Basics on the Form 1120 Corporate Income Tax Return
The IRS Form 1120 (US Corporation Income Tax Return) is the official form that corporations in the United States use to report their income, gains, losses, deductions, and credits to the Internal Revenue Service (IRS).
This form is used to calculate the amount of federal income tax a corporation owes. A corporation will often need to file a state corporate income tax return, depending on where the corporation operates.
Schedule L for the Beginning and End of Year Balance Sheets
This article and video tutorial cover Schedule L (Balance Sheets per Per Books), which is included with a standard Form 1120 tax filing for a U.S. corporation.
The Schedule L is NOT required when a corporation meets both of the following requirements:
- The corporation’s total receipts for the tax year are less than $250,000, and
- The corporation’s total assets at the end of the tax year are less than $250,000.
If the corporation meets this small company exception, it is not required to complete Schedule L. However, many companies voluntarily choose to complete Schedule L even where their gross receipts and assets fall under the threshold.
Example Schedule L for the 2020 Tax Year
In this video tutorial, we examine a consulting business organized as a corporation in Delaware. The company needs to complete Schedule L for its 2020 income tax return.
The company references its 2019 Form 1120 to carry over the prior year’s ending balances to the current year’s beginning balances.
The company reports the following assets, liabilities, and equity on its balance sheet at the end of the tax year:
- Cash: $63,020
- Other Current Assets: $1,050
- Other Current Liabilities: $5,863
- Other Liabilities: $5,000
- Common Stock: $100
- Additional Paid-In Capital (APIC): $35,000
- End of the Year Retained Earnings: $18,107
What are the Basics of the Form 1120 Tax Filing?
Income & Expense Reporting. To report the corporation’s income, expenses, gains, losses, credits, estimated tax payments, and other transactions.
Tax Calculation. Corporations are generally subject to a 21% tax rate on their net taxable income. The tax rate is subject to change depending upon legislation passed by Congress.
A corporation’s net taxable income may differ from its net income per books. The corporation reports any book-to-tax adjustments on Schedule M-1 or Schedule M-3. For example, many corporations keep their internal accounting records using generally accepted accounting principles (GAAP), which often differ from U.S. federal tax rules.
Who Must File
C Corporations. Domestic corporations must file Form 1120 annually. Most domestic corporations are, by default, taxable as a C corporation. If a company forms a limited liability company (LLC) that elects to be taxed as a C corporation by filing Form 8832 (Entity Classification Election), the LLC must file Form 1120.
Due Date. Form 1120 must be filed annually and is due on or before the 15th day of the 4th month following the close of the corporation’s tax year. For a calendar year corporation, the due date is generally April 15. Extensions can be requested by filing Form 7004 (Application for Extension of Time to File).
Additional Schedules and Tutorials
- Form 1120-X Amended Corporate Tax Return
- Form 1120 Real Estate Investment Entity
- Form 1120 for a Landscaping Company in 2022
- Form 1120 with Form 5472 for Foreign-Owned Corporation
- Form 1120 for the 2021 Tax Year
- Form 851 Affiliations Schedule
- Schedule B Form 1120 for Additional Information
- Schedule C Form 1120 for Dividends & Special Deductions
- Schedule G Form 1120 for Substantial Shareholders
- Schedule PH Form 1120 for Personal Holding Company
- Schedule N Form 1120 for Foreign Operations
YouTube Form 1120 Playlist
Please view our YouTube playlist here for a complete collection of Form 1120-related tutorials.
Additional Information
Corporations can find more information in the Form 1120 Instructions and IRS Publication 542 (Corporations).