Section references are to the Internal Revenue Code unless otherwise noted.
For the latest information about developments related to Form 1120 and its instructions, such as legislation enacted after they were published, go to IRS.gov/Form1120.
Increase in penalty for failure to file.
For tax returns required to be filed in 2024, the minimum penalty for failure to file a return that is more than 60 days late has increased to the smaller of the tax due or $485. See Late filing of return , later.
Electronically filed returns.
The electronic-filing threshold for corporate returns required to be filed on or after January 1, 2024, has decreased to 10 or more returns. See Electronic Filing , later.
Deduction for certain energy efficient commercial building property.
For tax years beginning in 2023, corporations filing Form 1120 and claiming the energy efficient commercial buildings deduction should report the deduction on line 25. See the instructions for line 25.
Expiration of 100% business meal expense deduction.
The temporary 100% business meal expenses deduction for food and beverages provided by a restaurant does not apply to amounts paid or incurred after 2022.
Corporate alternative minimum tax (CAMT).
For tax years beginning after 2022, certain corporations must determine whether they are subject to the new CAMT and calculate CAMT if applicable. See the instructions for Schedule J, line 3. Also, see new Schedule K, Question 29.
Elective payment election.
Applicable entities and electing taxpayers can elect to treat certain credits as elective payments. Resulting overpayment may result in refunds. See the instructions for Schedule J, Part II, line 22. Also, see the Instructions for Form 3800.
Relief from additions to tax for underpayments applicable to the new corporate alternative minimum tax.
For tax year 2023, the IRS will waive the penalty for failure to make estimated tax payments for taxes attributable to a CAMT liability. Affected corporations must still file the 2023 Form 2220, even if they owe no estimated tax penalty. However, affected corporations may exclude the CAMT tax liability when calculating the required annual payment on Form 2220. Affected corporations must also include an amount of estimated tax penalty on line 34 of Form 1120 (or other appropriate line of the corporation's income tax return), even if that amount is zero. Failure to follow these instructions could result in affected corporations receiving a penalty notice that will require an abatement request to apply the relief provided by Notice 2023-42. See Notice 2023-42, 2023-26 I.R.B. 1085, available at IRS.gov/irb/2023-26_IRB#NOT-2023-42. Also, see the instructions for line 34.
The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children selected by the Center may appear in instructions on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. TAS's job is to ensure that every taxpayer is treated fairly and knows and understands their rights under the Taxpayer Bill of Rights.
As a taxpayer, the corporation has rights that the IRS must abide by in its dealings with the corporation. TAS can help the corporation if:
TAS has offices in every state, the District of Columbia, and Puerto Rico. Local advocates' numbers are in their local directories and at TaxpayerAdvocate.IRS.gov. The corporation can also call TAS at 877-777-4778.
TAS also works to resolve large-scale or systemic problems that affect many taxpayers. If the corporation knows of one of these broad issues, please report it to TAS through the Systemic Advocacy Management System at IRS.gov/SAMS.
For more information, go to IRS.gov/Advocate.
To request a direct deposit of the corporation's income tax refund into an account at a U.S. bank or other financial institution, attach Form 8050, Direct Deposit of Corporate Tax Refund. See the instructions for line 37.
To help reduce debt held by the public, make a check payable to “Bureau of the Fiscal Service.” Send it to:
Bureau of the Fiscal Service
Attn: Dept G
P.O. Box 2188
Parkersburg, WV 26106-2188 Or, enclose the check with the corporation's income tax return. In the memo section of the check, make a note that it is a gift to reduce the debt held by the public. For information on how to make this type of contribution online, go to www.treasurydirect.gov and click on “How to Make a Contribution to Reduce the Debt.”
Do not add the contributions to any tax the corporation may owe. See the instructions for line 35 for details on how to pay any tax the corporation owes. Contributions to reduce debt held by the public are deductible subject to the rules and limitations for charitable contributions.
Internet.
You can access the IRS website 24 hours a day, 7 days a week, at IRS.gov to:
Tax forms and publications.
The corporation can view, print, or download all of the forms and publications it may need on IRS.gov/FormsPubs. Otherwise, the corporation can go to IRS.gov/OrderForms to place an order and have forms mailed to it.
Use Form 1120, U.S. Corporation Income Tax Return, to report the income, gains, losses, deductions, credits, and to figure the income tax liability of a corporation.
Unless exempt under section 501, all domestic corporations (including corporations in bankruptcy) must file an income tax return whether or not they have taxable income. Domestic corporations must file Form 1120, unless they are required, or elect to file a special return. See Special Returns for Certain Organizations , later.
Entities electing to be taxed as corporations.
A domestic entity electing to be classified as an association taxable as a corporation must file Form 1120, unless it is required to or elects to file a special return listed under Special Returns for Certain Organizations . The entity must also file Form 8832, Entity Classification Election, and attach a copy of Form 8832 to Form 1120 (or the applicable return) for the year of the election. For more information, see Form 8832 and its instructions.
Limited liability companies (LLC).
If an entity with more than one owner was formed as an LLC under state law, it is generally treated as a partnership for federal income tax purposes and files Form 1065, U.S. Return of Partnership Income. Generally, a single-member LLC is disregarded as an entity separate from its owner and reports its income and deductions on its owner's federal income tax return. The LLC can file a Form 1120 only if it has filed Form 8832 to elect to be treated as an association taxable as a corporation. For more information about LLCs, see Pub. 3402, Taxation of Limited Liability Companies.
Corporations engaged in farming.
A corporation (other than a corporation that is a subchapter T cooperative) that engages in farming should use Form 1120 to report the income (loss) from such activities. Enter the income and deductions of the corporation according to the instructions for lines 1 through 10 and 12 through 29.
Ownership interest in a Financial Asset Securitization Investment Trust (FASIT).
Special rules apply to a FASIT in existence on October 22, 2004, to the extent that regular interests issued by the FASIT before October 22, 2004, continue to remain outstanding in accordance with their original terms.
If a corporation holds an ownership interest in a FASIT to which these special rules apply, it must report all items of income, gain, deductions, losses, and credits on the corporation's income tax return (except as provided in section 860H). Show a breakdown of the items on an attached statement. For more information, see sections 860H and 860L (repealed with certain exceptions).
Foreign-owned domestic disregarded entities.
If a foreign person, including a foreign corporation, wholly owns a domestic disregarded entity (DE), the domestic DE is treated as a domestic corporation separate from its owner (the foreign corporation) for the limited purposes of the requirements under section 6038A that apply to 25% foreign-owned domestic corporations. While a DE is not required to file a U.S. income tax return, a DE covered by these rules is required to file a pro forma Form 1120 with Form 5472 attached by the due date (including extensions) of the return. See the Instructions for Form 5472 for additional information and coordination with Form 5472 reporting by the domestic DE.
Qualified opportunity fund.
To certify as a qualified opportunity fund (QOF), the corporation must file Form 1120 and attach Form 8996, even if the corporation had no income or expenses to report. See Schedule K, Question 25, later. Also, see the Instructions for Form 8996.
Qualified opportunity investment.
If the corporation held a qualified investment in a QOF at any time during the year, the corporation must file its return with Form 8997 attached. See the instructions for Form 8997.
Special Returns for
Certain Organizations
| Instead of filing Form 1120, certain organizations, as shown below, file special returns. | |
| If the organization is a: | File Form |
| ▼ | ▼ |
| Exempt organization with unrelated trade or business income | 990-T |
| Religious or apostolic organization exempt under section 501(d) | 1065 |
| Entity formed as a limited liability company under state law and treated as a partnership for federal income tax purposes | 1065 |
| Subchapter T cooperative association (including a farmers' cooperative) | 1120-C |
| Entity that elects to be treated as a real estate mortgage investment conduit (REMIC) under section 860D | 1066 |
| Interest charge domestic international sales corporation (section 992) | 1120-IC-DISC |
| Foreign corporation (other than life or property and casualty insurance company filing Form 1120-L or Form 1120-PC) | 1120-F |
| Foreign sales corporation (section 922) | 1120-FSC |
| Condominium management, residential real estate management, or timeshare association that elects to be treated as a homeowners association under section 528 | 1120-H |
| Life insurance company (section 801) | 1120-L |
| Fund set up to pay for nuclear decommissioning costs (section 468A) | 1120-ND |
| Property and casualty insurance company (section 831) | 1120-PC |
| Political organization (section 527) | 1120-POL |
| Real estate investment trust (section 856) | 1120-REIT |
| Regulated investment company (section 851) | 1120-RIC |
| S corporation (section 1361) | 1120-S |
| Settlement fund (section 468B) | 1120-SF |
Corporations can generally electronically file ( e-file ) Form 1120, related forms, schedules, and attachments; Form 7004 (automatic extension of time to file); and Forms 940, 941, and 944 (employment tax returns). If there is a balance due, the corporation can authorize an electronic funds withdrawal while e-filing . Form 1099 and other information returns can also be electronically filed. The option to e-file does not, however, apply to certain returns.
For returns filed on or after January 1, 2024, corporations that file 10 or more returns are required to e-file Form 1120. See Regulations section 301.6011-5. However, these corporations can request a waiver of the electronic filing requirements.
For more information on e-filing, see E-file for Business and Self-employed Taxpayers on IRS.gov.
Waivers.
The IRS may waive the electronic filing rules if the corporation demonstrates that a hardship would result if it were required to file its return electronically. A corporation interested in requesting a waiver of the mandatory electronic filing requirement must file a written request, and request one in the manner prescribed by the IRS. All written requests for waivers should be mailed to:
Internal Revenue Service
Ogden Submission Processing Center
Attn: Form 1120 e-file Waiver Request
Mail Stop 1057
Ogden, UT 84201 If using a delivery service, requests for waivers should be mailed to: Internal Revenue Service
Ogden Submission Processing Center
Attn: Form 1120 e-file Waiver Request
Mail Stop 1057
1973 N. Rulon White Blvd.
Ogden, UT 84404 Waiver requests can also be faxed to 877-477-0575. Contact the e-Help Desk at 866-255-0654 for questions regarding the waiver procedures or process.
Exemptions.
The IRS may provide exemptions from the requirements to electronically file. If using the technology required to electronically file conflicts with religious beliefs, the corporation is exempt from the requirement. Clearly indicate the exemption on the corporation’s return. Write "Religious Exemption" at the top of Form 1120. File the corporation's return at the applicable IRS address. See Where To File , later. For more information see Notice 2024-18.
Generally, a corporation must file its income tax return by the 15th day of the 4th month after the end of its tax year. A new corporation filing a short-period return must generally file by the 15th day of the 4th month after the short period ends. A corporation that has dissolved must generally file by the 15th day of the 4th month after the date it dissolved.
However, a corporation with a fiscal tax year ending June 30 must file by the 15th day of the 3rd month after the end of its tax year. A corporation with a short tax year ending anytime in June will be treated as if the short year ended on June 30, and must file by the 15th day of the 3rd month after the end of its tax year.
If the due date falls on a Saturday, Sunday, or legal holiday, the corporation can file on the next business day.
Corporations can use certain private delivery services (PDS) designated by the IRS to meet the “timely mailing as timely filing” rule for tax returns. Go to IRS.gov/PDS.
The PDS can tell you how to get written proof of the mailing date.
For the IRS mailing address to use if you’re using a PDS, go to IRS.gov/PDSstreetAddresses.
Private delivery services can't deliver items to P.O. boxes. You must use the U.S. Postal Service to mail any item to an IRS P.O. box address.
File Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, to request an extension of time to file. Generally, the corporation must file Form 7004 by the regular due date of the return. See the Instructions for Form 7004.
File the corporation's return at the applicable IRS address listed below.
| If the corporation's principal business, office, or agency is located in: | And the total assets at the end of the tax year are: | Use the following address: |
| Connecticut, Delaware, District of Columbia, Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, Wisconsin | Less than $10 million and Schedule M-3 is not filed | Department of the Treasury Internal Revenue Service Center Kansas City, MO 64999-0012 |
| $10 million or more, or less than $10 million and Schedule M-3 is filed | Department of the Treasury Internal Revenue Service Center Ogden, UT 84201-0012 | |
| Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington, Wyoming | Any amount | Department of the Treasury Internal Revenue Service Center Ogden, UT 84201-0012 |
| A foreign country or U.S. territory | Any amount | Internal Revenue Service Center P.O. Box 409101 Ogden, UT 84409 |
| A group of corporations with members located in more than one service center area will often keep all the books and records at the principal office of the managing corporation. In this case, the tax returns of the corporations may be filed with the service center for the area in which the principal office of the managing corporation is located. | ||
The return must be signed and dated by:
If a return is filed on behalf of a corporation by a receiver, trustee, or assignee, the fiduciary must sign the return, instead of the corporate officer. Returns and forms signed by a receiver or trustee in bankruptcy on behalf of a corporation must be accompanied by a copy of the order or instructions of the court authorizing signing of the return or form.
Paid Preparer Use Only section.
If an employee of the corporation completes Form 1120, the paid preparer section should remain blank. Anyone who prepares Form 1120 but does not charge the corporation should not complete that section. Generally, anyone who is paid to prepare the return must sign and complete the section.
The paid preparer must complete the required preparer information and:
If the corporation wants to allow the IRS to discuss its 2023 tax return with the paid preparer who signed it, check the “Yes” box in the signature area of the return. This authorization applies only to the individual whose signature appears in the “Paid Preparer Use Only” section of the return. It does not apply to the firm, if any, shown in that section.
If the “Yes” box is checked, the corporation is authorizing the IRS to call the paid preparer to answer any questions that may arise during the processing of its return. The corporation is also authorizing the paid preparer to:
The corporation is not authorizing the paid preparer to receive any refund check, bind the corporation to anything (including any additional tax liability), or otherwise represent the corporation before the IRS.
The authorization will automatically end no later than the due date (excluding extensions) for filing the corporation's 2024 tax return. If the corporation wants to expand the paid preparer's authorization or revoke the authorization before it ends, see Pub. 947, Practice Before the IRS and Power of Attorney.
To ensure that the corporation's tax return is correctly processed, attach all schedules and other forms after page 6 of Form 1120 in the following order.
Complete every applicable entry space on Form 1120. Do not enter “See Attached” or “Available Upon Request” instead of completing the entry spaces. If more space is needed on the forms or schedules, attach separate sheets using the same size and format as the printed forms.
If there are supporting statements and attachments, arrange them in the same order as the schedules or forms they support and attach them last. Show the totals on the printed forms. Enter the corporation's name and EIN on each supporting statement or attachment.
If the corporation had tax withheld under Chapter 3 or 4 of the Internal Revenue Code and received a Form 1042-S, Form 8805, or Form 8288-A showing the amount of income tax withheld, attach such form(s) to the corporation’s income tax return to claim a withholding credit. The corporation should report the tax withheld on Schedule J, Part II, line 20z. See the instructions for Schedule J, Part II, Line 20z.
Generally, the corporation must pay any tax due in full no later than the due date for filing its tax return (not including extensions). See the instructions for line 35. If the due date falls on a Saturday, Sunday, or legal holiday, the payment is due on the next day that isn't a Saturday, Sunday, or legal holiday.
Corporations must use electronic funds transfer to make all federal tax deposits (such as deposits of employment, excise, and corporate income tax). Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). However, if the corporation does not want to use EFTPS, it can arrange for its tax professional, financial institution, payroll service, or other trusted third party to make deposits on its behalf. Also, it may arrange for its financial institution to submit a same-day payment (discussed below) on its behalf. EFTPS is a free service provided by the Department of the Treasury. Services provided by a tax professional, financial institution, payroll service, or other third party may have a fee.
To get more information about EFTPS or to enroll in EFTPS, visit EFTPS.gov or call 800-555-4477. To contact EFTPS using the Telecommunications Relay Services (TRS), for people who are deaf, hard of hearing, or have a speech disability, dial 711 and provide the TRS assistant the 800-555-4477 number above or 800-733-4829.
Depositing on time.
For any deposit made by EFTPS to be on time, the corporation must submit the deposit by 8 p.m. Eastern time the day before the date the deposit is due. If the corporation uses a third party to make deposits on its behalf, they may have different cutoff times.
Same-day wire payment option.
If the corporation fails to submit a deposit transaction on EFTPS by 8 p.m. Eastern time the day before the date a deposit is due, it can still make its deposit on time by using the Federal Tax Collection Service (FTCS). To use the same-day wire payment method, the corporation will need to make arrangements with its financial institution ahead of time regarding availability, deadlines, and costs. Financial institutions may charge a fee for payments made this way. To learn more about the information the corporation will need to provide to its financial institution to make a same-day wire payment, go to IRS.gov/SameDayWire.
Generally, the following rules apply to the corporation's payments of estimated tax.
See section 6655 and Pub. 542, Corporations, for more information on how to figure estimated taxes.
Estimated tax penalty.
A corporation that does not make estimated tax payments when due may be subject to an underpayment penalty for the period of underpayment. Generally, a corporation is subject to the penalty if its tax liability is $500 or more and it did not timely pay at least the smaller of:
Use Form 2220, Underpayment of Estimated Tax by Corporations, to see if the corporation owes a penalty and to figure the amount of the penalty. If Form 2220 is completed, enter the penalty on line 34. See the instructions for line 34. Also see Relief from additions to tax for underpayments applicable to the new corporate alternative minimum tax (CAMT) , earlier.
If the corporation receives a notice about penalties after it files its return, send the IRS an explanation and we will determine if the corporation meets reasonable-cause criteria. Do not attach an explanation when the corporation's return is filed.
Interest.
Interest is charged on taxes paid late even if an extension of time to file is granted. Interest is also charged on penalties imposed for failure to file, negligence, fraud, substantial valuation misstatements, substantial understatements of tax, and reportable transaction understatements from the due date (including extensions) to the date of payment. The interest charge is figured at a rate determined under section 6621.
Late filing of return.
A corporation that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. The minimum penalty for a tax return required to be filed in 2024 that is more than 60 days late is the smaller of the tax due or $485. The penalty will not be imposed if the corporation can show that the failure to file on time was due to reasonable cause. See Caution , earlier.
Late payment of tax.
A corporation that does not pay the tax when due may generally be penalized ½ of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. See Caution , earlier.
Trust fund recovery penalty.
This penalty may apply if certain excise, income, social security, and Medicare taxes that must be collected or withheld are not collected or withheld, or these taxes are not paid. These taxes are generally reported on:
The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to have been responsible for collecting, accounting for, or paying over these taxes, and who acted willfully in not doing so. The penalty is equal to the full amount of the unpaid trust fund tax. See the Instructions for Form 720, Pub. 15 (Circular E), Employer's Tax Guide, or Pub. 51 (Circular A), Agricultural Employer's Tax Guide, for details, including the definition of responsible persons.
The trust fund recovery penalty will not apply to any amount of trust fund taxes an employer holds back in anticipation of the credit for qualified sick and family leave wages or the employee retention credit that they are entitled to. See Pub. 15 or Pub. 51 for more information.
Other penalties.
Other penalties can be imposed for negligence, substantial understatement of tax, reportable transaction understatements, and fraud. See sections 6662, 6662A, and 6663.
Figure taxable income using the method of accounting regularly used in keeping the corporation's books and records. In all cases, the method used must clearly show taxable income. Permissible methods include cash, accrual, or any other method authorized by the Internal Revenue Code.
Generally, the following rules apply. For more information, see Pub. 538, Accounting Periods and Methods.
Small business taxpayer.
For tax years beginning in 2023, a corporation qualifies as a small business taxpayer if (a) it has average annual gross receipts of $29 million or less for the 3 prior tax years, and (b) it is not a tax shelter (as defined in section 448(d)(3)).
A small business taxpayer can account for inventory by (a) treating the inventory as non-incidental materials and supplies, or (b) conforming to its treatment of inventory in an applicable financial statement (as defined in section 451(b)(3)). If it does not have an applicable financial statement, it can use the method of accounting used in its books and records prepared according to its accounting procedures.
Change in accounting method.
Generally, the corporation must get IRS consent to change either an overall method of accounting or the accounting treatment of any material item for income tax purposes. To obtain consent, the corporation must generally file Form 3115, Application for Change in Accounting Method, during the tax year for which the change is requested. See the Instructions for Form 3115 and Pub. 538 for more information and exceptions. Also see the Instructions for Form 3115 for procedures that may apply for obtaining automatic consent to change certain methods of accounting, non-automatic change procedures, and reduced Form 3115 filing requirements.
If the corporation's taxable income for the current tax year is figured under a method of accounting different from the method used in the preceding tax year, the corporation may have to make an adjustment under section 481(a) to prevent amounts of income or expense from being duplicated or omitted. The section 481(a) adjustment period is generally 1 year for a net negative adjustment and 4 years for a net positive adjustment. For an eligible terminated S corporation, the section 481(a) adjustment period is generally 6 years for a negative or positive adjustment that is attributable to the S corporation's revocation of its election under section 1362(a) after December 21, 2017, and before December 22, 2019. See section 481(d). Also, see the Instructions for Form 3115.
Exceptions to the general section 481(a) adjustment period may apply. Also, in some cases, a corporation can elect to modify the section 481(a) adjustment period. The corporation may have to complete the appropriate lines of Form 3115 to make an election. See the Instructions for Form 3115 for more information and exceptions.
If the net section 481(a) adjustment is positive, report the ratable portion on Form 1120, line 10, as other income. If the net section 481(a) adjustment is negative, report the ratable portion on line 26 as a deduction.
A corporation must figure its taxable income on the basis of a tax year. A tax year is the annual accounting period a corporation uses to keep its records and report its income and expenses. Generally, corporations can use a calendar year or a fiscal year. Personal service corporations, however, must use a calendar year unless they meet one of the exceptions discussed later under Personal Service Corporation.
Change of tax year.
Generally, a corporation, including a personal service corporation, must get the consent of the IRS before changing its tax year by filing Form 1128, Application To Adopt, Change, or Retain a Tax Year. However, exceptions may apply. See the Instructions for Form 1128 and Pub. 538 for more information.
The corporation may enter decimal points and cents when completing its return. However, the corporation should round off cents to whole dollars on its return, forms, and schedules to make completing its return easier. The corporation must either round off all amounts on its return to whole dollars, or use cents for all amounts. To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar. For example, $8.40 rounds to $8 and $8.50 rounds to $9.
If two or more amounts must be added to figure the amount to enter on a line, include cents when adding the amounts and round off only the total.
Keep the corporation's records for as long as they may be needed for the administration of any provision of the Internal Revenue Code. Usually, records that support an item of income, deduction, or credit on the return must be kept for 3 years from the date the return is due or filed, whichever is later. Keep records that verify the corporation's basis in property for as long as they are needed to figure the basis of the original or replacement property.
The corporation should keep copies of all filed returns. They help in preparing future and amended returns and in the calculation of earnings and profits.
Amended return.
Use Form 1120-X, Amended U.S. Corporation Income Tax Return, to correct a previously filed Form 1120.
Reportable transaction disclosure statement.
Disclose information for each reportable transaction in which the corporation participated. Form 8886, Reportable Transaction Disclosure Statement, must be filed for each tax year that the federal income tax liability of the corporation is affected by its participation in the transaction. The following are reportable transactions.
For more information, see Regulations section 1.6011-4. Also, see the Instructions for Form 8886.
The corporation may have to pay a penalty if it is required to disclose a reportable transaction under section 6011 and fails to properly complete and file Form 8886. Penalties may also apply under section 6707A if the corporation fails to file Form 8886 with its corporate return, fails to provide a copy of Form 8886 to the Office of Tax Shelter Analysis (OTSA), or files a form that fails to include all the information required (or includes incorrect information). Other penalties, such as an accuracy-related penalty under section 6662A, may also apply. See the Instructions for Form 8886 for details on these and other penalties.
Reportable transactions by material advisors.
Material advisors to any reportable transaction must disclose certain information about the reportable transaction by filing Form 8918 with the IRS. For details, see the Instructions for Form 8918.
Transfers to a corporation controlled by the transferor.
Every significant transferor (as defined in Regulations section 1.351-3(d)(1)) that receives stock of a corporation in exchange for property in a nonrecognition event must include the statement required by Regulations section 1.351-3(a) on or with the transferor's tax return for the tax year of the exchange. The transferee corporation must include the statement required by Regulations section 1.351-3(b) on or with its return for the tax year of the exchange, unless all the required information is included in any statement(s) provided by a significant transferor that is attached to the same return for the same section 351 exchange. If the transferor or transferee corporation is a controlled foreign corporation (CFC), each U.S. shareholder (within the meaning of section 951(b)) must include the required statement on or with its return.
Distributions under section 355.
Every corporation that makes a distribution of stock or securities of a controlled corporation, as described in section 355 (or so much of section 356 as it relates to section 355), must include the statement required by Regulations section 1.355-5(a) on or with its return for the year of the distribution. A significant distributee (as defined in Regulations section 1.355-5(c)) that receives stock or securities of a controlled corporation must include the statement required by Regulations section 1.355-5(b) on or with its return for the year of receipt. If the distributing or distributee corporation is a CFC, each U.S. shareholder (within the meaning of section 951(b)) must include the statement on or with its return.
Dual consolidated losses.
If a domestic corporation incurs a dual consolidated loss (as defined in Regulations section 1.1503(d)-1(b)(5)), the corporation (or consolidated group) may need to attach a domestic use agreement and/or an annual certification, as provided in Regulations section 1.1503(d)-6(d) and (g).
Election to reduce basis under section 362(e)(2)(C).
If property is transferred to a corporation subject to section 362(e)(2), the transferor and the transferee corporation may elect, under section 362(e)(2)(C), to reduce the transferor's basis in the stock received instead of reducing the transferee corporation's basis in the property transferred. Once made, the election is irrevocable. For more information, see section 362(e)(2) and Regulations section 1.362-4. If an election is made, a statement must be filed in accordance with Regulations section 1.362-4(d)(3).
Annual information reporting by specified domestic entities under section 6038D.
Certain domestic corporations that are formed or availed of to hold specified foreign financial assets (“specified domestic entities”) must file Form 8938. Form 8938 must be filed each year the value of the corporation's specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. For more information on domestic corporations that are specified domestic entities and the types of foreign financial assets that must be reported, see the Instructions for Form 8938, generally, and in particular, Who Must File , Specified Domestic Entity , Specified Foreign Financial Assets , Interests in Specified Foreign Financial Assets , Assets Not Required To Be Reported , and Exceptions to Reporting .
In addition, a domestic corporation required to file Form 8938 with its Form 1120 for the tax year should check “Yes” to Schedule N (Form 1120), Question 8, and also include that schedule with its Form 1120.
Form 8975.
Certain U.S. persons that are the ultimate parent entity of a U.S. multinational enterprise group with annual revenue for the preceding reporting period of $850 million or more are required to file Form 8975, Country-by-Country Report. Form 8975 and Schedule A (Form 8975) must be filed with the income tax return of the ultimate parent entity of a U.S. multinational enterprise group for the tax year in or within which the reporting period covered by Form 8975 ends. For more information, see Form 8975, Schedule A (Form 8975) and the Instructions for Form 8975, and Schedule A (Form 8975).
Paycheck Protection Program (PPP) loans.
A corporation that had tax-exempt income resulting from the forgiveness of a PPP loan should attach a statement to its return reporting each tax year for which the corporation is applying Rev. Proc. 2021-48, sections 3.01(1), (2), or (3). Any statement for the current tax year should include the following information, for each PPP loan:
A corporation that reported tax-exempt income from the forgiveness of a PPP loan on its 2020 return, the timing of which corresponds to one of the options presented in Rev. Proc. 2021-48, need not file an amended return solely to attach the statement that is described in these instructions.
If a corporation treats tax-exempt income resulting from a PPP loan as received or accrued prior to when forgiveness of the PPP loan is granted and the amount of forgiveness granted is less than the amount of tax-exempt income that was previously treated as received or accrued, the corporation should make a prior-period adjustment on Schedule M-2 for the tax year in which the corporation receives notice that the PPP loan was not fully forgiven. See the instructions for Schedule M-2 for more details.
Other forms and statements.
See Pub. 542, Corporations, for a list of other forms and statements a corporation may need to file in addition to the forms and statements discussed throughout these instructions.
File the 2023 return for calendar year 2023 and fiscal years that begin in 2023 and end in 2024. For a fiscal or short tax year return, fill in the tax year space at the top of the form.
The 2023 Form 1120 can also be used if:
The corporation must show its 2024 tax year on the 2023 Form 1120 and take into account any tax law changes that are effective for tax years beginning after December 31, 2023.
Enter the corporation's true name (as set forth in the charter or other legal document creating it), address, and EIN on the appropriate lines. Enter the address of the corporation's principal office or place of business. Include the suite, room, or other unit number after the street address. If the post office does not deliver mail to the street address and the corporation has a P.O. box, show the box number instead.
Do not use the address of the registered agent for the state in which the corporation is incorporated. For example, if a business is incorporated in Delaware or Nevada and the corporation's principal office is located in Little Rock, Arkansas, the corporation should enter the Little Rock address.
If the corporation receives its mail in care of a third party (such as an accountant or an attorney), enter on the street address line “C/O” followed by the third party's name and street address or P.O. box.
If the corporation has a foreign address, include the city or town, state or province, country, and foreign postal code. Do not abbreviate the country name. Follow the country's practice for entering the name of the state or province and postal code.
Corporations filing a consolidated return must check Item A, box 1a, and attach Form 851, Affiliations Schedule, and other supporting statements to the return. Also, for the first year a subsidiary corporation is being included in a consolidated return, attach Form 1122 to the parent's consolidated return. Attach a separate Form 1122 for each new subsidiary being included in the consolidated return.
File supporting statements for each corporation included in the consolidated return. Do not use Form 1120 as a supporting statement. On the supporting statement, use columns to show the following, both before and after adjustments.
Enter on Form 1120 the totals for each item of income, gain, loss, expense, or deduction, net of eliminating entries for intercompany transactions between corporations within the consolidated group. Attach consolidated balance sheets and a reconciliation of consolidated retained earnings.
The corporation does not have to provide the information requested in (3), (4), and (5), above, if its total receipts (line 1a plus lines 4 through 10 on page 1 of the return) and its total assets at the end of the tax year (Schedule L, line 15(d)) are less than $250,000. See Schedule K, Question 13.
For more information on consolidated returns, see the regulations under section 1502.
If Item A, box 1a, is checked and the corporation is the common parent of a consolidated group that includes a life insurance company, also check box 1b. See Regulations section 1.1502-47(m) for the requirements for filing a consolidated tax return for a life-nonlife consolidated group.
A personal holding company must check Item A, box 2, and attach Schedule PH (Form 1120), U.S. Personal Holding Company (PHC) Tax. See the Instructions for Schedule PH (Form 1120) for details.
If the corporation is a personal service corporation, check Item A, box 3. A personal service corporation is a corporation whose principal activity for the testing period is the performance of personal services. The testing period for a tax year is generally the prior tax year unless the corporation has just been formed. Personal services include any activity performed in the fields of accounting, actuarial science, architecture, consulting, engineering, health, law, and the performing arts. The services must be substantially performed by employee-owners.
A personal service corporation must use a calendar tax year unless:
If a corporation makes the section 444 election, its deduction for certain amounts paid to employee-owners may be limited. See Schedule H (Form 1120), Section 280H Limitations for a Personal Service Corporation (PSC), to figure the maximum deduction.
If a section 444 election is terminated and the termination results in a short tax year, type or print at the top of the first page of Form 1120 for the short tax year “SECTION 444 ELECTION TERMINATED.”
A corporation with total assets (nonconsolidated or consolidated for all corporations included within a consolidated tax group) of $10 million or more on the last day of the tax year must file Schedule M-3 (Form 1120) instead of Schedule M-1. A corporation filing Form 1120 that is not required to file Schedule M-3 may voluntarily file Schedule M-3 instead of Schedule M-1.
Corporations that (a) are required to file Schedule M-3 (Form 1120) and have less than $50 million total assets at the end of the tax year, or (b) are not required to file Schedule M-3 (Form 1120) and voluntarily file Schedule M-3 (Form 1120), must either (i) complete Schedule M-3 (Form 1120) entirely, or (ii) complete Schedule M-3 (Form 1120) through Part I, and complete Form 1120, Schedule M-1, instead of completing Parts II and III of Schedule M-3 (Form 1120). If the corporation chooses to complete Schedule M-1 instead of completing Parts II and III of Schedule M-3, the amount on Schedule M-1, line 1, must equal the amount on Schedule M-3, Part I, line 11. See the Instructions for Schedule M-3 (Form 1120) for more details. Also, see the instructions for Schedule M-1, later.
If you are filing Schedule M-3, check Item A, box 4, to indicate that Schedule M-3 is attached.
Enter the corporation's EIN. If the corporation does not have an EIN, it must apply for one. An EIN can be applied for:
EIN applied for, but not received.
If the corporation has not received its EIN by the time the return is due, enter “Applied For” and the date the corporation applied in the space for the EIN. However, if the corporation is filing its return electronically, an EIN is required at the time the return is filed. An exception applies to subsidiaries of corporations whose returns are filed with the parent's electronically filed consolidated Form 1120. These subsidiaries should enter “Applied For” in the space for the EIN on their returns. The subsidiaries' returns are identified under the parent corporation's EIN.
For more information, see the Instructions for Form SS-4.
Enter the corporation's total assets (as determined by the accounting method regularly used in keeping the corporation's books and records) at the end of the tax year. If there are no assets at the end of the tax year, enter -0-.
If the corporation is required to complete Schedule L, enter the total assets from Schedule L, line 15, column (d), on page 1, Item D. If filing a consolidated return, report total consolidated assets for all corporations joining in the return.
If a change in address or responsible party occurs after the return is filed, use Form 8822-B, Change of Address or Responsible Party— Business, to notify the IRS. See the instructions for Form 8822-B for details.
Except as otherwise provided in the Internal Revenue Code, gross income includes all income from whatever source derived.
Exception for income from qualifying shipping activities.
Gross income does not include income from qualifying shipping activities if the corporation makes an election under section 1354 to be taxed on its notional shipping income (as defined in section 1353) at the highest corporate tax rate. If the election is made, the corporation generally may not claim any loss, deduction, or credit with respect to qualifying shipping activities. A corporation making this election may also elect to defer gain on the disposition of a qualifying vessel.
Use Form 8902, Alternative Tax on Qualifying Shipping Activities, to figure the tax. Include the alternative tax on Schedule J, Part I, line 9e.
Line 1a. Gross receipts or sales.
Enter on line 1a gross receipts or sales from all business operations, except for amounts that must be reported on lines 4 through 10.
Special rules apply to certain income, as discussed below.
In general, advance payments must be included in income in the year of receipt. For exceptions to this general rule for corporations that use the accrual method of accounting, see the following.
Generally, the installment method cannot be used for dealer dispositions of property. A “dealer disposition” is any disposition of (a) personal property by a person who regularly sells or otherwise disposes of personal property of the same type on the installment plan, or (b) real property held for sale to customers in the ordinary course of the taxpayer's trade or business.
The restrictions on using the installment method do not apply to the following.
Enter on line 1a (and carry to line 3) the gross profit on collections from these installment sales. Attach a statement showing the following information for the current and the 3 preceding years: (a) gross sales, (b) cost of goods sold, (c) gross profits, (d) percentage of gross profits to gross sales, (e) amount collected, and (f) gross profit on the amount collected.
For sales of timeshares and residential lots reported under the installment method, if the corporation elects to pay interest under section 453(I)(3), the corporation's income tax is increased by the interest payable under section 453(l)(3). Report this addition to the tax on Schedule J, Part I, line 9g.
Accrual method corporations are not required to accrue certain amounts to be received from the performance of services that, based on their experience, will not be collected, if:
This provision does not apply to any amount if interest is required to be paid on the amount or if there is any penalty for failure to timely pay the amount. See Regulations section 1.448-3 for more information on the nonaccrual experience method, including information on safe harbor methods.
For information on a book safe harbor method of accounting for corporations that use the nonaccrual experience method of accounting, see Rev. Proc. 2011-46, 2011-42 I.R.B. 518 available at IRS.gov/irb/2011-42_IRB#RP-2011-46, or any successor. Also, see the Instructions for Form 3115 for procedures to obtain automatic consent to change to this method or make certain changes within this method.
Corporations that qualify to use the nonaccrual experience method should attach a statement to its return showing total gross receipts, the amount not accrued because of the application of section 448(d)(5), and the net amount accrued. Enter the net amount on line 1a.
Line 1b. Returns and allowances.
Enter cash and credit refunds the corporation made to customers for returned merchandise, rebates, and other allowances made on gross receipts or sales.
Complete and attach Form 1125-A, Cost of Goods Sold, if applicable. Enter on Form 1120, line 2, the amount from Form 1125-A, line 8. See Form 1125-A and its instructions.
See the instructions for Schedule C, later. Complete Schedule C and enter on line 4 the amount from Schedule C, line 23, column (a).
Enter taxable interest on U.S. obligations and on loans, notes, mortgages, bonds, bank deposits, corporate bonds, tax refunds, etc. Do not offset interest expense against interest income. Special rules apply to interest income from certain below-market-rate loans. See section 7872 for details.
Report tax-exempt interest on Schedule K, item 9. Also, if required, include the same amount on Schedule M-1, line 7, or Schedule M-3 (Form 1120), Part II, line 13, if applicable.
Enter the gross amount received for the rental of property. Deduct expenses such as repairs, interest, taxes, and depreciation on the proper lines for deductions. A rental activity held by a closely held corporation or a personal service corporation may be subject to the passive activity loss rules. See Passive activity limitations , later.
Enter any other taxable income not reported on lines 1 through 9. List the type and amount of income on an attached statement. If the corporation has only one item of other income, describe it in parentheses on line 10.
Examples of other income to report on line 10 include the following.
The LIFO recapture amount is the amount by which the C corporation's inventory under the FIFO method exceeds the inventory amount under the LIFO method at the close of the corporation's last tax year as a C corporation (or for the year of the transfer, if (2) above applies). Also, see the instructions for Schedule J, Part I, line 11.
See Form 8621 and the Instructions for Form 8621 for details.
A credit is available only if the leave was taken after March 31, 2020, and before October 1, 2021, and only after the qualified leave wages were paid, which might, under certain circumstances, not occur until a quarter after September 30, 2021, including quarters in 2023.
Uniform capitalization rules.
The uniform capitalization rules of section 263A require corporations to capitalize certain costs to inventory or other property. Corporations subject to the section 263A uniform capitalization rules are required to capitalize:
The corporation cannot deduct the costs required to be capitalized under section 263A until it sells, uses, or otherwise disposes of the property (to which the costs relate). The corporation recovers these costs through depreciation, amortization, or cost of goods sold.
A small business taxpayer (defined earlier) is not required to capitalize costs under section 263A. A small business taxpayer that wants to discontinue capitalizing costs under section 263A must change its method of accounting. See section 263A(i) and Regulations section 1.263A-1(j). Also, see the Instructions for Form 3115.
For more information on the uniform capitalization rules, see Pub. 538. Also, see Regulations sections 1.263A-1 through 1.263A-3. See section 263A(d), Regulations section 1.263A-4, and Pub. 225 for rules for property produced in a farming business.
Transactions between related taxpayers.
Generally, an accrual basis taxpayer can only deduct business expenses and interest owed to a related party in the year the payment is included in the income of the related party. See sections 163(e)(3) and 267(a)(2) for limitations on deductions for unpaid interest and expenses.
Limitations on business interest expense.
Business interest expense may be limited. See section 163(j) and Form 8990. Also, see Limitation on deduction in the instructions for line 18 and Schedule K, Question 23 and Question 24, later.
Section 291 limitations.
Corporations may be required to adjust deductions for depletion of iron ore and coal, intangible drilling and exploration and development costs, certain deductions for financial institutions, and the amortizable basis of pollution control facilities. See section 291 to determine the amount of the adjustment.
Election to deduct business start-up and organizational costs.
A corporation can elect to deduct a limited amount of start-up and organizational costs it paid or incurred. Any remaining costs must generally be amortized over a 180-month period. See sections 195 and 248 and the related regulations.
The corporation generally elects to deduct start-up or organizational costs by claiming the deduction on its income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. For more details, see the Instructions for Form 4562.
If the corporation timely filed its return for the year without making an election, it can still make an election by filing an amended return within 6 months of the due date of the return (excluding extensions). Clearly indicate the election on the amended return and enter “Filed pursuant to section 301.9100-2” at the top of the amended return. File the amended return at the same address the corporation filed its original return. The election applies when figuring taxable income for the current tax year and all subsequent years.
The corporation can choose to forgo the elections above by affirmatively electing to capitalize its start-up or organizational costs on its income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins.
The election to either amortize or capitalize start-up costs is irrevocable and applies to all start-up costs that are related to the trade or business.
Report the deductible amount of start-up and organizational costs and any amortization on line 26. For amortization that begins during the current tax year, complete and attach Form 4562, Depreciation and Amortization.
Passive activity limitations.
Limitations on passive activity losses and credits under section 469 apply to personal service corporations (defined earlier) and closely held corporations (defined later).
Generally, the two kinds of passive activities are:
Corporations subject to the passive activity limitations must complete Form 8810 to compute their allowable passive activity loss and credit. Before completing Form 8810, see Temporary Regulations section 1.163-8T, which provides rules for allocating interest expense among activities. If a passive activity is also subject to the at-risk rules of section 465 or the tax-exempt use loss rules of section 470, those rules apply before the passive loss rules.
For more information, see section 469, the related regulations, and Pub. 925, Passive Activity and At-Risk Rules.
A corporation is a closely held corporation if:
Certain organizations are treated as individuals for purposes of this test. See section 542(a)(2). For rules for determining stock ownership, see section 544 (as modified by section 465(a)(3)).
Reducing certain expenses for which credits are allowable.
If the corporation claims certain credits, it may need to reduce the otherwise allowable deductions for expenses used to figure the credit. This applies to credits such as the following.
If the corporation has any of the credits listed above, figure the current-year credit before figuring the deduction for expenses on which the credit is based. If the corporation capitalized any costs on which it figured the credit, it may need to reduce the amount capitalized by the credit attributable to these costs.
See the instructions for the form used to figure the applicable credit for more details.
Limitations on deductions related to property leased to tax-exempt entities.
If a corporation leases property to a governmental or other tax-exempt entity, the corporation cannot claim deductions related to the property to the extent that they exceed the corporation's income from the lease payments. This disallowed tax-exempt use loss can be carried over to the next tax year and treated as a deduction with respect to the property for that tax year. See section 470(d) for exceptions.
Limitation on tax benefits for remuneration under the Patient Protection and Affordable Care Act.
The $1 million compensation limit is reduced to $500,000 for remuneration for services provided by individuals for or on behalf of certain health insurance providers. The $500,000 limitation applies to remuneration that is deductible in the tax year during which the services were performed and remuneration for services during the year that is deductible in a future tax year (called "deferred deduction remuneration"). The $500,000 limitation is reduced by any amounts disallowed as excess parachute payments. See section 162(m)(6) and Regulations section 1.162-31 for definitions and other special rules.
Enter deductible officers' compensation on line 12. Do not include compensation deductible elsewhere on the return, such as amounts included in cost of goods sold, elective contributions to a section 401(k) cash or deferred arrangement, or amounts contributed under a salary reduction SEP agreement or a SIMPLE IRA plan.
If the corporation's total receipts (line 1a, plus lines 4 through 10) are $500,000 or more, complete Form 1125-E, Compensation of Officers. Enter on Form 1120, line 12, the amount from Form 1125-E, line 4.
Enter the total salaries and wages paid for the tax year. Do not include salaries and wages deductible elsewhere on the return, such as amounts included in officers' compensation, cost of goods sold, elective contributions to a section 401(k) cash or deferred arrangement, or amounts contributed under a salary reduction SEP agreement or a SIMPLE IRA plan.
If the corporation provided taxable fringe benefits to its employees, such as personal use of a car, do not deduct as wages the amount allocated for depreciation and other expenses claimed on lines 20 and 26.
If the corporation claims a credit for any wages paid or incurred, it may need to reduce any corresponding deduction for officers' compensation and salaries and wages. See Reducing certain expenses for which credits are allowable, earlier.
Enter the cost of repairs and maintenance not claimed elsewhere on the return, such as labor and supplies, that are not payments to produce or improve real or tangible personal property. See Regulations section 1.263(a)-1. For example, amounts are paid for improvements if they are for betterments to the property, restorations of the property (such as the replacements of major components or substantial structural parts), or if they adapt the property to a new or different use. Amounts paid to produce or improve property must be capitalized. See Regulations sections 1.263(a)-2 and (a)-3.
The corporation can deduct repair and maintenance expenses only to the extent they relate to a trade or business activity. See Regulations section 1.162-4. The corporation may elect to capitalize certain repair and maintenance costs consistent with its books and records. See Regulations section 1.263(a)-3(n) for information on how to make the election.
Enter the total debts that became worthless in whole or in part during the tax year. A small bank or thrift institution using the reserve method of section 585 should attach a statement showing how it figured the current year's provision. A corporation that uses the cash method of accounting cannot claim a bad debt deduction unless the amount was previously included in income.
If the corporation rented or leased a vehicle, enter the total annual rent or lease expense paid or incurred during the year. Also, complete Part V of Form 4562. If the corporation leased a vehicle for a term of 30 days or more, the deduction for vehicle lease expense may have to be reduced by an amount includible in income called the inclusion amount. The corporation may have an inclusion amount if:
| The lease term began: | And the vehicle's FMV on the first day of the lease exceeded: |
| Cars (excluding trucks and vans) | |
| After 12/31/22 but before 1/1/24 | $60,000 |
| After 12/31/21 but before 1/1/23 | $56,000 |
| After 12/31/20 but before 1/1/22 | $51,000 |
| After 12/31/17 but before 1/1/21 | $50,000 |
| After 12/31/12 but before 1/1/18 | $19,000 |
| Trucks and vans | |
| After 12/31/22 but before 1/1/24 | $60,000 |
| After 12/31/21 but before 1/1/23 | $56,000 |
| After 12/31/20 but before 1/1/22 | $51,000 |
| After 12/31/17 but before 1/1/21 | $50,000 |
| After 12/31/13 but before 1/1/18 | $19,500 |
| After 12/31/09 but before 1/1/14 | $19,000 |
See Pub. 463, Travel, Gift, and Car Expenses, for instructions on figuring the inclusion amount.
The inclusion amount for lease terms beginning in 2024 will be published in the Internal Revenue Bulletin in early 2024.
Enter taxes paid or accrued during the tax year, but do not include the following.
See section 164(d) for information on apportionment of taxes on real property between seller and purchaser.
Do not reduce the corporation's deduction for social security and Medicare taxes by the nonrefundable and refundable portions of any FFCRA and ARP credits for qualified sick and family leave wages claimed on its employment tax returns. Instead, report this amount as income on line 10.
Do not offset interest income against interest expense.
The corporation must make an interest allocation if the proceeds of a loan were used for more than one purpose (for example, to purchase a portfolio investment and to acquire an interest in a passive activity). See Temporary Regulations section 1.163-8T for the interest allocation rules.
Mutual savings banks, building and loan associations, and cooperative banks can deduct the amounts paid or credited to the accounts of depositors as dividends, interest, or earnings. See section 591.
Do not deduct the following interest.
Special rules apply to:
Limitation on deduction.
Under section 163(j), business interest expense is generally limited to the sum of business interest income, 30% of the adjusted taxable income, and floor plan financing interest. The amount of any business interest expense that is not allowed as a deduction for the tax year is carried forward to the following year. If section 163(j) applies, use Form 8990 to figure the amount of business interest expense the corporation can deduct for the current tax year and the amount that can be carried forward to the next year. See the Instructions for Form 8990. Also see Schedule K, Question 23 and Question 24, later.
Enter contributions or gifts actually paid within the tax year to or for the use of charitable and governmental organizations described in section 170(c) and any unused contributions carried over from prior years. Special rules and limits apply to contributions to organizations conducting lobbying activities. See section 170(f)(9).
Corporations reporting taxable income on the accrual method can elect to treat as paid during the tax year any contributions paid by the due date for filing the corporation’s tax return (not including extensions), if the contributions were authorized by the board of directors during the tax year. Attach a declaration to the return stating that the resolution authorizing the contributions was adopted by the board of directors during the tax year. The declaration must include the date the resolution was adopted. See section 170(a)(2)(B).
Limitation on deduction.
Generally, the total amount claimed cannot be more than 10% of taxable income (line 30) computed without regard to the following.
Carryover.
Charitable contributions over the 10% limitation cannot be deducted for the tax year but can be carried over to the next 5 tax years. See the exception below for farmers and ranchers and certain Native Corporations.
Special rules apply if the corporation has an NOL carryover to the tax year. In figuring the charitable contributions deduction for the current tax year, the 10% limit is applied using the taxable income after taking into account any deduction for the NOL.
To figure the amount of any remaining NOL carryover to later years, taxable income must be modified (see section 172(b)). To the extent that contributions are used to reduce taxable income for this purpose and increase an NOL carryover, a contributions carryover is not allowed. See section 170(d)(2)(B).
Suspension of 10% limitation for farmers and ranchers and certain Native Corporations.
Certain corporations can deduct contributions of qualified conservation property without regard to the general 10% limit. This applies to:
The total amount of the contribution claimed for the qualified conservation property cannot exceed 100% of the excess of the corporation's taxable income (as computed above substituting “100%” for “10%” ) over all other allowable charitable contributions. Any excess qualified conservation contributions can be carried over to the next 15 years, subject to the 100% limitation. See sections 170(b)(2)(B) and (C).
Cash contributions.
For contributions of cash, check, or other monetary gifts (regardless of the amount), the corporation must maintain a bank record, or a receipt, letter, or other written communication from the donee organization indicating the name of the organization, the date of the contribution, and the amount of the contribution.
Contributions of $250 or more.
A corporation can deduct a contribution of $250 or more only if it gets a written acknowledgment from the donee organization that shows the amount of cash contributed, describes any property contributed (but not its value), and either gives a description and a good faith estimate of the value of any goods or services provided in return for the contribution or states that no goods or services were provided in return for the contribution. The acknowledgment must be obtained by the due date (including extensions) of the corporation's return, or, if earlier, the date the return is filed. Do not attach the acknowledgment to the tax return, but keep it with the corporation's records.
Contributions of property other than cash.
If a corporation (other than a closely held or personal service corporation) contributes property other than cash and claims over a $500 deduction for the property, it must attach a statement to the return describing the kind of property contributed and the method used to determine its FMV. Closely held corporations and personal service corporations must complete Form 8283, Noncash Charitable Contributions, and attach it to their returns. All other corporations must generally complete and attach Form 8283 to their returns for contributions of property (other than money) if the total claimed deduction for all property contributed was more than $5,000. Special rules apply to the contribution of certain property. See the Instructions for Form 8283.
Special rules apply to qualified conservation contributions, including contributions of certain easements on buildings located in a registered historic district. See section 170(h) and Pub. 526, Charitable Contributions.
The corporation must reduce its deduction for contributions of certain ordinary income and capital gain property. See section 170(e).
A larger deduction is allowed for certain contributions including:
For more information on charitable contributions, including substantiation and recordkeeping requirements, see section 170 and the related regulations and Pub. 526. For other special rules that apply to corporations, see Pub. 542.
Include on line 20 depreciation and the cost of certain property that the corporation elected to expense under section 179 from Form 4562. Include amounts not claimed on Form 1125-A or elsewhere on the return. See Form 4562 and the Instructions for Form 4562.
If the corporation has an economic interest in mineral property or standing timber, it can take a deduction for depletion. More than one person can have an economic interest in the same mineral deposit or timber. In the case of leased property, the depletion deduction is divided between the lessor and the lessee.
See sections 613 and 613A for percentage depletion rates applicable to natural deposits. Also, see section 291 for the limitation on the depletion deduction for iron ore and coal (including lignite).
Attach Form T (Timber), Forest Activities Schedule, if a deduction for depletion of timber is taken.
Foreign intangible drilling costs and foreign exploration and development costs must either be added to the corporation's basis for cost depletion purposes or be deducted ratably over a 10-year period. See sections 263(i), 616, and 617 for details.
Enter the deduction for contributions to qualified pension, profit-sharing, or other funded deferred compensation plans. Employers who maintain such a plan must generally file one of the forms listed below unless exempt from filing under regulations or other applicable guidance, even if the plan is not a qualified plan under the Internal Revenue Code. The filing requirement applies even if the corporation does not claim a deduction for the current tax year. There are penalties for failure to file these forms on time and for overstating the pension plan deduction. See sections 6652(e) and 6662(f). Also, see the instructions for the applicable form.
Form 5500,
Annual Return/Report of Employee Benefit Plan.
Form 5500-SF,
Short Form Annual Return/Report of Small Employee Benefit Plan. File this form instead of Form 5500 generally if there were under 100 participants at the beginning of the plan year.
Form 5500 and Form 5500-SF must be filed electronically under the computerized ERISA Filing Acceptance System (EFAST2). For more information, see the EFAST2 website at www.EFAST.dol.gov.
Form 5500-EZ,
Annual Return of A One-Participant (Owners/Partners and Their Spouses) Retirement Plan or A Foreign Plan. File this form for a plan that only covers the owner (or the owner and spouse) or a foreign plan that is required to file an annual return and does not file the annual return electronically on Form 5500-SF. See the Instructions for Form 5500-EZ.
Enter contributions to employee benefit programs not claimed elsewhere on the return (for example, insurance or health and welfare programs) that are not an incidental part of a pension, profit-sharing, etc., plan included on line 23.
Complete and attach Form 7205 if claiming the energy efficient commercial building deduction. See the Instructions for Form 7205 for more information. Also, see section 179D.
Attach a statement, listing by type and amount, all allowable deductions that are not deductible elsewhere on Form 1120. Enter the total on line 26.
Examples of other deductions include the following.
Certain film, television, or live theatrical productions acquired and placed in service after September 27, 2017 (for which a deduction would have been allowable under section 181 without regard to the dollar limitation), are qualified property eligible for the special depreciation allowance under section 168(k). See the Instructions for Form 4562.
However, a deduction may be taken for these dividends only if, according to the plan, the dividends are:
Do not deduct expenses such as the following.
Travel, meals, and entertainment.
Subject to limitations and restrictions discussed below, a corporation can deduct ordinary and necessary travel, meal, and non-entertainment expenses paid or incurred in its trade or business. Generally, entertainment expenses, membership dues, and facilities used in connection with these activities cannot be deducted. In addition, no deduction is generally allowed for qualified transportation fringe benefits. Special rules apply to deductions for gifts, luxury water travel, and convention expenses. See section 274 and Pub. 463, for details.
The corporation cannot deduct travel expenses of any individual accompanying a corporate officer or employee, including a spouse or dependent of the officer or employee, unless:
Generally, the corporation can deduct only 50% of the amount otherwise allowable for non-entertainment-related meal expenses paid or incurred in its trade or business. Meals not separately stated from entertainment are generally not deductible. In addition (subject to exceptions under section 274(k)(2)):
See section 274(n)(3) for a special rule that applies to expenses for meals consumed by individuals subject to the hours of service limits of the Department of Transportation.
Generally, no deduction is allowed under section 274(a)(4) for QTFs provided by employers to their employees. QTFs are defined in section 132(f)(1) and include:
See section 274 and Pub. 15-B, Employers Tax Guide to Fringe Benefits, for details.
The corporation can deduct amounts paid or incurred for membership dues in civic or public service organizations, professional organizations (such as bar and medical associations), business leagues, trade associations, chambers of commerce, boards of trade, and real estate boards. However, no deduction is allowed if a principal purpose of the organization is to entertain or provide entertainment facilities for members or their guests. In addition, corporations cannot deduct membership dues in any club organized for business, pleasure, recreation, or other social purpose. This includes country clubs, golf and athletic clubs, airline and hotel clubs, and clubs operated to provide meals under conditions favorable to business discussion.
Generally, the corporation cannot deduct an expense paid or incurred for a facility (such as a yacht or hunting lodge) used for an activity usually considered entertainment, amusement, or recreation.
Generally, the corporation may be able to deduct otherwise nondeductible entertainment, amusement, or recreation expenses if the amounts are treated as compensation to the recipient and reported on Form W-2 for an employee or on Form 1099-NEC for an independent contractor.
However, if the recipient is an officer, director, beneficial owner (directly or indirectly), or other “specified individual” (as defined in section 274(e)(2)(B) and Regulations section 1.274-9(b)), special rules apply.
Fines or similar penalties.
Generally, no deduction is allowed for fines or similar penalties paid or incurred to, or at the direction of, a government or governmental entity for violating any law, or for the investigation or inquiry into the potential violation of a law, except:
No deduction is allowed unless the amounts are specifically identified in the order or agreement and the corporation establishes that the amounts were paid for that purpose. Also, any amount paid or incurred as reimbursement to the government for the costs of any investigation or litigation are not eligible for the exceptions and are nondeductible. See section 162(f).
Lobbying expenses.
Generally, lobbying expenses are not deductible. These expenses include:
Dues and other similar amounts paid to certain tax-exempt organizations may not be deductible. If certain in-house lobbying expenditures do not exceed $2,000, they are deductible.
At-risk rules.
Generally, special at-risk rules under section 465 apply to closely held corporations (see Passive activity limitations , earlier) engaged in any activity as a trade or business or for the production of income. These corporations may have to adjust the amount on line 28. (See below.)
The at-risk rules do not apply to:
However, the at-risk rules do apply to the holding of mineral property.
If the at-risk rules apply, adjust the amount on this line for any section 465(d) losses. These losses are limited to the amount for which the corporation is at risk for each separate activity at the close of the tax year. If the corporation is involved in one or more activities, any of which incurs a loss for the year, report the losses for each activity separately. Attach Form 6198, At-Risk Limitations, showing the amount at risk and gross income and deductions for the activities with the losses.
If the corporation sells or otherwise disposes of an asset or its interest (either total or partial) in an activity to which the at-risk rules apply, determine the net profit or loss from the activity by combining the gain or loss on the sale or disposition with the profit or loss from the activity. If the corporation has a net loss, it may be limited because of the at-risk rules.
Treat any loss from an activity not allowed for the tax year as a deduction allocable to the activity in the next tax year.
A corporation can use the NOL incurred in one tax year to reduce its taxable income in another tax year. Enter on line 29a the total NOL carryovers from other tax years, but do not enter more than the corporation's taxable income (after special deductions). Attach a statement showing the computation of the NOL deduction. Complete item 12 on Schedule K.
The following special rules apply.
For more details on the NOL deduction, see section 172 and the Instructions for Form 1139.
See the instructions for Schedule C.
Minimum taxable income.
The corporation's taxable income cannot be less than the largest of the following amounts.
Net operating loss (NOL).
If line 30 (figured without regard to the items listed above under minimum taxable income) is zero or less, the corporation may have an NOL that can be carried back or forward as a deduction to other tax years.
Only farming losses and losses of an insurance company (other than a life insurance company) can be carried back. The carryback period for these losses is 2 years. For NOLs that can be carried back, the corporation can elect to waive the carryback period and instead carry the NOL forward to future tax years.
See the instructions for Schedule K, Item 11 for information on making the election to waive the carryback period. See the Instructions for Form 1139 for other special rules and elections.
The NOL deduction for tax year 2023 cannot exceed the aggregate amount of NOLs arising in tax years beginning before January 1, 2018, carried to such year plus the lesser of:
An exception applies for NOLs of insurance companies other than life insurance companies. The 80% taxable income limit does not apply to these entities. See sections 172(b) and (f).
Merchant Marine capital construction fund.
To take a deduction for amounts contributed to a capital construction fund (CCF), reduce the amount that would otherwise be entered on line 30 by the amount of the deduction. On the dotted line next to the entry space, enter “CCF” and the amount of the deduction. For more information, see section 7518.
Reserved for future use.
Generally, the corporation does not have to file Form 2220 because the IRS can figure the penalty amount, if any, and bill the corporation. However, even if the corporation does not owe the penalty, it must complete and attach Form 2220 if:
If Form 2220 is attached, check the box on line 34, and enter any penalty on this line.
If the corporation's tax liability includes a CAMT liability, the corporation must complete and attach Form 2220. The affected corporation must also include an amount of estimated tax penalty on Form 1120, line 34, even if that amount is zero. Failure to follow these instructions could result in the corporation receiving a penalty notice that will require an abatement request to apply any penalty relief. See Notice 2023-42.
If the corporation cannot pay the full amount of tax owed, it can apply for an installment agreement online. The corporation can apply for an installment agreement online if:
Under an installment agreement, the corporation can pay what it owes in monthly installments. There are certain conditions that must be met to enter into and maintain an installment agreement, such as paying the liability within 24 months and making all required deposits and timely filing tax returns during the length of the agreement.
If the installment agreement is accepted, the corporation will be charged a fee and it will be subject to penalties and interest on the amount of tax not paid by the due date of the return.
Enter the amount of any overpayment that should be refunded or applied to next year's estimated tax.
This election to apply some or all of the overpayment amount to the corporation's 2024 estimated tax cannot be changed at a later date.
Direct deposit of refund.
If the corporation wants its refund directly deposited into its checking or savings account at any U.S. bank or other financial institution instead of having a check sent to the corporation, complete Form 8050, Direct Deposit of Corporate Tax Refund, and attach it to the corporation's tax return.
For purposes of the 20% ownership test on lines 1 through 7, the percentage of stock owned by the corporation is based on voting power and value of the stock. Preferred stock described in section 1504(a)(4) is not taken into account.
Consolidated returns.
Corporations filing a consolidated return should see Regulations sections 1.1502-13, 1.1502-26, and 1.1502-27 before completing Schedule C.
Corporations filing a consolidated return must not report as dividends on Schedule C any amounts received from corporations within the consolidated group. Such dividends are eliminated in consolidation rather than offset by the dividends-received deduction.
Enter dividends (except those received on certain debt-financed stock acquired after July 18, 1984—see section 246A) that are:
Also, include on line 1 the following.
Report so-called dividends or earnings received from mutual savings banks, etc., as interest. Do not treat them as dividends.
Enter on line 2:
Enter the following.
Dividends received on certain debt-financed stock acquired after July 18, 1984, are not entitled to the full 50% or 65% dividends-received deduction under section 243 or 245(a). The 50% or 65% deduction is reduced by a percentage that is related to the amount of debt incurred to acquire the stock. See section 246A. Also, see section 245(a) before making this computation for an additional limitation that applies to certain dividends received from foreign corporations. Attach a statement to Form 1120 showing how the amount on line 3, column (c), was figured.
Enter dividends received on preferred stock of a less-than-20%-owned public utility that is subject to income tax and is allowed the 23.3% deduction provided in sections 244 and 247 (as affected by P.L.113-295, Div. A, section 221(a)(41)(A), Dec. 19, 2014, 128 Stat. 4043) for dividends paid.
Enter dividends received on preferred stock of a 20%-or-more-owned public utility that is subject to income tax and is allowed the 26.7% deduction provided in sections 244 and 247 (as affected by P.L.113-295, Div. A, section 221(a)(41)(A), Dec. 19, 2014, 128 Stat. 4043) for dividends paid.
Enter the U.S.-source portion of dividends that:
Also, include dividends received from a less-than-20%-owned FSC that:
Enter the U.S.-source portion of dividends that:
Also, include dividends received from a 20%-or-more-owned FSC that:
Enter dividends received from wholly owned foreign subsidiaries that are eligible for the 100% deduction under section 245(b).
In general, the deduction under section 245(b) applies to dividends paid out of the earnings and profits of a foreign corporation for a tax year during which:
Generally, line 9, column (c), cannot exceed the amount from the Worksheet for Schedule C, line 9. However, in a year in which an NOL occurs, this limitation does not apply even if the loss is created by the dividends-received deduction. See sections 172(d) and 246(b).
Small business investment companies operating under the Small Business Investment Act of 1958 must enter dividends that are received from domestic corporations subject to income tax even though a deduction is allowed for the entire amount of those dividends. To claim the 100% deduction on line 10, column (c), the company must file with its return a statement that it was a federal licensee under the Small Business Investment Act of 1958 at the time it received the dividends.
Enter only dividends that qualify under section 243(b) for the 100% dividends-received deduction described in section 243(a)(3). Corporations taking this deduction are subject to the provisions of section 1561.
The 100% deduction does not apply to affiliated group members that are joining in the filing of a consolidated return.
Enter dividends from FSCs that are attributable to foreign trade income and that are eligible for the 100% deduction provided in section 245(c)(1)(A).
Enter the foreign-source portion of dividends that:
Enter the foreign dividends not reportable on line 3, 6, 7, 8, 11, 12, or 13 of column (a).
Include on line 14 the foreign-source portion of any dividend that does not qualify for the section 245A deduction (for example, hybrid dividends within the meaning of section 245A(e), ineligible amounts of dividends within the meaning of Regulations section 1.245A-5(b), dividends that fail to meet the holding period requirement under section 246(c)(5), etc.).
Also, include on line 14 the corporation's share of distributions from a section 1291 fund from Form 8621, to the extent that the amounts are taxed as dividends under section 301. See Form 8621 and the Instructions for Form 8621.
Attach a statement identifying the amount of each dividend reported on line 14 and the provision pursuant to which a deduction is not allowed with respect to such dividend.
Reserved for future use.
Reserved for future use.
Enter the foreign-source portion of any subpart F inclusions attributable to the sale or exchange by a CFC of stock in another foreign corporation described in section 964(e)(4). This should equal the sum of the amounts reported by the U.S. shareholder on Form(s) 5471, Schedule I, line 1a. (Do not include on line 16a any portion of such subpart F inclusion that is not eligible for the section 245A deduction pursuant to Regulations section 1.245A-5(g)(2). Include such amounts on line 16c.)
Enter the total subpart F inclusions attributable to tiered hybrid dividends. This should equal the sum of the amounts reported by the U.S. shareholder on Form(s) 5471, Schedule I, line 1b.
Enter all other amounts included in income under section 951. This should equal the sum of the amounts reported by the U.S. shareholder on Form(s) 5471, Schedule I, lines 1(c) through 1(h), 2, and 4.
Enter amounts included in income under section 951A. See Form 8992, Part II, line 5, and the Instructions for Form 8992. Also, if applicable, attach Form(s) 5471.
Consider the applicability of section 951A with respect to CFCs owned by domestic partnerships in which the corporation has an interest.
Include gross-up for taxes deemed paid under section 960.
| 1. | Refigure Form 1120, page 1, line 28, without any adjustment under section 1059 and without any capital loss carryback to the tax year under section 1212(a)(1) | 1. | _____ |
| 2. | Complete lines 10, 11, 12, and 13, column (c), and enter the total here | 2. | _____ |
| 3. | Subtract line 2 from line 1 | 3. | _____ |
| 4. | Multiply line 3 by 65% (0.65) | 4. | _____ |
| 5. | Add lines 2, 5, 7, and 8, column (c), and the part of the deduction on line 3, column (c), that is attributable to dividends from 20%-or-more-owned corporations | 5. | _____ |
| 6. | Enter the smaller of line 4 or line 5. If line 5 is greater than line 4, stop here; enter the amount from line 6 on line 9, column (c), and do not complete the rest of this worksheet | 6. | _____ |
| 7. | Enter the total amount of dividends from 20%-or-more-owned corporations that are included on lines 2, 3, 5, 7, and 8, column (a) | 7. | _____ |
| 8. | Subtract line 7 from line 3 | 8. | _____ |
| 9. | Multiply line 8 by 50% (0.50) | 9. | _____ |
| 10. | Subtract line 5 from line 9, column (c) | 10. | _____ |
| 11. | Enter the smaller of line 9 or line 10 | 11. | _____ |
| 12. | Dividends-received deduction after limitation (sec. 246(b)) . Add lines 6 and 11. Enter the result here and on line 9, column (c) | 12. | _____ |
Enter taxable distributions from an IC-DISC or former DISC that are designated as not eligible for a dividends-received deduction.
No deduction is allowed under section 243 for a dividend from an IC-DISC or former DISC (as defined in section 992(a)) to the extent the dividend:
Include the following.
If patronage dividends or per-unit retain allocations are included on line 20, identify the total of these amounts in a statement attached to Form 1120.
Section 247 (as affected by P.L.113-295, Div. A, section 221(a)(41)(A), Dec. 19, 2014, 128 Stat. 4043) allows public utilities a deduction of 40% of the smaller of (a) dividends paid on their preferred stock during the tax year, or (b) taxable income computed without regard to this deduction. In a year in which an NOL occurs, compute the deduction without regard to section 247(a)(1)(B).
Enter the section 250 deduction claimed for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI). This should equal the sum of the amounts on Form 8993, Part III, lines 28 and 29.
Multiply taxable income (page 1, line 30) by 21% (0.21). Enter this amount on line 1.
Mutual savings bank conducting life insurance business.
The tax under section 594 consists of the sum of (a) a partial tax computed on Form 1120 on the taxable income of the bank, determined without regard to income or deductions allocable to the life insurance department, and (b) a partial tax on the taxable income computed on Form 1120-L of the life insurance department. Enter the combined tax on line 1. Attach Form 1120-L as a schedule (and identify it as such), together with the annual statements and schedules required to be filed with Form 1120-L. See Regulations section 1.6012-2(c)(1)(ii).
If an insurance company files its income tax return electronically, it should not include the annual statements and schedules required to be filed with Form 1120-L. However, such statements must be available at all times for inspection by the IRS and retained for so long as such statements may be material in the administration of any Internal Revenue law.
Deferred tax under section 1291.
If the corporation was a shareholder in a PFIC and received an excess distribution or disposed of its investment in the PFIC during the year, it must include the increase in taxes due under section 1291(c)(2) (from Form 8621) in the total for line 1. On the dotted line next to line 1, enter “Section 1291” and the amount.
Do not include on line 1 any interest due under section 1291(c)(3). Instead, include the amount of interest owed on Schedule J, Part I, line 9z.
For more information on reporting the deferred tax and interest, see the Instructions for Form 8621.
Increase in tax attributable to partner's audit liability under section 6226.
If the corporation is filing Form 8978, Partner’s Additional Reporting Year Tax, to report adjustments shown on Form 8986, Push Out to Partners under IRC 6226(a)(2), they received from partnerships that have been audited and have elected to push out imputed underpayments to their partners, include any increase in taxes due from Form 8978, line 14, in the total for Form 1120, Schedule J, line 1. On the dotted line next to line 1, enter "FROM FORM 8978" and the amount. Attach Form 8978. If Form 8978, line 14, shows a decrease in tax, see the instructions for Schedule J, line 6.
Additional tax under section 197(f).
A corporation that elects to recognize gain and pay tax on the sale of a section 197 intangible under the related person exception to the anti-churning rules should include any additional tax due in the total for line 1. On the dotted line next to line 1, enter “Section 197” and the amount. See section 197(f)(9)(B)(ii).
If the corporation had gross receipts of at least $500 million in any 1 of the 3 tax years preceding the current tax year, complete and attach Form 8991. Enter on line 2 the base erosion minimum tax amount from Form 8991, Part IV, line 5e. See section 59A and the Instructions for Form 8991. Also, see Schedule K, Question 22, later.
Enter on line 3 the amount from Form 4626, Alternative Minimum Tax—Corporations, Part II, line 13, if applicable. See the Instructions for Form 4626.
Line 5a.
To find out when a corporation can take the credit for payment of income tax to a foreign country or U.S. territory, see Form 1118, Foreign Tax Credit—Corporations.
Line 5b.
Enter any qualified electric vehicle passive activity credits from prior years allowed for the current tax year from Form 8834, Qualified Electric Vehicle Credit, line 7. Attach Form 8834.
Line 5c.
Use Form 3800 to claim any general business credits. Enter on line 5c the allowable credit from Form 3800, Part II, line 38. See the Instructions for Form 3800.
Line 5d.
Enter any allowable credit from Form 8827, Credit for Prior Year Minimum Tax—Corporations. Complete and attach Form 8827.
Line 5e.
Enter the allowable credits from Form 8912, Credit to Holders of Tax Credit Bonds, line 12.
Add lines 5a through 5e. Enter the total on line 6.
Decrease attributable to partner's audit liability under section 6226.
If the corporation is filing Form 8978 to report adjustments shown on Form 8986 they received from partnerships that have been audited and have elected to push out imputed underpayments to their partners, include any decrease in taxes due (negative amount) from Form 8978, line 14, in the total for Form 1120, Schedule J, line 6. On the dotted line next to line 6, enter "FROM FORM 8978" and the amount. Attach Form 8978. If Form 8978, line 14, shows an increase in tax, see the instructions for Schedule J, line 1.
A corporation is taxed as a personal holding company under section 542 if:
See Schedule PH (Form 1120) for definitions and details on how to figure the tax.
Include any of the following taxes and interest.
Line 9a. Recapture of investment credit.
If the corporation disposed of investment credit property or changed its use before the end of the 5-year recapture period under section 50(a), enter the increase in tax from Form 4255. See the Instructions for Form 4255.
Line 9b. Recapture of low-income housing credit.
If the corporation disposed of property (or there was a reduction in the qualified basis of the property) for which it took the low-income housing credit, and the corporation did not follow the procedures that would have prevented recapture of the credit, it may owe a tax. See Form 8611.
Line 9c. Interest due under the look-back method—completed long-term contracts.
If the corporation used the percentage-of-completion method under section 460(b) for certain long-term contracts, figure any interest due or to be refunded using the look-back method, described in section 460(b)(2). Use Form 8697 to figure any interest due or to be refunded. See the Instructions for Form 8697. Include any interest due on line 9c.
Line 9d. Interest due under the look-back method—income forecast method.
If the corporation used the income forecast method to depreciate property, it must figure any interest due or to be refunded using the look-back method, described in section 167(g)(2). Use Form 8866 to figure any interest due or to be refunded. See the Instructions for Form 8866. Include any interest due on line 9d.
Line 9e. Alternative tax on qualifying shipping activities.
Enter any alternative tax on qualifying shipping activities from Form 8902.
Line 9f. Interest/tax due under section 453A(c).
Include any interest on deferred tax attributable to certain nondealer installment obligations (section 453A(c)).
Line 9g. Interest/tax due under section 453(l).
Include any interest on deferred tax attributable to dealer installment obligations (section 453(l)).
Line 9z. Other.
Include on line 9z additional taxes and interest such as the following. Attach a statement showing the computation of each item included in the total for line 9z and identify the applicable Code section and the type of tax or interest.
Include any deferred tax on the termination of a section 1294 election applicable to shareholders in a qualified electing fund in the amount entered on line 11.
Subtract the following amounts from the total for line 11.
Step 1. Figure the tax on the corporation's income including the LIFO recapture amount. Complete Schedule J, Part I, lines 1 through 10.
Step 2. Using a separate worksheet, complete Schedule J again, but do not include the LIFO recapture amount in the corporation's taxable income.
Step 3. Compare the tax in Step 2 to the tax in Step 1. The difference between the two is the LIFO recapture tax.
Step 4. Multiply the amount figured in Step 3 by 75% (0.75). The result is the deferred LIFO recapture tax.
How to report.
Attach a statement showing the computation of each item included in, or subtracted from, the total for line 11. On the dotted line next to line 11, specify (a) the applicable Code section, (b) the type of tax, and (c) enter the amount of tax. For example, if the corporation is deferring a $100 LIFO recapture tax, subtract this amount from the total on line 11, then enter “Section 1363—Deferred Tax—$100” on the dotted line next to line 11.
Reserved for future use.
Enter any estimated tax payments the corporation made for the current tax year.
Beneficiaries of trusts.
If the corporation is the beneficiary of a trust, and the trust makes a section 643(g) election to credit its estimated tax payments to its beneficiaries, include the corporation's share of the payment in the total for line 14. Enter “T” and the amount of the payment on the dotted line next to the entry space.
If the corporation overpaid estimated tax, it may be able to get a quick refund by filing Form 4466. The overpayment must be at least 10% of the corporation's expected income tax liability and at least $500. File Form 4466 after the end of the corporation's tax year, and no later than the due date for filing the corporation’s tax return (not including extensions). Form 4466 must be filed before the corporation files its tax return. See the instructions for Form 4466.
If the corporation had federal income tax withheld from any payments it received because, for example, it failed to give the payer its correct EIN or was otherwise subjected to backup withholding, include the amount withheld in the total for line 18.
Line 20a. Credit from Form 2439.
Enter any credit from Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains, for the corporation's share of the tax paid by a regulated investment company (RIC) or a real estate investment trust (REIT) on undistributed long-term capital gains included in the corporation's income. Attach Form 2439.
Line 20b. Credit for federal tax on fuels.
Enter the total income tax credit claimed on Form 4136, Credit for Federal Tax Paid on Fuels. Attach Form 4136.
Line 20c.
Reserved for future use.
Line 20z. Other.
Include on line 20z any other refundable credit the corporation is claiming, including the following. Attach a statement listing the type of credit and the amount of the credit.
Enter on line 22 the total net elective payment election amount from Form 3800, Part III, line 6, column (i). See the Instructions for Form 3800.
Complete all items that apply to the corporation.
See the list of Principal Business Activity Codes later in the instructions. Using the list of codes and activities, determine from which activity the corporation derives the highest percentage of its total receipts. Enter on lines 2a, 2b, and 2c the principal business activity code number, the corporation's business activity, and a description of the principal product or service of the corporation. For nonstore retailers, select the PBA code by the primary product that your establishment sells. For example, establishments primarily selling prescription and non-prescription drugs, select PBA code 456110 Pharmacies & Drug Retailers.
Check the “Yes” box for question 3 if:
Any corporation that meets either of the requirements above should check the “Yes” box. This applies even if the corporation is a subsidiary member of one group and the parent corporation of another.
If the corporation is an “excluded member” of a controlled group (see definition in the Instructions for Schedule O (Form 1120)), it is still considered a member of a controlled group for this purpose.
Affiliated group.
An affiliated group is one or more chains of includible corporations (as defined in section 1504(b)) connected through stock ownership with a common parent corporation. See section 1504(a). The common parent must be an includible corporation and the following requirements must be met.
For this purpose, the term “stock” generally does not include any stock that (a) is nonvoting, (b) is nonconvertible, (c) is limited and preferred as to dividends and does not participate significantly in corporate growth, and (d) has redemption and liquidation rights that do not exceed the issue price of the stock (except for a reasonable redemption or liquidation premium). See section 1504(a)(4).
For purposes of question 4, the constructive ownership rules of section 267(c) (excluding section 267(c)(3)) apply to ownership of interests in corporate stock and ownership of interests in the profit, loss, or capital of a partnership. If the corporation checked “Yes” to question 4a or 4b, complete and attach Schedule G (Form 1120), Information on Certain Persons Owning the Corporation's Voting Stock.
For purposes of determining the corporation's constructive ownership of other entities, the constructive ownership rules of section 267(c) (excluding section 267(c)(3)) apply to ownership of interests in partnerships and trusts as well as corporate stock. Generally, if an entity (a corporation, partnership, or trust) is owned, directly or indirectly, by or for another entity (corporation, partnership, estate, or trust), the owned entity is considered to be owned proportionately by or for the owners (shareholders, partners, or beneficiaries) of the owning entity.
List each foreign or domestic corporation not included on Form 851, Affiliations Schedule, in which the corporation, at the end of the tax year, owned directly 20% or more, or owned, directly or indirectly, 50% or more of the total voting power of all classes of stock entitled to vote. Indicate the name of the corporation, EIN (if any), country of incorporation, and the percentage interest owned, directly or indirectly, in the total voting power. List the parent corporation of an affiliated group of corporations filing a consolidated tax return rather than the subsidiary members except for subsidiary members in which an interest is owned, directly or indirectly, independent of the interest owned, directly or indirectly, in the parent corporation. List a corporation owned through a disregarded entity rather than the disregarded entity.
List each foreign or domestic partnership in which the corporation, at the end of the tax year, owned directly an interest of 20% or more, or owned, directly or indirectly, an interest of 50% or more in the profit, loss, or capital of the partnership. List each trust in which the corporation, at the end of the tax year, owned directly an interest of 20% or more, or owned, directly or indirectly, an interest of 50% or more in the trust beneficial interest. Indicate the name, EIN (if any), country of organization, and the maximum percentage interest owned, directly or indirectly, in the profit, loss, or capital of the partnership at the end of the partnership tax year, or, for a trust, the percentage interest owned in the trust beneficial interest. List a partnership or trust owned through a disregarded entity rather than the disregarded entity.
Maximum percentage owned in partnership profit, loss, or capital.
For the purposes of question 5b, the term “maximum percentage owned” means the highest percentage of interest in a partnership's profit, loss, or capital as of the end of the partnership's tax year, as determined under the partnership agreement, when taking into account the constructive ownership rules, earlier. If the partnership agreement does not express the partner's share of profit, loss, and capital as fixed percentages, use a reasonable method in arriving at the percentage items for the purposes of completing question 5b. Such method must be consistent with the partnership agreement. The method used to compute a percentage share of profit, loss, and capital must be applied consistently from year to year. Maintain records to support the determination of the share of profits, losses, and capital.
Example.
Corporation A owns, directly, a 50% interest in the profit, loss, or capital of Partnership B. Corporation A also owns, directly, a 15% interest in the profit, loss, or capital of Partnership C and owns, directly, 15% of the voting stock of Corporation D. Partnership B owns, directly, a 70% interest in the profit, loss, or capital of Partnership C and owns, directly, 70% of the voting stock of Corporation D. Corporation A owns, indirectly, through Partnership B, a 35% interest (50% of 70%) in the profit, loss, or capital of Partnership C and owns, indirectly, 35% of the voting stock of Corporation D. Corporation A owns, directly or indirectly, a 50% interest in the profit, loss, or capital of Partnership C (15% directly and 35% indirectly), and owns, directly or indirectly, 50% of the voting stock of Corporation D (15% directly and 35% indirectly).
Corporation A reports in its answer to question 5a that it owns, directly or indirectly, 50% of the voting stock of Corporation D. Corporation A reports in its answer to question 5b that it owns, directly, an interest of 50% in the profit, loss, or capital of Partnership B and owns, directly or indirectly, 50% of the profit, loss, or capital of Partnership C.
Check the “Yes” box if one foreign person owned at least 25% of the total voting power of all classes of stock of the corporation entitled to vote or at least 25% of the total value of all classes of stock of the corporation.
The constructive ownership rules of section 318 apply in determining if a corporation is foreign owned. See section 6038A(c)(5) and the related regulations.
Enter on line 7a the percentage owned by the foreign person specified in question 7. On line 7b, enter the name of the owner’s country.
If there is more than one 25%-or-more foreign owner, complete question 7 for the foreign person with the highest percentage of ownership.
Foreign person.
The term “foreign person” means:
However, the term "foreign person" does not include any foreign person who consents to the filing of a joint U.S. income tax return.
Owner's country.
For individuals, the term “owner's country” means the country of residence. For all others, it is the country where incorporated, organized, created, or administered.
Requirement to file Form 5472.
If the corporation checked “Yes,” it may have to file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business. Generally, a 25% foreign-owned corporation that had a reportable transaction with a foreign or domestic related party during the tax year must file Form 5472. See the Instructions for Form 5472, for filing instructions and penalties for failure to file.
Show any tax-exempt interest received or accrued. Include any exempt-interest dividends received as a shareholder in a mutual fund or other RIC. Also, if required, include the same amount on Schedule M-1, line 7 (or Schedule M-3 (Form 1120), Part II, line 13, if applicable).
Generally, if the corporation has an NOL for tax year 2023, it can elect to waive the entire carryback period for the NOL and instead carry the NOL forward to future tax years. To do so, check the box on line 11 and file the tax return by its due date, including extensions. Do not attach the statement described in Temporary Regulations section 301.9100-12T. Generally, once made, the election is irrevocable.
If the corporation timely filed its return for the loss year without making the election, it can make the election on an amended return filed within 6 months of the due date of the loss year return (excluding extensions). Attach the election to the amended return and write "Filed pursuant to section 301.9100-2" on the election statement. See the Instructions for Form 1139.
Corporations filing a consolidated return that elect to waive the entire carryback period for the group must also attach the statement required by Regulations section 1.1502-21(b)(3) or the election will not be valid.
Enter the amount of the NOL carryover to the tax year from prior years, even if some of the loss is used to offset income on this return. The amount to enter is the total of all NOLs generated in prior years but not used to offset income (either as a carryback or carryover) to a tax year prior to 2023. Do not reduce the amount by any NOL deduction reported on line 29a.
A corporation that files Form 1120 must file Schedule UTP (Form 1120), Uncertain Tax Position Statement, with its 2023 income tax return if:
Attach Schedule UTP to the corporation's income tax return. Do not file it separately. A taxpayer that files a protective Form 1120 must also file Schedule UTP if it satisfies the requirements set forth above.
For details, see the Instructions for Schedule UTP.
If the corporation made any payment in 2023 that would require the corporation to file any Form(s) 1099, check the “Yes” box for question 15a and answer question 15b. Otherwise, check the “No” box for question 15a and skip question 15b. See Am I Required to File a Form 1099 or Other Information Return? on IRS.gov.
If the corporation made any payments in 2023 that would require the corporation to file any Forms 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, and 1042‐S, Foreign Person's U.S. Source Income Subject to Withholding, check the “Yes” box. See the Instructions for Form 1042 and Instructions for Form 1042‐S for information regarding who is required to file Forms 1042 and 1042‐S and what types of payments are subject to reporting on Forms 1042 and 1042‐S.
If the corporation paid or accrued (including through a partnership) any interest or royalty for which a deduction is not allowed under section 267A, check "Yes" for question 21 and enter the total amount for which a deduction is not allowed.
Payments to which section 267A applies.
Interest or royalty paid or accrued by a domestic corporation (including, in the case of a domestic corporation that is a partner in a partnership, the domestic corporation's allocable share of interest or royalty paid or accrued by the partnership) is subject to section 267A. Section 267A generally applies to interest or royalty paid or accrued according to a hybrid arrangement (such as, for example, a payment according to a hybrid instrument, or a payment to a reverse hybrid), provided that the payment or accrual is to a related party (or according to a structured arrangement). In addition, under an imported mismatch rule, section 267A generally applies to interest or royalties paid or accrued according to a non-hybrid arrangement where the income attributable to that payment or accrual is directly or indirectly offset by certain deductions involving hybridity incurred by a related party or according to a structured arrangement. However, section 267A does not apply if a de minimis exception is satisfied. See Regulations section 1.267A-1(c). For purposes of section 267A, interest and royalties are defined broadly. For additional information about arrangements subject to section 267A, see Regulations sections 1.267A-2 and 1.267A-4. Also, see the anti-avoidance rule under Regulations section 1.267A-5(b)(6).
Extent to which deduction is disallowed.
When section 267A applies to interest or royalties paid or accrued pursuant to a hybrid arrangement, it generally disallows a deduction for the amount to the extent that, under the foreign tax law, there is not a corresponding income inclusion (including long-term deferral). However, the deduction is not disallowed to the extent the amount is directly or indirectly included in income in the United States, such as if the amount is taken into account with respect to a U.S. shareholder under section 951(a) or section 951A. For additional information, see Regulations sections 1.267A-2 through 1.267A-4. For examples illustrating the application of section 267A, see Regulations section 1.267A-6.
If the corporation had gross receipts of at least $500 million in any 1 of the 3 preceding tax years, complete and attach Form 8991. For this purpose, the corporation's gross receipts include the gross receipts of all persons aggregated with the corporation, as specified in section 59A(e)(3). See the Instructions for Form 8991 to determine if the corporation is subject to the base erosion minimum tax.
The limitation on business interest expense applies to every taxpayer with a trade or business, unless the taxpayer meets certain specified exceptions. A taxpayer may elect out of the limitation for certain businesses otherwise subject to the business interest expense limitation. See Question 24 . Also, see the Instructions for Form 8990.
Certain real property trades or businesses and farming businesses qualify to make an election not to limit business interest expense. This is an irrevocable election. If you make this election, you are required to use the alternative depreciation system to depreciate any nonresidential real property, residential rental property, and qualified improvement property for an electing real property trade or business, and any property with a recovery period of 10 years or more for an electing farming business. See section 168(g)(1)(F). Also, you are not entitled to the special depreciation allowance for that property. For a taxpayer with more than one qualifying business, the election is made with respect to each business.
Check “Yes” if the corporation has an election in effect to exclude a real property trade or business or a farming business from section 163(j). For more information, see the Instructions for Form 8990.
Generally, a taxpayer with a trade or business must file Form 8990 to claim a deduction for business interest. In addition, Form 8990 must be filed by any taxpayer that owns an interest in a partnership with current-year, or prior-year carryover, excess business interest expense allocated from the partnership.
Exclusions from filing.
A taxpayer is not required to file Form 8990 if the taxpayer is a small business taxpayer (defined below) and does not have excess business interest expense from a partnership. A taxpayer also is not required to file Form 8990 if the taxpayer only has business interest expense from these excepted trades or businesses:
Small business taxpayer.
A small business taxpayer is not subject to the business interest expense limitation and is not required to file Form 8990. A small business taxpayer is a taxpayer that (a) is not a tax shelter (as defined in section 448(d)(3)), and (b) meets the gross receipts test of section 448(c), discussed next.
Gross receipts test.
For 2023, a taxpayer meets the gross receipts test if the taxpayer has average annual gross receipts of $29 million or less for the 3 prior tax years. A taxpayer's average annual gross receipts for the 3 prior tax years is determined by adding the gross receipts for the 3 prior tax years and dividing the total by 3. Gross receipts include the aggregate gross receipts from all persons treated as a single employer, such as a controlled group of corporations, commonly controlled partnerships, or proprietorships, and affiliated service groups. See section 448(c) and the Instructions for Form 8990 for additional information.
To certify as a QOF, the corporation must file Form 1120 and attach Form 8996, even if the corporation had no income or expenses to report. If the corporation is attaching Form 8996, check the “Yes” box for question 25. On the line following the dollar sign, enter the amount from Form 8996, line 15.
The penalty reported on this line from Form 8996, line 15, is not due with the filing of this form. The IRS will separately send to you a notice setting forth the due date for the penalty payment and where that payment should be sent.
Check the “Yes” box if:
If “Yes” is checked, also enter in the space provided the ownership percentage both by vote and by value. If there are multiple acquisitions that must be reported, enter the ownership for the most recent acquisition. Attach a statement reporting the ownership percentage by vote and by value for the other acquisitions.
Section 7874 applies in certain cases in which a foreign corporation directly or indirectly acquires substantially all of the properties of a domestic corporation. Generally, it applies when three requirements are satisfied.
When section 7874 applies, the tax treatment of the acquisition depends on the ownership percentage. If the ownership percentage is at least 80%, then the foreign acquiring corporation is treated as a domestic corporation for all purposes of the Internal Revenue Code. See section 7874(b). If the ownership percentage is at least 60% but less than 80%, then the foreign acquiring corporation is respected as a foreign corporation, but the domestic corporation and certain other persons are subject to special rules that reduce the tax benefits of the acquisition. See section 7874(a).
See the regulations under section 7874 for rules regarding the computation of the ownership percentage. See sections 59A(d)(4), 965(l), 4501(d), and 4985 for additional rules regarding the tax treatment of certain expatriated entities.
Digital assets are any digital representations of value that are recorded on a cryptographically secured distributed ledger or any similar technology. For example, digital assets include non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrencies and stablecoins. If a particular asset has the characteristics of a digital asset, it will be treated as a digital asset for federal income tax purposes.
Check the “Yes” box if at any time during 2023 the corporation received (as a reward, award, or payment for property or services); or (b) sold, exchanged, or otherwise disposed of a digital asset (or any financial interest in any digital asset).
For example, check “Yes” if at any time during 2023 the corporation:
The corporation has a financial interest in a digital asset if it is the owner of record of a digital asset, or has an ownership stake in an account that holds one or more digital assets, including the rights and obligations to acquire a financial interest, or owns a wallet that holds digital assets.
The following actions or transactions in 2023, alone, generally do not require the corporation to check “Yes:"
Do not leave the question unanswered. The corporation must answer "Yes" or “No” by checking the appropriate box. For more information, go to IRS.gov/virtualcurrencyfaqs.
If the corporation disposed of any digital asset which was held as a capital asset, through a sale, trade, exchange, payment, or other transfer, use Form 8949 to calculate the capital gain or loss and report that gain or loss on Schedule D (Form 1120). If the corporation received any digital asset as compensation for services or disposed of any digital asset that was held for sale to customers in a trade or business, it must report the income as it would report other income of the same type.
If the corporation is a member of a controlled group, check the "Yes" box. Complete and attach Schedule O (Form 1120), Consent Plan and Apportionment Schedule for a Controlled Group. Component members of a controlled group must use Schedule O to report the apportionment of certain tax benefits between the members of the group. See Schedule O and the Instructions for Schedule O for more information.
Check the appropriate boxes to indicate if the corporation is required to file Form 4626. If the corporation does not meet the requirements of the safe harbor method, as provided under section 59(k)(3)(A) and Notice 2023-7, 2023-3 I.R.B. 390, available at IRS.gov/irb/2023-03_IRB#NOT-2023-7, for the current year, Form 4626 must be completed and attached to the corporation's return. See the instructions for Form 4626.
Under section 4501, the corporation may be required to file Form 7208, Excise Tax on Repurchase of Corporate Stock, and pay the stock repurchase excise tax if, during the corporation's taxable year, (a) the corporation is publicly traded and repurchased its stock (or a specified affiliate of the corporation acquired the corporation's stock); (b) the corporation is a specified affiliate of an applicable foreign corporation; or (c) the corporation is an expatriated entity with respect to a covered surrogate foreign corporation.
Do not complete a Form 7208 until the date specified in upcoming regulations under section 4501. For additional information, see section 4501 and Announcement 2023-18, 2023-30 I.R.B. 366, available at IRS.gov/irb/2023-30_IRB#ANN-2023-18.
If the answer to question 31 is “Yes,” attach a statement titled “Schedule K Statement of Subchapter K Basis Adjustments” that includes the information required for each tax basis adjustment described in (1) through (4) below. Provide the required information for each partnership where 80 % or more of the capital or profits of the partnership is owned, directly or indirectly, by members of the corporation's controlled group of corporations (as defined in section 1563). If there are unrelated third-party minority partner interests in the partnership, the corporation is not required to include such partners' information on this statement.
The balance sheets should agree with the corporation's books and records.
Corporations with total receipts (page 1, line 1a plus lines 4 through 10) and total assets at the end of the tax year less than $250,000 are not required to complete Schedules L, M-1, and M-2 if the “Yes” box on Schedule K, question 13, is checked.
Corporations with total assets nonconsolidated (or consolidated for all corporations included within the consolidated tax group) of $10 million or more on the last day of the tax year must file Schedule M-3 (Form 1120) instead of Schedule M-1. However, see the instructions for Schedule M-1 below. See the separate Instructions for Schedule M-3 (Form 1120) for provisions that also affect Schedule L.
If filing a consolidated return, report total consolidated assets, liabilities, and shareholder's equity for all corporations joining in the return. See Consolidated Return , earlier.
Include certificates of deposit as cash on this line.
Include on this line:
Some examples of adjustments to report on this line include:
If the total adjustment to be entered on line 26 is a negative amount, enter the amount in parentheses.
In completing Schedule M-1, the following apply.
Include any of the following applicable expenses.
Report any tax-exempt interest received or accrued, including any exempt-interest dividends received as a shareholder in a mutual fund or other RIC. Also, report this same amount on Schedule K, item 9.
The corporation should include tax-exempt income from forgiven PPP loans on line 7 of Schedule M-1 (if it was included on line 1 of the Schedule M-1), or on Part II, line 25 of Schedule M-3 (Form 1120), column (c) as a negative number (if it was included on line 25 in column (a) as Income per Income Statement).
If the corporation treats tax-exempt income resulting from a PPP loan as received or accrued prior to when forgiveness of the PPP loan is granted and the amount of forgiveness granted is less than the amount of tax-exempt income that was previously treated as received or accrued, the corporation should include the difference as a decrease in tax-exempt income on Schedule M-2, line 6, for the tax year in which the taxpayer receives notice that the PPP loan was not fully forgiven. The corporation should attach a statement to Schedule M-2 including the following information:
We ask for the information on these forms to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103.
Estimates of Taxpayer Burden. The following tables show burden estimates based on current statutory requirements as of December 2023 for taxpayers filing 2023 Forms 1065, 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-S, 1120-SF, 1120-FSC, 1120-L, 1120-PC, 1066, 1120-REIT, 1120-RIC, 1120-POL, and related attachments. Time spent and out-of-pocket costs are presented separately. Time burden is broken out by taxpayer activity, with reporting representing the largest component. Out-of-pocket costs include any expenses incurred by taxpayers to prepare and submit their tax returns. Examples include tax return preparation and submission fees, postage and photocopying costs, and tax preparation software costs. While these estimates don't include burden associated with post-filing activities, IRS operational data indicate that electronically prepared and filed returns have fewer arithmetic errors, implying lower post-filing burden.
Reported time and cost burdens are national averages and don't necessarily reflect a “typical” case. Most taxpayers experience lower than average burden, with taxpayer burden varying considerably by taxpayer type.
The average burden for partnerships filing Forms 1065 and related attachments is about 60 hours and $5,000; the average burden for corporations filing Form 1120 and associated forms is about 105 hours and $6,700; and the average burden for Forms 1066, 1120-REIT, 1120-RIC, 1120S, and all related attachments is 65 hours and $4,400. Within each of these estimates there is significant variation in taxpayer activity. Tax preparation fees and other out-of-pocket costs vary extensively depending on the tax situation of the taxpayer, the type of software or professional preparer used, and the geographic location. Third-party burden hours are not included in these estimates.
Table 1 – Taxpayer Burden for Entities Taxed as Partnerships
| Forms 1065, 1066, and all attachments | ||||
|---|---|---|---|---|
| Primary Form Filed or Type of Taxpayer | Total Number of Returns (millions) | Average Time (hours) | Average Cost ($) | Average Monetized Burden ($) |
| All Partnerships | 5.3 | 60 | 5,000 | 8,700 |
| Small | 4.9 | 50 | 3,200 | 5,200 |
| Large* | 0.4 | 200 | 27,800 | 50,800 |
| *A large business is defined as one having end-of-year assets greater than $10 million. A large business is defined the same way for partnerships, taxable corporations, and pass-through corporations. A small business is any business that doesn't meet the definition of a large business. | ||||
Table 2 – Taxpayer Burden for Entities Taxed as Taxable Corporations
| Forms 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-SF, 1120-FSC, 1120-L, 1120-PC, 1120-POL, and all attachments | ||||
|---|---|---|---|---|
| Primary Form Filed or Type of Taxpayer | Total Number of Returns (millions) | Average Time (hours) | Average Cost ($) | Average Monetized Burden ($) |
| All Taxable Corporations | 2.1 | 105 | 6,700 | 14,900 |
| Small | 2.0 | 55 | 3,600 | 6,200 |
| Large* | 0.1 | 830 | 53,800 | 149,000 |
| *A large business is defined as one having end-of-year assets greater than $10 million. A large business is defined the same way for partnerships, taxable corporations, and pass-through corporations. A small business is any business that doesn't meet the definition of a large business. | ||||
Table 3 – Taxpayer Burden for Entities Taxed as Pass-Through Corporations
| Forms 1120-REIT, 1120-RIC, 1120-S, and all attachments | ||||
|---|---|---|---|---|
| Primary Form Filed or Type of Taxpayer | Total Number of Returns (millions) | Average Time (hours) | Average Cost ($) | Average Monetized Burden ($) |
| All Pass-Through Corporations | 5.8 | 65 | 4,400 | 7,500 |
| Small | 5.7 | 60 | 3,800 | 6,400 |
| Large* | 0.1 | 295 | 37,700 | 71,800 |
| *A large business is defined as one having end-of-year assets greater than $10 million. A large business is defined the same way for partnerships, taxable corporations, and pass-through corporations. A small business is any business that doesn't meet the definition of a large business. | ||||
Comments. If you have comments concerning the accuracy of these time estimates or suggestions for making these forms simpler, we would be happy to hear from you. You can send us comments through IRS.gov/FormComments. Or you can write to the Internal Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send the tax form to this address. Instead, see Where To File , earlier, near the beginning of the instructions.
This list of principal business activities and their associated codes is designed to classify an enterprise by the type of activity in which it is engaged to facilitate the administration of the Internal Revenue Code. These principal business activity codes are based on the North American Industry Classification System.
Using the list of activities and codes below, determine from which activity the company derives the largest percentage of its “total receipts.” Total receipts is defined as the sum of gross receipts or sales (page 1, line 1a) plus all other income (page 1, lines 4 through 10). If the company purchases raw materials and supplies them to a subcontractor to produce the finished product, but retains title to the product, the company is considered a manufacturer and must use one of the manufacturing codes (311110–339900).
Once the principal business activity is determined, entries must be made on Form 1120, Schedule K, lines 2a, 2b, and 2c. On line 2a, enter the six-digit code selected from the list below. On line 2b, enter the company's business activity. On line 2c, enter a brief description of the principal product or service of the company.
111100 - Oilseed & Grain Farming
111210 - Vegetable & Melon Farming (including potatoes & yams)
111300 - Fruit & Tree Nut Farming
111400 - Greenhouse, Nursery, & Floriculture Production
111900 - Other Crop Farming (including tobacco, cotton, sugarcane, hay, peanut, sugar beet, & all other crop farming)
112111 - Beef Cattle Ranching & Farming
112112 - Cattle Feedlots
112120 - Dairy Cattle & Milk Production
112210 - Hog & Pig Farming
112300 - Poultry & Egg Production
112400 - Sheep & Goat Farming
112510 - Aquaculture (including shellfish & finfish farms & hatcheries)
112900 - Other Animal Production
113110 - Timber Tract Operations
113210 - Forest Nurseries & Gathering of Forest Products
113310 - Logging