Are you responsible for filing taxes for a corporation or LLC? Then you’ll need to know about IRS Form 1120. If this is your first time filing taxes for a corporation or LLC, or you simply need a refresher before you start this year’s taxes, read on to learn everything you need to know about Form 1120 this tax season.
What is IRS Form 1120
IRS Form 1120, the U.S. Corporation Income Tax Return, is the central filing document for incorporated businesses, like corporations and LLCs. This document totals “the corporation’s income, gains, losses, deductions, credits, and to figure the income tax liability of a corporation.” It’s a considerably dense document. At 6 pages long and with 7 sections, it’s substantially longer than personal tax forms like the W-2 and 1099.
Depending on the nature of your business, there are many different versions of IRS Form 1120. Most corporations will just fill out the standard Form 1120, but a number of industries have special versions of IRS Form 1120. Those include:
- Form 1120-C: For cooperatives, including farmers’ cooperatives
- Form 1120-F: Foreign corporations
- Form 1120-FSC: Foreign sales corporations
- Form 1120-H: Condominium management, residential real estate management, or timeshare association that elects to be treated as an HOA
- Form 1120-L: Life insurance company
- Form 1120-ND: Fund set up to pay for nuclear decommissioning costs
- Form 1120-PC: Property and casualty insurance company
- Form 1120-POL: Political organization
- Form 1120-REIT: Real estate investment trust
- Form 1120-RIC: Regulated investment company
- Form 1120-S: S corporation
- Form 1120-SF: Settlement fund
Who Needs to File Form 1120
All non-exempt corporations are required to file IRS Form 1120 each year, even those who are in bankruptcy or don’t have taxable income. Those may include:
- Businesses that elect to be taxed as corporations. These entities need to file Form 8832, Entity Classification Election, along with Form 1120.
- Limited liability companies (LLCs), if they’ve elected to be taxed as corporations. LLCs with more than one owner are typically considered a partnership and must file Form 1065 instead, whereas a single-member LLC reports income along with the owner’s personal federal tax return.
- Foreign-owned domestic disregarded entities may elect to file Form 1120, though these entities are not required to file a US income tax return
- Qualified opportunity funds
- Qualified opportunity investment
Form 1120 is not a standard tax form for small businesses, so if you’re completing your small business taxes, it’s unlikely you’ll have to complete it. This is only for businesses that operate as one of the above corporations and a few other very rare circumstances.
Form 1120 Instructions
Your Form 1120 should be filed according to the year in which your tax year began. For instance, you should file your 2019 tax return for the fiscal year that begins in 2019 and ends in 2020. Let’s review specific instructions for Form 1120.
This section will include all income, no matter which source you’ve derived it from.
- Line 1: Enter your gross receipts or sales in Line 1a, except those reported on lines 4 through 10. This includes advanced payments, which should be reported in the year you received them. In Line 1b, enter your total returns and allowances, including credit and cash refunds.
- Line 2: Enter your cost of goods sold.
- Line 4: Enter your dividends and inclusions. This number will be determined using the worksheet for Schedule C.
- Line 5: Enter your taxable interest. Do not offset interest expense against interest income. This is the total.
- Line 6: Enter gross amount received for the rental of the property, minus expenses related to the property.
- Line 10: Enter any other taxable income.
Before starting this section, be sure to review the instructions for limitations on deductions.
- Line 12: Enter deductible officers’ compensation here and here only.
- Line 13: Enter total salaries and wages paid by the corporation throughout the tax year here and here only.
- Line 14: Enter the cost of repair and maintenance that is not claimed elsewhere, like those that do not add value to your property or prolong its life. These are things like labor and supplies.
- Line 15: Enter any debts you have that became worthless over the course of the year.
- Line 16: Enter the cost of any corporation-rented or leased vehicles. Include the total annual rent or lease expense paid throughout the year.
- Line 17: Enter any taxes that were paid throughout the year, with some limitations.
- Line 18: If the corporation used a loan for more than one purpose, you must make an interest allocation. Do not offset interest income against interest expense.
- Line 19: Enter any charitable contributions paid within the tax year. Note that there are a number of limitations for specific situations, including cash contributions, contributions over $250, non-cash contributions, and more.
- Line 20: Enter depreciation
- Line 21: Enter depletion according to sections 613 and 613A
- Line 23: Enter total deduction based on contributions to funded deferred compensation plans. These typically are filed alongside Form 5500 or Form 5500-SF
- Line 26: Total your deductions that are not accounted for elsewhere on the phone. Along with this, attach a statement with each type of deduction and amount deductible.
- Line 30: Enter your minimal taxable income. If 0 or less, the corporation may have a net operating loss that can be carried forward or back as a deduction in other tax years.
- Line 34: If you have an estimated tax penalty, detail it here and file Form 2220.
Schedule C: Dividends, Inclusions, and Special Deductions
In Schedule C, you’ll detail dividends from foreign and domestic corporations owned by your corporation, certain types of stock (debt-financed, public utility stock), foreign subsidiaries, affiliated group members, and more. You’ll also detail inclusions and other types of uncommon income. On Line 23, total your dividends and inclusions. On Line 24, total your special deductions.
Schedule G: Allocation of Patronage and Nonpatronage Income and Deductions
This section should only be completed if the cooperative’s total receipts for the tax year and total assets at the end of the tax year are greater than $250,000.
Schedule J: Tax Computation
- Line 1: Check the box if the corporation is a member of the controlled group. If so, be sure to attach Schedule O.
- Line 2: Calculate your taxable income by 21%.
- Line 5: Enter any foreign tax credits if applicable. Be sure to attach form 1118.
- Line 6: Total above credits.
- Line 8: Your corporation will only be taxed as a personal holding company if at least 60% of its income is personal holding company income, or at least 50% of stock is owned by 5 or less people.
- Line 9: Total all of the above.
Schedule K: Other Information
These items only need to be completed as applicable. Your corporation may answer all or none of the questions, or any number between.
Schedule L: Balance Sheets per Books
This section only needs to be completed if your corporation’s total receipts and total assets at the end of the tax year are over $250,000. The information completed here must agree with the corporation’s records.
Schedule M-1: Reconciliation of Income (Loss) per Books With Income Per Return
Only complete this section if your corporation’s total receipts and total assets at the end of the tax year are over $250,000.
When to File Form 1120
Unlike personal taxes, tax filing deadlines for corporations can shift according to the corporation’s tax year. As a guideline, a corporation is required to file its IRS 1120 “by the 15th day of the 4th month after the end of its tax year.” So, for a corporation with the tax year ending December 30, Form 1120 must be filed by April 15th. There are, however, a few extenuating circumstances.
- For new corporations filing a short-period return: file by the 15th day of the 4th month after the short period ends
- For corporations that have dissolved: file by the 15th day of the 4th month after dissolving
- For corporations with a fiscal tax year ending June 30: file by the 15th day of the 3rd month after the end of its tax year
If your due date for IRS Form 1120 falls on a Saturday, Sunday, or legal holiday, simply file on the next business day.
Completing IRS Form 1120 can be a complex endeavor, even for those who have completed many times. If you are feeling unsure about the process, contact us for tax preparation services. Our tax experts are well versed in taxes for corporations and can assist with accounting services, as well. Contact us today.