Reserve Transition Relief lines: Lines 3b and 11b were added under section 13517(c)(3) of the Tax Cuts and Jobs Act to allow transitional adjustments for life insurance reserves.
  
  
• Repeal of section 847: Lines 6 and 28b were reserved for future use after section 847 was repealed, eliminating previous deductions for special estimated tax reserve accounts.
  
  
• Increased late-filing penalty: Returns filed more than 60 days past the due date became subject to a minimum penalty of $435 or 100 percent of the tax due, whichever is less.
  
  
• Updated reserve rules: Life insurance companies were required to compute reserves in accordance with revised sections 807 and 816 of the Internal Revenue Code.
  
  
• Consistency with annual statements: To ensure accuracy, companies must reconcile their NAIC annual statement with reported taxable income, deductions, and life insurance reserves.

Step-by-Step (High Level)

Filing IRS Form 1120-L (2019) requires careful preparation and accurate recordkeeping to ensure compliance with federal income tax laws. The process involves several key steps that all life insurance companies should follow.

• Gather records: Obtain the company’s NAIC annual statement, prior-year tax filings, and IRS account transcripts to confirm the accuracy of reported figures.
  
  
• Use the correct form: Complete the 2019 version of Form 1120-L and apply the tax law provisions that were in effect for that year.
  
  
• Attach required schedules: Include all applicable schedules such as Schedule F for reserves, Schedule G for policy acquisition expenses, and Schedule K for computing taxable income and credits.
  
  
• File and pay: Submit the completed form electronically or by mail to the Ogden, Utah, IRS processing center, and include payment or Form 9465 to request an installment agreement if necessary.
  
  
• Keep documentation: Retain copies of the filed return, supporting schedules, balance sheets, and all correspondence for at least three years.

Common Mistakes and How to Avoid Them

Even experienced life insurance companies can make errors when filing IRS Form 1120-L (2019), but most can be prevented with careful review and documentation.

• Incorrect reserve calculations: Review reserve computations under sections 807 and 816 of the Internal Revenue Code to confirm that policy and deficiency reserves are accurately calculated.
  
  
• Omitted Reserve Transition Relief reporting: Verify that lines 3b and 11b are completed if the company qualifies for Reserve Transition Relief adjustments.
  
  
• Missing required schedules: Attach all necessary schedules, such as F, G, and K, and ensure the amounts reconcile with the NAIC annual statement.
  
  
• Using the wrong form year: Always confirm that the 2019 version of Form 1120-L is used, as forms from other years may contain outdated or invalid line references.
  
  
• Incomplete electronic filings: Keep copies of the NAIC annual statement and supporting documentation even when filing electronically, since these may be required during IRS review.

What Happens After You File IRS Form 1120-L (2019)

After a life insurance company files IRS Form 1120-L (2019), the IRS reviews the return to confirm accuracy and completeness. Processing times can vary, especially for late or amended filings that require manual review. The IRS sends a notice outlining payment instructions or installment plan options if additional taxes are due. Refunds are issued if the company filed within the refund window and reported an overpayment. 

Sometimes the IRS may request supporting documentation, such as the NAIC annual statement or schedules for computing taxable income. If discrepancies or understatements are found, the company may receive an examination notice or be referred to the Office of Appeals for resolution. Maintaining organized records and accurate supporting statements helps ensure smoother post-filing communication and reduces the likelihood of penalties or further audits.

FAQs

How did the corporate alternative minimum tax affect 2019 filings?

In 2019, the corporate alternative minimum tax did not apply to most insurers, simplifying tax calculations. However, companies operating in a foreign country were advised to follow interim guidance and consider how the later Inflation Reduction Act would impact intangible assets and future tax years.

How is insurance company income tax calculated on Form 1120-L (2019)?

Insurance company income tax for 2019 was based on taxable income from underwriting, reserves, and investment gains. Under interim guidance, companies with operations in a foreign country had to account for intangible assets, ensuring compliance before the Inflation Reduction Act introduced new corporate reporting considerations.

Why must insurers complete Schedule attachments on Form 1120-L (2019)?

To support transparency, insurers must complete Schedule attachments detailing reserves, deductions, and intangible assets. These schedules help validate data for U.S. and foreign country operations, aligning with interim guidance preceding Inflation Reduction Act updates on corporate income reporting.

What should a company include in its income tax return for 2019?

A company income tax return for 2019 had to include all financial statements, reserve computations, and intangible assets valuations. For insurers with business in a foreign country, interim guidance clarified reporting methods before the Inflation Reduction Act expanded global tax compliance requirements.

How is adjusted financial statement income reported under Form 1120-L (2019)?

Adjusted financial statement income included U.S. and foreign country operations, factoring in intangible assets like goodwill and deferred acquisition costs. The IRS issued interim guidance to ensure consistency in reporting until the Inflation Reduction Act established new rules affecting insurance company disclosures.