Understanding IRS Form 1120 – U.S. Corporation Income Tax Return

A tax preparer learning how to file Form 1120 with TaxSlayer Pro

Unless exempt under IRC section 501, all U.S. corporations are required to file an income tax return whether they have taxable income or not, and most will use Form 1120 U.S. Corporation Income Tax Return. Form 1120 is used to report the corporation’s income, deductions, gains, losses, and credits and to calculate its income tax liability. The corporate tax rate is 21%.

Certain organizations are required to file or can elect to file a special return, as outlined in the IRS Form 1120 instructions, but generally if you are preparing a return for a corporation or a business entity that chooses to be taxed as a corporation you will file Form 1120.

When is the deadline to file Form 1120?

Generally, the corporate income tax return must be filed by the 15th day of the 4th month after the end of its tax year. There are several exceptions however:

  • A new corporation filing a short-period return must file by the 15th day of the 4th month after the end of the short period.
  • A corporation with a fiscal year ending date of June 30 or a corporation with a short tax year ending anytime in June must file by September 15.
  • A corporation that has dissolved must file by the 15th day of the 4th month after the date it dissolved.

Preparing Form 1120

Completing Form 1120 can be divided into roughly three sections:

  • Section 1: Entering basic information about the corporation, including the name, address, EIN, and date of incorporation, as well as completing Schedule K.
  • Section 2: Entering all the various items of income including cost of goods sold, gains and losses, deductions, and credits to determine the corporation’s tax liability.
  • Section 3: Completing the balance sheet (Schedule L) along with Schedule M-1 (reconciling the net income per the tax return with the books) and Schedule M-2 (analysis of unappropriated retained earnings per the books). A corporation with total receipts (all income unreduced by returns, allowances, and cost of goods sold) and total assets at the end of the tax year of less than $250,000 can skip this section if desired. A corporation with total assets of $10 million or more at the end of the tax year must file the longer and more detailed Schedule M-3 instead of Schedule M-1.

Read also: Creating a Basic Form 1120 – U.S. Corporation Income Tax Return