All you need to know about filing Form 1120
- Hussain Ziniya
- Nov 12
- 5 min read
When you start a new business, you take up new responsibilities! One of these is filing Form 1120 (U.S. Corporate Income Tax Return)... a six pager form that needs to be filled with a lot of financial information.
Note: As per the new Tax Cuts and Jobs Act, all corporate income tax returns will be taxed at a fixed rate of 21%, regardless of their incomes. For the financial year 2020, the deadline for filing is set as April 15, 2021.
Table of content
Content | |
What is Form 1120? | 1 |
Who must file Form 1120? | 2 |
What you need to file Form 1120 | 3 |
Filling up the Form 1120 | 4 |
Where to file Form 1120? | 5 |
1. What is Form 1120?
IRS Form 1120 is a special document for American corporations to report their credits, deductions, losses, gains and income. It also helps you find out how much income tax your business needs to pay, as per the IRS
Companies getting taxed as ‘C corporations’ have to file their tax returns with IRS Form 1120. It is like a C corporation equivalent to your personal tax Form 1040.
Unlike other company structures, companies taxed as C corporations pay a flat 21% corporate tax rate on the taxable income. If your business isn’t taxed as a C corporation, it’s considered a pass-through entity. Pass-through entities, such as sole proprietorships and partnerships, pay no entity-level tax.
The form is also known as the U.S. Corporation Income Tax Return.
2. Who must file Form 1120?
Just to make it simpler to understand, a corporation or C Corp is a type of business structure that is a separate legal entity from its owners. The business owners, or shareholders, are not personally liable for the company’s debts and actions.
If your business is registered as a corporation or files tax returns as a corporation, you need to file Form 1120. This includes:
C corporations or C Corps
LLCs filing as corporations
Once you get your business incorporated, you have to file Form 1120 annually.
3. What you need to file Form 1120
Tax returns filing can be tricky especially for businesses, as there are lots of records and data to be considered. As a good practice, you should create a checklist of the information you should have on hand, whether you’re filing Form 1120 yourself, or your accountant is taking care of it.
Employer Identification Number (EIN)
The date you incorporated the business
Total assets held by your company
Gross receipts
Cost of Goods Sold (COGS)
Total income
Dividends earned
Interest earned
Royalties earned
Capital gains
Tax deductions
4.Filling up the Form 1120
Form 1120 comprises of six pages. The first page has four preliminary sections like;
Basic corporation information
Income
Deductions
Tax, refundable credits, and payments
The other five pages deal with more detailed information, like your dividends, special deductions, balance sheet, and other accounting information.
Before you file Form 1120, make sure you sign and date the bottom of the first page.
Steps to fill
1. Build your tax team
First things first, gather a tax team that should include a corporate tax professional and corporate tax filing software.
It’s infamously long-winded, so engaging a tax professional would help you complete the form faster
As an owner of a C corporation, you cannot use a self-employment tax software. Therefore, you can go for a software that has options for C corporations, like TurboTax or a complete bookkeeping solution like Fincent.
2. Fill out most of page 1
The first page of 1120 asks for basic information, which gives the IRS a glance at your company’s tax situation. You can fill out much of this using information stored in your accounting software.
3. Fill out the Schedules
As per various circumstances, you'll have to fill out certain Schedules along with filing tax Form 1120.
Schedule C
Just like people, C corporations are allowed to buy stocks in different companies. C corporations report their annual dividend income from stock investments on the Schedule C of Form 1120
Schedule J
This section calculates your tax liabilities by taking in information on your business tax credits and estimated tax payments. Tax credits are termed as dollar-for-dollar reductions on your tax liability. It is one of the most effective ways to reduce your tax bill.
Schedule K
Schedule K asks for more information about the C corporation’s owners and holdings in other companies.
Schedule L
Schedule L recreates your company’s balance sheet per your books. You can open the balance sheet ( year-end) in your accounting software to fill out this section.
Schedules M-1 and M-2
As the IRS calculates some expenses, like depreciation, differently from the Generally Accepted Accounting Principles (GAAP), Schedules M-1 and M-2 help explain to the IRS the differences between your statements for book and tax purposes.
4. Look for other required schedules
Depending on specific business activities at your organization, you may have to fill up and attach a few more forms or Schedules
Some common attachments include:
Form 1125-A: For companies with cost of goods sold
Form 1125-E: To enlist compensations with gross receipts of $500,000 or more
Form 4797: For the sale of any business property
Form 4563: For calculating depreciation and amortization
Schedule D For capital gains and losses
5. Return to page 1
Once you are done with the rest of Form 1120 and the required Schedules, you’re ready to hit the finish button on the first page.
6. Review and file your return
You’re done! After reviewing your return along with your tax team, you can e-file Form 1120 using the tax software or have your tax preparer do it.
5. Where to file Form 1120?
You can either file Form 1120 online or by mail. We recommend filing it online as it’s faster, easier, and cuts back on paperwork. Also, if your corporation has reportings of $10 million or more in assets, you are required to file online.
When is Form 1120 due?
The due date for Form 1120 depends on its fiscal year. Some C corporations use a calendar year, while others start their year in July or October.
Usually, C corporations must file their Form 1120 by the 15th day of the fourth month after the end of its tax year. For the financial year 2020, the deadline for filing is set as April 15, 2021.
In conclusion:
Tax keeping can be added burden to your ongoing business processes. Allotting resources for this may take a toll on your productivity and efficiency, during the tax season.
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