The Form 1120 series is the U.S. corporation income tax return. It is designed by the Internal Revenue Service (IRS), which consists of several tax returns customized for various types of corporations and organizations. American corporations use this document to report their credits, deductions, losses, gains, and income. Furthermore, it helps them determine how much income tax they are liable to pay, as per the IRS.
Knowing these forms not only ensures compliance but also helps you in planning strategic financial management. For example, selecting between Form 1120 and Form 1120-S can notably affect your tax liability and shareholder obligations. In this blog, we will understand these forms and identify the relevant and accurate one for your organization.
Key Takeaways
The Form 1120 series comprises multiple variants tailored to various corporate structures.
Selecting the correct form is crucial for complying with tax regulations and avoiding penalties.
Each form has certain eligibility criteria and filing requirements.
What is Form 1120?
A 1120 tax form is an Internal Revenue Service (IRS) form that corporations use to determine their tax liability, or how much business tax they are liable to pay. It is officially titled the "U.S. Corporation Income Tax Return". It serves as a cornerstone of corporate tax filing in the U.S. American corporations use this form to report their income, gains, losses, deductions, and credits to the IRS.
There are different forms for specific types of organizations, which are as follows:
1120-C: cooperative associations, such as farmers' cooperatives
1120-F: Foreign corporations
1120-H: Condominium management, residential real estate management, and timeshare association that chooses to be treated as a homeowners association
1120-L: Life insurance companies
1120-POL: Political organizations
1120-S: S corporations.
Some Key Components of Form 1120
The corporate income tax return, Form 1120, requires detailed reporting of income, expenses, and tax computations. The following are some of the main components to complete the form:
Income Reporting
Gross profit
Cost of sold goods
Gross receipts or sales
Deductions
Rents
Bad Debts
Depreciation
Interest expenses
Taxes and licenses
Salaries and wages
Repairs and maintenance
Tax Calculation
Tax credits application
Taxable income calculation
Alternative Minimum Tax (AMT) considerations.
Who Uses Form 1120?
Mostly, a U.S. corporation uses Form 1120 to report its income, gains, deductions, etc., unless they fall under any of the exceptions.
For instance, S corporations are not required to file Form 1120. IRS has classified S corporations as corporations that pass their corporate income through to shareholders (for tax purposes). After that, the shareholders report this income or loss on their personal income tax returns. They are required to file Form 2553 instead.
Who Must File Tax Form 1120?
Form 1120 is required for most domestic corporations, regardless of whether they have a taxable income. Corporations that are exempt under Section 501 are not required to file tax Form 1120. Additionally, corporations in bankruptcy are also required to file Form 1120. Below are the entities that must file tax Form 1120:
Farming Corporations: They are required to file Form 1120 to report their income or losses.
Businesses that opt to be taxed as corporationsMust file Form 8832 and attach their copy to Form 1120.
Corporations having ownership interest in a FASIT: A FASIT stands for Financial Asset Securitization Investment Trust.
Limited Liability Companies (LLCs): Such companies are required to file 1120 only if they have chosen to be taxed as a corporation. Single-member LLCs typically file their taxes through the owner's personal federal tax return, while partnership LLCs are required to file Form 1065.
Foreign-Owned Domestic Disregarded Entities: The IRS doesn't consider a DE business separate from its owner. However, for a foreign person or corporation owning 100% of a domestic disregarded entity (DE), the Domestic DE will be treated separately from its foreign owner. Although the two things oppose each other, this is how it functions. The foreign person or corporation must file Form 1120 and attach it to Form 5472.
They might have to produce some additional documents, schedules that some corporations may have to fill out. It includes Form 1120 (Schedule N) for foreign operations of U.S. corporations and Form 1120 (Schedule D) for capital gains and losses.
On the contrary, small corporations wouldn't have to stress about these additional forms, as they find them by searching for "Form 1120" through the IRS Forms and Publications tool.
Where Should I File a 1120 Tax Form?
Corporations can file 1120 tax form as well as any other forms, schedules, and attachments electronically (e-file), such as Form 7004 (automatic extension of time to file) and Forms 940, 941, and 944 (employment tax returns). Log in or sign up to Modernized e-file on the official website of the IRS and submit your return online.
Suppose you are liable to pay tax to the IRS. In that case, you have the option to either authorize that the tax payment will be withdrawn electronically from your account or authorize the direct deposit of a refund.
If you want to mail your return, you can use private delivery services (PDS), which provide written evidence of the mailing date. You can check the list of PDS approved by the IRS on their official website.
Do I Need to File Form 1120?
You need to file a 1120 tax form if you are a U.S. corporation that fulfills the above-mentioned criteria. Having said that, the IRS considers specific organizations as tax-exempt, which include the following:
Social Clubs
Trade Associations
Labor Organizations
Political Organizations
Veterans' Organizations
Charitable Organizations
Social Welfare Organizations
You can visit the website of the IRS to check the full list of tax-exempt organizations. Such types of organizations need to file an information return that must comprise Form 990, Form 990-EZ, and Form 990-PF. You can access and download these tax forms and their instructions from the IRS website.
When Do I Need to File a 1120 Tax Form?
A corporation is required to file its income tax return, including Form 1120, by the 15th day of the fourth month after the end of its tax year. For a new corporation, it must file by the 15th day of the 4th month after the end of its tax year, regardless of its length. Corporations with a fiscal tax year that ends on June 30 must file by the 15th day of the third month after their tax year ends.
For due dates falling on Saturdays, Sundays, or legal holidays, the dates will be extended to the next business day. If you need an extension for your tax return for 2024, you are required to fill out the tax extension Form 7004 by your regular date.
What are Some Common Mistakes to Avoid When Filing Form 1120?
Here are some common mistakes to avoid while filing Form 1120:
One of the main mistakes that occurs is missing the deadline, or late filing, which can lead to significant penalties.
Wrong calculations or mathematical errors can affect IRS inspection and potential audits.
Failing to claim all eligible deductions and credits can result in overpaying taxes. For example, if a manufacturing company forgets to claim the research and development tax credit, it could miss out on substantial tax savings.
Reporting different aggregate income figures on the main form and supporting schedules can raise red flags with the IRS. So, ensure to stay consistent and add accurate details across all schedules and forms.
Choosing the incorrect variant of Form 1120 for your business structure. For example, a corporation mistakenly filing Form 1120-S when it hasn't made a valid S corporation election could lead to substantial penalties and back taxes.
To Conclude
While filing Form 1120 with the IRS, carefulness and attention to every detail are crucial. Staying informed about the latest updates to tax laws and rules is essential to ensure compliance and enhance the overall financial well-being of your company. It is advised to seek expert guidance to complete Form 1120 accurately and avoid common errors that occur while filing.
You can reach out to our professional experts at Savetaxs. We ensure to provide you with an accurate and smooth tax filing process. Our experts have been guiding with tax services for over a decade now. Contact us as per your convenience, and get quick assistance as we work 24*7 across all time zones.
Note: This guide is for informational purposes only. The views expressed in this guide are personal and do not constitute the views of Savetaxs. Savetaxs or the author will not be responsible for any direct or indirect loss incurred by the reader for taking any decision based on the information or the contents. It is advisable to consult with either a Chartered Accountant (CA) or a professional Company Secretary (CS) from the Savetaxs team, as they are familiar with the current regulations and help you make accurate decisions and maintain accuracy throughout the whole process.
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Form 1120 is the IRS's U.S. Corporation Income Tax Return. Corporations use it to report income, deductions, credits, gains, and losses, and finally compute how much federal tax they are liable for.
All domestic corporations are required to file Form 1120, even if they don't have any taxable income, unless they are eligible for exemption under IRS code Section 501. It includes:
Farming corporations
Corporations treated as such through Form 8832
Domestic disregarded entities with foreign ownership (in some situations)
Corporations with ownership interests in specific entities like FASITs.
Several variations of Form 1120 apply to certain entities, like:
1120-C for cooperatives
1120-F for foreign corporations
1120-H, 1120-L, 1120-POL, and 1120-S for HOAs, life insurance companies, political organizations, and S corporations, respectively.
Corporations need to file by the 15th day of the fourth month after the end of their tax year (for example, 15th of April for a calendar-year corporation). If that falls on a weekend or a holiday, the deadline will extend to the next business day.
Yes, you can get an automatic extension by filing Form 7004 on your original due date.
You can e-file through an IRS-approved system, such as Modernized e-file, or via a commercial tax software. Paper filing is also allowed if you mail your return; try to use a private delivery service to produce proof of timely submission.
To modify errors or make changes to a previously filed Form 1120, you need to file Form 1120-X, the Amended U.S. Corporation Income Tax Return.
Corporations must report the following on Form 1120:
Income and gains
Deductions and credits
Every calculation shows their corporate tax liability.
If an LLC elects corporate tax treatment with Form 8832, it needs to file Form 1120. Unless the LLC particularly chooses such treatment, it is treated as a disregarded entity (single-member) or partnership (more than one member).
Form 1120 is important because C-corporations are different tax entities. It is essential as it calculates and reports the corporation's federal tax obligation, separate from any shareholder taxes.
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