What Is Form 1120?

One of the principal forms of doing business in the United States is the corporation.  Many corporations file their Federal income tax returns on Form 1120, “U.S. Corporation Income Tax Return”.

This article discusses some of the key issues to know concerning Form 1120.

Who Must File Form 1120?

Generally, all domestic corporations must file Form 1120.  A domestic corporation is a corporation created or organized in the United States or under the law of the United States or of any state in the United States. 

In addition, a domestic entity that elects to be classified as an association taxable as a corporation generally must file Form 1120.

Among the key exceptions to the filing of Form 1120 are:

If you have a domestic corporation, please note that your corporation generally is required to file Form 1120, even if you are a US citizen who moves abroad and becomes an expat.

• Foreign corporations file Form 1120-F;
• Life insurance company corporations file Form 1120-L;
• Property and casualty insurance company corporations file Form 1120-PC;
• Real estate investment trust corporations file Form 1120-REIT;
• Regulated investment company corporations file Form 1120-RIC; and
• S corporations file Form 1120-S.

What Do You Report on Form 1120?

Form 1120 is used to report the income, gains, losses, deductions, and credits of a corporation and then figure the income tax liability of the corporation.

Form 1120 – Page 1

At the top of page 1, the corporation must answer certain factual questions, including concerning:

• The time period covered by the Form 1120 (generally the calendar year, unless if a different time period is designated);
• The name, address, employer identification number, and total assets of the corporation (including whether the corporation had total assets of $10 million or more on the last day of its tax year);
• The date the corporation was incorporated;
• Whether the corporation is filing a certain type of consolidated return;
• Whether the corporation is a personal holding company or personal service corporation;
• Whether the Form 1120 is an initial or final return; and
• Whether the Form 1120 reflects a name change or address change.

The corporation also must report on page 1:

• Its income, including from gross receipts, less returns and allowances and cost of goods sold, plus “dividends and inclusions” (see below), interest, rents, royalties, capital gain, and other gains or income; and
• Its deductions, including from compensation of officers, salaries and wages, repairs and maintenance, bad debts, rents, taxes and licenses, interest, charitable contributions, depreciation, depletion, advertising, pension and profit-sharing plans, employee benefit programs, net operating loss, “special deductions” (see below), and other deductions.

Based on this income and these deductions, the corporation then determines on page 1 its taxable income,  “total tax” (see below), and “total payments and credits” (see below), whether there is an amount owed or an overpayment, and certain estimated tax issues.

At the bottom of page 1, Form 1120 must be signed and dated (as described below).

Form 1120 – Page 2

On page 2 (which has the heading, “Schedule C Dividends, Inclusions, and Special Deductions”), the corporation must report the “dividends and inclusions” and the “special deductions” that are referenced on page 1.   

Form 1120 – Page 3

On page 3 (which has the heading, “Schedule J Tax Computation and Payment”), the corporation determines the “total tax” that is referenced on page 1 by:

• Computing an amount of “Income Tax”, generally equal to taxable income multiplied by 21%;
• Subtracting certain credits, including the foreign tax credit, the general business credit, and the credit for prior year minimum tax; and
• Adding certain items, including the personal holding company tax and the recapture of investment credit.

The corporation also on page 3 determines the “total payments and credits” that are referenced on page 1.

If the “total payments and credits” are less than the sum of “total tax” plus any applicable estimated tax penalty, the corporation will owe a tax liability.  Alternatively, if the “total payments and credits” are more than the sum of “total tax” plus any applicable estimated tax penalty, the corporation can receive a refund of the excess amount or credit it to future estimated tax liability.

Form 1120 – Pages 4 and 5

On pages 4 and 5 (which have the heading, “Schedule K Other Information”), the corporation must answer 26 additional factual questions, including concerning:

• The accounting method used by the corporation;
• Whether the corporation is a subsidiary in an affiliated group or a parent-subsidiary controlled group;
• Whether one foreign person owns, directly or indirectly, at least 25% of the total voting power of all classes of the corporation’s stock entitled to vote or at least 25% of the total value of all classes of the corporation’s stock;
• The amount of tax-exempt interest received or accrued by the corporation;
• Whether the corporation’s total receipts and total assets are less than $250,000;
• Whether the corporation made any payments that would require it to file Form(s) 1099;
• Whether the corporation had an 80%-or-more change in ownership, including a change due to redemption of its own stock; and
• Whether the corporation disposed of more than 65% (by value) of its assets in a taxable, non-taxable, or tax deferred transaction.

Form 1120 – Page 6

Page 6 consists of three financial Schedules:

• “Schedule L Balance Sheets per Books”;
• “Schedule M-1 Reconciliation of Income (Loss) per Books With Income per Return”; and
•  “Schedule M-2 Analysis of Unappropriated Retained Earnings per Books”.

If the corporation’s total receipts and total assets are less than $250,000, these Schedules do not need to be completed.

Who Signs Form 1120?

As the corporation is an entity and not a natural person, the Form 1120 must be signed and dated by some person on behalf of the corporation.  This person can be the president, vice president, treasurer, assistant treasurer, or chief accounting officer of the corporation, or any other corporate officer authorized to sign the corporation’s Form 1120.

In addition, if a “paid preparer” is used for the Form 1120, the “paid preparer” must include identifying information and sign and date the Form 1120 at the bottom of page 1.

Where Is Form 1120 Filed?

Form 1120 can generally be filed electronically (“e-filing”).  If there is a balance due, the corporation can authorize an electronic funds withdrawal while e-filing.

Form 1120 also can be filed by mail.  Form 1120 is mailed to an address determined by where the corporation’s principal business, office, or agency is located and the amount of the total assets of the corporation.  These addresses are listed in the “Instructions for Form 1120” (see below). 

When Is Form 1120 Due?

A corporation generally must file its Form 1120 by the 15th day of its fourth month after the end of its tax year.  Thus, a corporation with a calendar tax year generally must file its Form 1120 by April 15 of the following calendar year.

A new corporation filing a short-period Form 1120 must generally file by the 15th day of the fourth month after the short period ends.  A corporation that has dissolved must generally file its Form 1120 by the 15th day of the fourth month after the date it dissolved.

However, a corporation with a fiscal tax year ending June 30 must file its Form 1120 by the 15th day of the third month after the end of its tax year.  A corporation with a short tax year ending anytime in June will be treated as if the short year ended on June 30, and must file its Form 1120 by the 15th day of the third month after the end of its tax year.

If the due date of the Form 1120 falls on a Saturday, Sunday, or legal holiday, the corporation can file its Form 1120 on the next business day.

“Instructions for Form 1120”

A critical resource to help persons prepare Form 1120 is “Instructions for Form 1120”.  Produced by the Internal Revenue Service, “Instructions for Form 1120” is a 31-page document that provides specific details on how to prepare and file Form 1120. 

The “Instructions to Form 1120” describe the various other Schedules and Forms that need to be attached to Form 1120.

Helping Expats with Form 1120

At Greenback Expat Tax Services, we specialize in helping expats manage their US tax obligations.  Among our many services, we can assist expats with filing Form 1120.  We have expansive experience in helping expats with their Form 1120.  Form 1120 is a complicated tax return, and you need the services of someone with the experience of Greenback Expat Tax Services to aid you in preparing Form 1120 in a correct manner.