Don't be bogged down by the details. With a bit of readiness, Form 1120 is a breeze to conquer. Let's explore who should file it, the process, and the business records you should have ready to tackle the task.
TL;DR
- U.S. companies handle their taxes using Form 1120, paying what's owed based on the return.
- Businesses need to play by the rules that apply to them when they're doing their tax returns.
- Corporate income taxes are calculated at the corporate income tax rate, not your regular personal tax rate.
- Form 1120 isn't just for paying taxes; it's also a tool to figure out how much a business owes in income tax.
- Every local company has to throw in an 1120 form. Even if they didn't make any money, they still have to spill the beans on their income, gains, losses, deductions, and credits to determine the tax situation.
- LLCs, farms doing business as corporations, and those companies picking corporate taxation must get in on the Form 1120 action.
- You can file Form 1120 online or go old school and mail it. If you're mailing, fill out the form and pop it in the mail.
- Have you messed up on your Form 1120? No worries, use Form 1120X, the Amended U.S. Corporation Income Tax Return, to fix things. Generally, you have to do this within three years of the first try.
What's Form 1120?
Form 1120 is the tax document employed by C corporations (and LLCs filing as corporations) for reporting their income taxes.
After finishing Form 1120, you'll get a sense of your corporation's tax liability. However, instead of paying the total amount to the IRS in one go, every corporation has to make quarterly estimated tax payments.
Filing Guidelines for Form 1120
You can choose to submit Form 1120 through either online or mail channels. For a quicker, more straightforward process that reduces paperwork, we strongly advise utilising the IRS e-file service.
Moreover, it's worth noting that certain large C corporations reporting assets of $10 million or more are obligated to file online. Check whether your C corporation falls under this requirement.
Form 1120 Filing Deadline
The deadline for submitting Form 1120 for the 2023 calendar year was April 15, 2024. You can refer to our corporate tax deadlines guide to stay on top of due dates and ensure you never miss a filing deadline.
Do you still need clarification? Let's Inkle take care of your Form 1120.
What are the different types of Form 1120?
Different organisational setups come with their own tax paperwork, such as:
- Farmers' co-ops come with Form 1120-C.
- Corporations outside U.S. borders go for Form 1120-F.
- If you're running a show for condos, residential real estate, or timeshares with homeowners association treatment, Form 1120-H is correct.
- Life insurance companies have their special Form 1120-L.
- Political organisations go with Form 1120-POL.
- S corporations need to work with Form 1120-S.
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Filing Form 1120: Step-by-Step Guide
Form 1120 is spread across six pages, with the initial page covering four key sections:
- Basic corporation details
- Income
- Deductions
- Tax, refundable credits, and payments
The subsequent five pages dive into more specific details, such as dividends, unique deductions, balance sheets, and additional financial information.
Before submitting Form 1120, remember to sign and date the bottom of the first page.
Now, let's walk through the steps to complete Form 1120:
Step 1: Collect all the necessary information
It's smart to compile a checklist of essential details, whether you're managing Form 1120 on your own or relying on your accountant's expertise.
Make sure you have the following in hand:
- Employer Identification Number (EIN)
- Business incorporation date
- Total assets owned by your company
- Gross receipts
- Cost of goods sold (COGS)
- Total income
- Dividends earned
- Interest earned
- Royalties earned
- Capital gains
- Tax deductions
Step 2: Complete the majority of Page 1
Page 1 of Form 1120 requests fundamental details, offering the IRS an overview of your company's tax status. You can efficiently tackle most of these sections by referencing the information stored in your accounting software.
Step 3: Complete the Form 1120 Schedules
Depending on your specific situation, you should include additional forms, commonly referred to as schedules. Here are the schedules you should fill out when submitting tax Form 1120:
Schedule C: Dividends, Inclusions, and Special Deductions
Schedule C of Form 1120 is the space where a C corporation discloses dividends received from both foreign and domestic subsidiaries. This includes income from debt-financed and public utility stock, as well as earnings from affiliates and other entities. It's also the go-to for reporting less common types of income. Sum up all dividends and similar income on Line 23 and itemise any special deductions on Line 24. Just like individuals, C corporations can invest in stocks of other companies and are required to declare the dividend income from these investments annually on Schedule C.
Schedule J: Tax Computation
This segment calculates your tax obligations by incorporating details on your business tax credits and estimated tax payments. Tax credits are essentially dollar-for-dollar reductions on your tax liability.
Part I—Tax Computation
Specify whether the corporation is a controlled group member and include Schedule O. Determine income tax due and add any base erosion minimum tax from Form 8991.
Include tax credits, such as foreign tax credits from Form 1118, credits from Form 8834, general business credits from Form 3800, and others. Subtract these credits from the total tax.
Part II—Reserved For Future Use
Line 12 is reserved for potential updates or tax code changes and currently has no entries. No additional details are provided as this part is reserved for future use and holds no current application.
Part III—Payments and Refundable Credits
Note any overpayment credited from the previous year, estimated tax payments for the current year, and refunds applied for on Form 4466. Combine these with any tax deposited with Form 7004.
Record withholdings and sum up all payments, incorporating refundable credits from forms like Form 2439 and Form 4136 to determine the total payments and credits for the year.
Schedule K
On Schedule K, you should provide extra information about the owners and their interests in other companies. Complete this section if your corporation's total receipts and year-end assets exceed $250,000. It's crucial to ensure that the information aligns with the corporation's official records.
Schedule L
Schedule L mirrors your company's balance sheet as per your accounting records. To complete this section, refer to your accounting software and access the year-end balance sheet.
Schedule 1 tax form is utilised to report various types of income not listed on the 1040, including capital gains, alimony, unemployment payments, and gambling winnings.
Schedules M-1 and M-2
Due to variations in the treatment of certain expenses, such as depreciation, between the IRS and Generally Accepted Accounting Principles (GAAP), Schedules M-1 and M-2 play a crucial role in outlining these disparities to the IRS.
Step 4: Check for additional necessary schedules
Depending on the specific activities of your business, you might need to complete and append several additional forms. Some frequently required attachments include:
- Form 1125-A: Applicable to companies with a cost of goods sold
- Form 1125-E: Used to list compensations with gross receipts of $500,000 or more
- Form 4797: Required for the sale of any business property
- Form 4563: Utilised for calculating depreciation and amortisation
- Schedule D: Employed for documenting capital gains and losses
Step 5: Double-check and submit your return
Congratulations, you've completed the process! Once you and your tax team have reviewed the return, you can electronically file Form 1120 using tax software or give it to us.
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Compiling the Tax Documentation
To ensure the accurate processing of the corporation's tax return, it's essential to attach all related schedules and forms in a specific order immediately following the 6th page of Form 1120. The recommended sequence is as follows:
- Schedule N (Form 1120)
- Schedule D (Form 1120)
- Schedule O (Form 1120)
- Form 8050
- Form 1125-A
- Form 4136
- Form 8941
- Form 3800
- Any additional schedules, organised alphabetically
- Any additional forms arranged numerically
- Supporting documentation and extra attachments
Ensure all required fields on Form 1120 are filled out, avoiding using phrases like "See Attached" or "Available Upon Request" instead of actual details. If space on the forms or schedules is insufficient, attach additional sheets following the official format.
Supplementary documents should follow the same sequence as the related schedules or forms and be attached at the end. Each supplemental statement or attachment should include the corporation's name and Employer Identification Number (EIN).
Who Needs to Sign
To complete the signing and dating of the return, it should be done by:
- The president, vice president, treasurer, assistant treasurer, chief accounting officer, or any other authorised corporate officer.
- If filed by a receiver, trustee, or assignee, the fiduciary must sign instead of a corporate officer. Include a court order or instructions authorising the receiver or trustee in bankruptcy to sign.
For paid preparers, they should:
- Sign the return in the preparer's designated area.
- Include their Preparer Tax Identification Number (PTIN).
- Provide a copy of the return to the taxpayer.
If the corporation wishes to grant the IRS permission to discuss its 2022 tax return with the preparer, it should mark the "Yes" box in the signature area. This authorisation is specific to the individual preparer, allowing them to address missing information, inquire about the return's processing, and respond to specific IRS notices.
This authorisation automatically expires by the filing due date of the 2023 tax return (excluding extensions). For additional authorisation or revocation, consult Pub. 947, Practice Before the IRS and Power of Attorney.
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Interest and Penalties for IRS Tax Form 1120
In the event that the corporation receives a notice about post-filing penalties, it is essential to provide an explanation to the IRS to evaluate reasonable-cause criteria. It is advisable to refrain from attaching explanations with the return during the filing process.
Interest: Charges are applicable for delayed tax payments, regardless of extensions. Interest also accrues on penalties for late filing, negligence, fraud, substantial valuation misstatements, substantial understatements of tax, and reportable transaction understatements from the due date (including extensions) until payment. The interest rate is determined under section 6621.
Late Filing: A penalty of 5% of the unpaid tax per month (or part) the return is overdue, up to 25% of the unpaid tax, is imposed on corporations that do not file by the due date, including extensions. A minimum penalty of the tax due or $450 is applied if the return is over 60 days late, only waived for reasonable cause.
Late Payment: Corporations failing to pay taxes on time may incur a penalty of ½ of 1% of the unpaid tax per month (or part), up to 25% of the unpaid tax.
Trust Fund Recovery Penalty: The trust fund recovery penalty may be imposed on individuals identified by the IRS as responsible for collecting, accounting, or paying over these taxes and who wilfully neglected to do so. The penalty equals the entire unpaid trust fund tax. These taxes are typically reported on various tax return forms:
- Form 720: Quarterly Federal Excise Tax Return
- Form 941: Employer's QUARTERLY Federal Tax Return
- Form 943: Employer's Annual Federal Tax Return for Agricultural Employees
- Form 944: Employer's ANNUAL Federal Tax Return
- Form 945: Annual Return of Withheld Federal Income Tax
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