Form 1120: U.S. Corporation Income Tax Return

Form 1120: U.S. Corporation Income Tax Return Guide

Form 1120, the U.S. Corporation Income Tax Return, is the document that C corporations must file annually with the Internal Revenue Service (IRS) to report their income, deductions, gains, losses, and tax liability. This form serves as the primary mechanism for determining the corporation’s federal tax obligations.

As a C corporation, the company itself is taxed on its income, and shareholders are also taxed on any dividends they receive, resulting in double taxation. Understanding how to correctly complete and file Form 1120 is crucial for compliance and to avoid penalties.

In this guide, we’ll explain everything you need to know about Form 1120, including its purpose, who is required to file it, and how to complete it accurately.

What is Form 1120?

Form 1120 is the tax return used by C corporations to report their income, deductions, credits, and other relevant tax-related information to the IRS. Unlike S corporations (which are pass-through entities), C corporations are subject to corporate income tax on their profits. After the corporation has paid its taxes, any dividends paid to shareholders are also taxed on the individuals’ personal tax returns, creating the double taxation issue.

Form 1120 is used by corporations to calculate their taxable income, report deductions, and determine how much tax they owe. The IRS requires corporations to file this form annually, typically by the 15th day of the 4th month after the close of the corporation’s tax year. For most corporations, this means the form is due on April 15th if they follow the calendar year tax year.

Who Must File Form 1120?

Form 1120 is filed by C corporations—businesses that are legally structured as corporations and taxed separately from their owners. Most domestic corporations that are classified as C corporations will need to file this form, but there are a few exceptions.

Here’s who typically needs to file:

1. Domestic C Corporations
   All C corporations that are based in the U.S. must file Form 1120. A C corporation is a corporation that is taxed separately from its shareholders, meaning the corporation itself pays taxes on its profits.

2. Corporations Engaged in Trade or Business
   If your corporation is actively engaged in business operations, it is required to file Form 1120 annually to report its taxable income.

3. Foreign Corporations
   Foreign corporations that do business or earn income in the U.S. are generally required to file Form 1120-F, a variant of Form 1120 specifically for foreign corporations.

4. Corporations with Special Tax Status
   Some entities, like S corporations, cooperatives, and certain tax-exempt organizations, do not file Form 1120 but instead file other specialized tax forms (e.g., Form 1120-S for S Corporations).

Key Sections of Form 1120

Form 1120 consists of several sections that provide detailed financial information about the corporation’s activities. Below is an overview of the major sections of the form:

1. Basic Information (Part I)
   The first section of Form 1120 requires the corporation to provide basic identifying information, such as:

   • Legal name of the corporation
   • Employer Identification Number (EIN)
   • Address and business activity
   • Date of incorporation
   • Tax year (calendar year or fiscal year)
   • Total assets at the end of the year

2. Income (Part I)
   This section reports the gross income of the corporation. This includes:

   • Sales of goods or services
   • Interest, dividends, and rental income
   • Other sources of income, including capital gains

   The corporation will list its gross receipts or sales, subtract any returns and allowances, and report total income. If the corporation has any non-taxable income, it should be reported separately.

3. Deductions (Part II)
   Here, the corporation lists its allowable deductions, which will reduce its taxable income. Common deductions include:

   • Cost of goods sold (COGS)
   • Salaries and wages
   • Rent and utilities
   • Depreciation
   • Interest on business loans
   • Advertising and marketing expenses
   • Employee benefits and retirement plans

   These deductions help determine the corporation’s net income, which is taxable.

4. Taxable Income (Part III)
   In this section, the corporation calculates its taxable income after accounting for income and deductions. The corporation subtracts its total deductions from its gross income to arrive at its taxable income.

5. Tax and Payments (Part IV)
   Here, the corporation calculates the amount of tax owed. The IRS uses a progressive tax rate based on the corporation’s taxable income. The current corporate tax rate is a flat 21% (as of 2025), but it can vary for certain types of income or businesses. If the corporation qualifies for any tax credits, such as research and development credits, these can reduce the amount of tax due.

   Additionally, if the corporation has made estimated tax payments throughout the year, these will be reported in this section and deducted from the total tax due.

6. Other Information (Schedule G)
   In this section, corporations report other information related to their operations, such as:

   • Shareholder information
   • Ownership structure
   • Special tax elections
   • Foreign bank accounts or assets (if applicable)

   Corporations may also be asked to provide details about any corporate reorganizations, mergers, or other significant changes in business structure.

7. Schedule C – Dividends and Special Deductions
   If the corporation has received dividends from other corporations, it may be able to claim a dividends received deduction on Schedule C. This is important to avoid double taxation on dividend income when one corporation owns stock in another.

8. Schedule D – Capital Gains and Losses
   This section is used to report any capital gains or capital losses resulting from the sale or exchange of assets, such as real estate, stocks, or other investments.

9. Schedule J – Tax Computation
   Schedule J contains the specific formulas for calculating the corporation’s tax liability. The corporate tax rate is applied to the taxable income, with any applicable credits and deductions taken into account.