Connect with us

Taxes

How to Fill Out Form 1120 for Tax Year 2024 (With Example)

Published

on

All domestic C corporations (C-corps) are required to file IRS Form 1120, US Corporation Income Tax Return, annually, regardless of whether they have taxable income. The financial information needed for Form 1120 is relatively straightforward if you have your balance sheet and profit and loss (P&L) statement ready before filling out the form.

The challenging part of completing the form is often the detailed questions asked. In this guide, we will walk you through how to fill out the financial information required using sample financial statements. We will also provide tips on answering the detailed questions and suggest where to find more information on completing the form.

If you need to make changes to a previously filed Form 1120, you will need to file an amended return using Form 1120X. Our guide on how to amend a corporate tax return can assist you with completing that return.

Example Financial Statements

To help you better understand how to complete Form 1120, we have provided sample P&L statement and balance sheet. It is also recommended to have the IRS Form 1120 instructions handy while filling out the form.

Step 1: Collect the Supporting Information

Before completing Form 1120, gather all the necessary financial information and documentation for your corporation. This information can typically be found on your prior-year tax return. Here are some key details you will need:

– Details about your corporation: Name, date of incorporation, date of election to be treated as a corporation, employer identification number (EIN), and mailing address.
– Tax year: Confirm if you are filing on a calendar year or fiscal year. Ensure that the tax year matches your prior-year return unless you have obtained permission from the IRS to change it.
– Business activity: Description of the business activity, main product or service offered, and business activity code reflecting your industry.
– Accounting method: Most C-corps can use either the cash or accrual method of accounting. Ensure you use the same method as the prior year unless the IRS allows a change.

See also  How to Fill Out Schedule C in 2025 (With Example)

Additionally, you will need to have the following reports prepared:

– P&L statement: Summary of income and expenses for the year.
– Balance sheet: Summary of assets, liabilities, and owner’s equity.
– Fixed asset purchases report: List of fixed asset transactions for depreciation calculations.
– Payroll expense report: Detailed list of compensation paid to officers.
– Capital accounts: Record of transactions affecting shareholder capital accounts.
– Loans: Record of financial transactions involving shareholder loans.
– Forms 1099: Report any payments made to independent contractors or freelancers.

Step 2: Complete the General Information Section

When filling out Form 1120, ensure you provide accurate general information about your corporation. This includes:

– Initial return: If it’s your corporation’s first tax return, indicate the date it was formed and mark the box for initial return.
– EIN: Enter the corporation’s EIN assigned by the IRS or “Applied For” if you’ve applied but haven’t received the number yet.
– Total assets: Enter the total assets of the corporation as shown on the balance sheet.

Step 3: Fill Out Income & Deductions Section

List your corporation’s income and deductions on the first page of Form 1120. Make sure to complete lines 1a through 37 using the information from your P&L statement.

– Income: Report gross receipts, COGS, dividend income, interest, rent, royalties, capital gains, and other income.
– Deductions: Include compensation, salaries, wages, charitable contributions, depreciation, meals, and other expenses.
– Tax & Payments: Report total tax, payments, underpayment penalty, and overpayment of tax.

Step 4: Complete Schedule C—Dividends, Inclusions & Special Deductions

See also  IRS Mileage Rates for 2017 Announced - with Minor Decreases

Use Schedule C to report dividends, interest, and other income from corporations where your corporation has an ownership interest.

Step 5: Complete Schedule J—Tax Computation and Payment

Schedule J is used to calculate all taxes owed by your C-corp. Ensure to accurately calculate and report federal income tax, special taxes for large corporations, tax credits, and other taxes.

Step 6: Complete Schedule K—Other Information

Answer the detailed questions in Schedule K to provide additional information about your corporation’s accounting method, ownership, related entities, and other relevant details.

Step 7: Complete Schedule L—Balance Sheets per Books

If required, complete Schedule L using the information from your balance sheet to show the financial position of your corporation.

Step 8: Complete Schedule M-1—Reconciliation of Income

Fill out Schedule M-1 to reconcile the net income on your P&L statement with the taxable income reported on Form 1120.

Step 9: Complete Schedule M-2—Analysis of Unappropriated Retained Earnings

Lastly, complete Schedule M-2 to analyze the unappropriated retained earnings per books of your corporation.

How to Assemble Form 1120

When assembling Form 1120, arrange the forms and schedules according to the Attachment Sequence No. Ensure any supporting statements or attachments are labeled and organized in the correct order before submission.

Before Filing Form 1120

Before filing your Form 1120, make sure to:

– Include all necessary attachments for federal and state filings.
– Resolve any flagged issues in the tax software diagnostics.
– Confirm that your tax return balances and all schedules are accurate.

By following these steps and ensuring the accuracy of your financial information, you can successfully complete and file Form 1120 for your C corporation.

See also  What Is Self-employment Tax: Rates & Calculations
Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Personal Growth

Trending