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 C Dividends, Inclusions, and Special Deductions
This article and video tutorial covers Schedule C (Dividends, Inclusions, and Special Deductions), which is a part of the standard Form 1120 corporate income tax return. Schedule C reports certain types of income that are eligible for special deductions.
The most common special deduction is the dividend received deduction (DRD) available to U.S. corporations. For example, if a corporation owns stock in a separate corporation and owns less than 20% of the stock, and that corporation receives a dividend payment, the corporation is allowed a 50% deduction, so it is only taxed on one-half of the income. The special deduction is available to U.S. corporations but not to individual investors.
When is Schedule C Required?
The Schedule C is part of the standard Form 1120 tax return. So, even if a corporation does not enter any figures on Schedule C, it is still filed with every Form 1120 tax return. Many corporations find they are not required to complete Schedule C because they have no dividends or other inclusions.
The most common items reported on Schedule C include the following types of income:
- Dividends received from other C corporations
- Subpart F income from a controlled foreign corporation (CFC)
- Income inclusions from Form 8992 for the Global Intangible Low-Taxed Income (GILTI)
- The Section 250 deduction using Form 8993
Example Schedule C Filing Requirement
Company A Inc., a Delaware limited liability company (LLC), operates a consulting business in Tampa, Florida. The company filed an election to be taxed as a corporation using IRS Form 8832, so it must file an annual Form 1120 corporate tax return.
The company has a brokerage account and owns 1,000 shares of stock in XYZ Company Inc., a publicly traded company, which pays a quarterly dividend of $0.20 per share. The company receives $800 in dividend income during the year. The company is required to include the dividends in gross income on Schedule C. The company owns less than 20% of the stock, so the dividend received deduction (DRD) is 50%.
As a result, the corporation only includes $400 (i.e., 50% of $800) in its gross taxable income because of the 50% DRD.
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 its 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
- Form 1120 Schedule L Balance Sheets
- Schedule B Form 1120 for Additional Information
- 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).