1120s travel expenses

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Building Your Business
Business Taxes

How to Deduct Business Travel Expenses

How "Business Travel" Is Determined
What You Can and Can't Deduct
Special Types of Travel

Documenting Travel Expenses

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Do you travel for your own business? Do you have employees who travel? Make sure you know which travel expenses are deductible - and which are not.

How "Business Travel" Is Determined

Business travel is a specific term determined by the IRS to describe travel away from your tax home . which is described by the IRS as "the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home." You are traveling away from home if your duties require you to be away from the general area of your tax home for a time that is at is "substantially longer than an ordinary day's work" and that requires you to sleep or rest while away from home.

Travel for Work Assignments

You must sleep away from home to be able to deduct these costs as travel expenses The travel must also be "temporary" (lasting less than a year).

You can't deduct travel expenses for an indefinite work assignment (including any work assignment of more than a year). You also can't deduct travel expenses if you expect to work at that location for more than a year.

Deducting Lodging Expenses

Long-term assignments at one location aren't considered as "travel," but employee lodging expenses at work locations, like renting an apartment while working at an extended assignment are deductible business expenses .

What You Can Deduct for Business Travel

You can deduct costs to travel by train, bus, or airplane between your tax home and your business destination. For travel by ship, see the section on cruise ships below.

Transportation: You can deduct the cost of travel by plane, train, bus, or car between your home and your business destination. You can't deduct the cost of a free ticket.

Taxi, commuter bus, airport limousine: You can deduct costs to take you from an airport to your hotel or to a business location.

Baggage and shipping: Costs for baggage delivery or for shipping business materials between your regular work location or tax home and a temporary work location are deductible.

Lodging and meals: You can deduct expenses for lodging and meals while away from home on a business assignment. You can submit actual expenses or use per diem rates, as determined by the IRS.

Other expenses; You can deduct other costs while traveling for business:

Dry cleaning and laundry
Business phone calls and faxes (not personal calls)
Tips for allowable expenses.
Other similar business expenses while traveling like computer rental

Business meals while traveling are deductible expenses, at 50% in most cases, but entertainment expenses are no longer deductible in any business situation.

Deductions for Special Types of Travel

Conventions and Trade Shows: If you travel to a convention or trade show, you may need to show that the convention is directly related to or associated with your business. If you have a sales booth at the convention, that would qualify. If you are a delegate to a convention, the purpose of the convention must relate to your business. Travel to and participation in conventions for political, investment, social, or other purposes is not deductible.

Cruises: Cost of travel on cruise ships, even for direct or associated business purposes, is limited. The IRS sets daily limits on luxury water travel each year, depending on the dates (months) of the cruise, based on an amount twice the allowable federal per diem rate for that travel period. IRS Be prepared to provide documentation that the cruise activities were related to business purpose.

The most important part of the process of deducting travel expenses is to save all of your receipts. You don't have to save paper copies, but you should be able to pull out a separate receipt (not just a line item on a credit card) to show (1) date (2) expense details (3) amount spent and (4) business purposes. Be as specific as possible.

Don't forget that travel expenses must be, as stated by the IRS: "ordinary and necessary expenses incurred while carrying on your trade or business."

Where to Show These Expenses

For sole proprietors and single-member LLCs, show these expenses in the "Expenses" section of Schedule C.
For partnerships and multiple-member LLCs, show these expenses in the "Deductions" section of Form 1065.
For corporations, show these expenses in the "Deductions" section of Form 1120.

The information contained in this article is not tax or legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law. For current tax or legal advice, please consult with an accountant or an attorney.

IRS. " Topic No. 511 Business Travel Expenses ." Accessed Feb. 3, 2021.

IRS. " Publication 535 Business Expenses ." Page 9. Accessed Feb. 3, 2021.

IRS. " Publication 463 Travel, Gift and Car Expenses ." Page 5. Accessed Feb. 3, 2021.

IRS. " Publication 463 Travel, Gift and Car Expenses ." Page 9. Accessed Feb. 3, 2021.

IRS. " Publication 463 Travel, Gift and Car Expenses ." Page 8. Accessed Feb. 3, 2021.

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Travel and Entertainment Expenses: Learn How to Deduct

For some business owners, spending money on travel and entertainment is inevitable. You might need to take a business trip or decide to take a client out for lunch. Whatever your situation, you might be able to claim travel, meals, and entertainment tax deductions.

Travel and entertainment

You can deduct certain travel and entertainment expenses come tax time. Travel and entertainment expenses are costs you incur when you travel or entertain for business purposes.

You need to know the travel and entertainment policy. What expenses are covered under travel, and which are covered under entertainment?

Download our free guide to get 10 recordkeeping tips that can make tax time a breeze, get additional resources, and more.

You can deduct travel expenses if they are ordinary (common and accepted in your business) and necessary (helpful and appropriate for your business). When you need to leave your tax home (the area you primarily work in) to travel for business, you incur expenses related to transportation, lodging, and meals.

Publication 463 says you are traveling away from home if:

You are gone from your tax home for more than an ordinary day’s work as a result of business
You need to sleep or rest to meet the demands of your work while traveling

The type of deductible travel expenses depends on your business and circumstances. Here are some travel expenses you can deduct:

Transportation (e.g., airplane, train, bus, or car)
Lodging and meals
Cleaning (dry cleaning and laundry)
Tips related to deductible expenses

There is a 50% limit on deducting meals. You can only deduct 50% of your meal expenses. You cannot deduct your expenses for meals if they are lavish or extravagant.

You cannot deduct a spouse’s or dependent’s expenses. You might be able to claim a business tax deduction for an employee’s travel expenses if they are necessary to the trip.

If you have an expense that covers other types of costs, you must allocate the cost between each (e.g., your hotel includes breakfast).

You can only deduct business-related travel expenses. If you decide to stay longer for vacation, you cannot deduct the personal expenses.

Entertainment

Many entertainment expense deductions were repealed following the Tax Cuts and Job Acts of 2017 tax reform. However, there are still certain entertainment expenses you can deduct.

Under the tax law , you can deduct expenses for recreational, social, or similar activities if they are explicitly for the benefit of your employees (excluding highly compensated employees ). This means you can still deduct 100% of your entertainment expenses for office holiday parties.

You can categorize a meal as entertainment if you or an employee are present. Meal entertainment expenses are only 50% deductible. If you claim the cost of a meal as entertainment, you cannot also claim it as a travel expense.

Entertainment, amusement, recreation, or use of a facility or property are no longer deductible expenses. This means you cannot deduct expenses for taking clients out to sporting events. And, you cannot deduct tickets to qualified charitable events.

How to deduct expenses

To deduct travel, meals, and entertainment expenses, you need to keep accurate records. According to IRS Publication 463 , you must submit records that show the amount, time, place, and business purpose of each expense.

Update your small business accounting books and hold onto documents like receipts. Keep records for three years from the date you file.

For example, you could have an expense report that looks like this:

If you are a sole proprietor or own a single-member LLC, you need to deduct your travel and entertainment expenses on Schedule C (Form 1040), Profit or Loss from Business. Partners use Form 1065 , U.S. Return of Partnership Income.

C corporation shareholders use Form 1120 , U.S. Corporation Income Tax Return. S corporation shareholders use Form 1120S , U.S. Income Tax Return for an S Corporation.

You need to make sure your accounting books are accurate. We’ll help you get there. Try Patriot’s online accounting software to track your expenses. We offer free, USA-based support. Get your free trial today!

This article has been updated from its original publication date of November 30, 2017.

This is not intended as legal advice; for more information, please click here.

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IRS Form 1120S: A Comprehensive Guide for S Corporations

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Form 1120-S is an important tax document used by S corporations to report their income, gains, losses, deductions, and credits, as well as to determine their tax liability. S corporations are a unique type of business entity, as they are treated as pass-through entities for tax purposes, meaning the income, deductions, and credits flow through to the shareholders who report the information on their individual tax returns. When filing Form 1120-S, it is crucial to have a comprehensive understanding of eligibility, filing requirements, and special tax considerations.

In order to ensure accurate reporting and to avoid potential penalties, S corporations must also be aware of the various attachments and schedules that accompany Form 1120-S. Shareholders’ pro-rata share items of international tax relevance are reported via Schedule K-2 (Form 1120-S). Additionally, a domestic corporation required to file Form 8938 with its Form 1120-S should include Schedule N (Form 1120).

Key Takeaways

Form 1120-S is utilized by S corporations for reporting income, deductions, and credits, as well as determining tax liability.
Proper completion of the form and its accompanying schedules is crucial to avoid potential penalties and ensure accurate reporting.
S corporations must stay informed of eligibility, filing requirements, and special tax considerations to remain compliant.

Understanding IRS Form 1120S

IRS Form 1120-S is specifically designed to report the income, gains, losses, deductions, credits, and other financial information of a domestic corporation or other entity that has elected to be an S Corporation in the United States. An S Corporation is a special type of corporation that can pass its income, losses, deductions, and credits through to its shareholders, bypassing the double taxation that traditional corporations face.

When a business chooses to be taxed as an S Corporation, it must complete and file Form 2553 (Election by a Small Business Corporation). Upon approval, the S Corporation is then required to file Form 1120-S with the Internal Revenue Service (IRS) annually. This form is essential for ensuring that the S Corporation’s financial data is correctly reported to the IRS, and to assist each shareholder in including their share of the income on their tax return.

The form itself consists of multiple sections that require the S Corporation to provide detailed information about its income sources, deductions, and tax credits. For instance, the corporation must report ordinary business income, rental real estate income, and other gains and losses separately. Additionally, Form 1120-S calls for information regarding shareholders, such as the number of shareholders and their ownership percentage.

It is important to note that the Internal Revenue Service has an e-file system in place for Form 1120-S, making it more convenient for the filers to complete and submit the form electronically. The e-file system also reduces the possibility of errors and provides a more accurate and efficient method for submitting tax returns.

In summary, IRS Form 1120-S is a crucial tax document for businesses that have elected to operate as an S Corporation, ensuring accurate reporting of financial figures to the IRS and aiding shareholders in the tax filing process. Filing this form electronically helps maintain accuracy, convenience, and timely submission, ensuring that both the S Corporation and its shareholders comply with the tax regulations set by the Internal Revenue Service.

Eligibility and Filing Requirements

Eligibility for s corporation status.

To be eligible for S corporation status, a business must meet certain criteria. First, it should be organized as a domestic corporation under state law. In addition, the corporation can only have allowable shareholders, which include individuals, certain trusts, and estates. Partnerships, corporations, or non-resident aliens cannot be shareholders.

Moreover, an S corporation can only have one class of stock. For a corporation to be considered an S corporation, it must file Form 2553 with the Internal Revenue Service (IRS) to elect S corporation tax treatment. The corporation should also possess an Employer Identification Number (EIN) .

Filing Requirements for Form 1120S

Once a corporation has elected S corporation status and meets the eligibility requirements, it must file Form 1120S, also known as the U.S. Income Tax Return for an S Corporation. This form is filed annually to report the corporation’s income, deductions, and other financial details pertinent to the S corporation .

The deadline to file Form 1120S is the 15th day of the third month following the end of the tax year . For most corporations operating on a calendar year ending December 31, this date falls on March 15. However, if March 15 lands on a weekend or holiday, the deadline will be the next business day.

The filing requirements for Form 1120S also include the submission of Schedule K-1, which is sent to each shareholder . This schedule provides vital tax information for the shareholder’s individual tax return, such as their share of the corporation’s income and deductions.

In summary, a corporation must meet specific criteria to qualify for S corporation status. Once eligible, the corporation needs to file Form 1120S annually to report its financial information to the IRS. Adhering to the specified deadlines and filing requirements is crucial for a corporation to maintain its S corporation tax status.

Completing the Form 1120S

Income reporting.

When completing the Form 1120S, the first step is to report the S corporation’s income. This includes any income from sales and services rendered, as well as gains from the sale of assets. S corporations must report gross income and subtract cost of goods sold to calculate their taxable income. Here’s a brief overview of some key lines to be aware of:

Line 1: Gross receipts or sales
Line 2: Cost of goods sold
Line 3: Gross profit (subtract Line 2 from Line 1)
Line 4: Dividends and interest income
Line 5: Gross rents
Line 6: Gross royalties
Line 10: Net gain or loss from the sale of assets

Deducting Expenses

After calculating the corporation’s taxable income, the next step is to deduct relevant business expenses. Note that only ordinary and necessary expenses incurred during the tax year may be deducted. The Form 1120S includes specific line items for common expenses, such as:

Line 12: Salaries and wages
Line 13: Repairs and maintenance
Line 14: Bad debts
Line 15: Rent expenses
Line 16: Taxes and licenses
Line 17: Interest expenses
Line 18: Depreciation
Line 19: Depletion

Additional expenses not listed on the form can be included under Line 20 – Other deductions.

Claiming Tax Credits

Tax credits can reduce the S corporation’s overall tax liability. Form 1120S filers should be aware of the credits most commonly claimed by S corporations, including:

General Business Credit (attach Form 3800)
Investment Credit (attach Form 3468)
Work Opportunity Credit (attach Form 5884)
Empowerment Zone Employment Credit (attach Form 8844)
New Markets Credit (attach Form 8874)

It’s important to understand the eligibility criteria and filing requirements for each credit before claiming them on the tax return. Properly completing Form 1120S and accurately reporting income, deductions, and credits is crucial to ensure your S corporation remains compliant with the IRS.

Attachments and Schedules

Schedule k-1.

Schedule K-1 is a critical component of Form 1120S as it reports each shareholder’s pro-rata share of the S corporation’s income, deductions, credits, and other items. This schedule is provided to shareholders, who must then report this information on their personal tax returns. This ensures that the S corporation’s income is taxed at the individual level, avoiding double taxation.

Balance Sheet Information

Form 1120S requires S corporations to provide balance sheet information if their total assets and income exceed $250,000. The balance sheet is part of Schedule L and includes details about the company’s assets, liabilities, and shareholders’ equity. This financial snapshot is crucial for the IRS to assess the financial health of the corporation and ensure accurate reporting of income and deductions.

Some key aspects of the balance sheet include:

Total Assets : A comprehensive sum of all the corporation’s assets, including cash, accounts receivable, inventory, and fixed assets.
Liabilities : Debts and obligations, such as accounts payable, loans, and taxes payable.
Shareholders’ Equity : The difference between total assets and liabilities, representing the ownership interest of the corporation’s shareholders.

Other Schedules and Forms

Apart from Schedule K-1 and Schedule L, Form 1120S includes several other schedules and forms that may be required, depending on the S corporation’s activities and financial situation:

Schedule B : Reports additional information related to the S corporation, such as accounting method, ownership changes, and tax-exempt items.
Schedule D : Records the corporation’s capital gains and losses, including information about securities and other assets sold or exchanged during the tax year.
Schedule M-3 : Mandatory for corporations with total assets of $10 million or more, the Schedule M-3 provides a reconciliation of net income or loss reported on the financial statements with taxable income reported on Form 1120S.

Overall, the various attachments and schedules associated with Form 1120S ensure comprehensive reporting of the S corporation’s financial activities and help maintain transparency for the IRS and shareholders.

Tax Calculations and Payments

Calculating s corporation tax.

The IRS Form 1120-S is used by S corporations to report their annual financial activities, such as gains, losses, credits, and dividends. S corporations are generally not liable for federal income tax; instead, the income, deductions, and credits flow through to the shareholders, who then report these items on their individual tax returns. Shareholders must also include their pro-rata share of non-separately stated items, such as ordinary income or loss, on their individual tax returns.

Estimated Tax Payments

Although S corporations don’t typically pay federal income tax, they may still be responsible for certain taxes, such as employment tax on wages and built-in gains tax. Shareholders should make estimated tax payments during the tax year if their total tax liability is expected to exceed a specific threshold. Estimated tax payments are generally made in four installments throughout the year. The IRS provides guidelines to calculate these payments, which depend on the shareholders’ individual situations.

Reporting and Payment Deadlines

S corporations are required to file their annual income tax return on Form 1120-S by the 15th day of the third month following the end of the tax year. For example, if the tax year ended on December 31, the filing deadline would be March 15 of the following year. If this date falls on a weekend or holiday, the deadline is extended to the next business day.

S corporations must also distribute Schedule K-1, which reports each shareholder’s share of income, deductions, and credits, to their shareholders by the deadline. Shareholders should include this information on their individual tax returns and make any necessary tax payments by the appropriate deadlines.

By properly calculating S corporation tax, making timely estimated tax payments, and adhering to reporting and payment deadlines, S corporations and their shareholders can navigate the tax filing process with confidence and accuracy.

Special Tax Considerations

Trusts and estates as shareholders.

Trusts and estates can be shareholders of S corporations, subject to certain limitations. In general, only certain types of trusts, such as grantor trusts, testamentary trusts, and voting trusts, are eligible to be shareholders. When a trust or estate is a shareholder, its income from the S corporation must be reported on its own tax return, and it may be subject to taxation at the entity level, depending on the specific type of trust.

Tax Treatment of Loans and Distributions

Loans from shareholders to the S corporation can have significant tax implications for both the corporation and the shareholders. When an S corporation receives a loan from a shareholder, that loan should be properly documented, and the corporation should pay interest on the loan at a reasonable rate. It is important to note that interest paid by the corporation on such loans is deductible as a business expense.

Distributions made by the S corporation to its shareholders also have tax implications. Generally, distributions are not subject to corporate income tax; instead, they are taxed at the shareholder level. The tax treatment of a distribution depends on the shareholder’s stock basis, which can be adjusted by the shareholder’s pro-rata share of the corporation’s income, losses, deductions, and credits.

Special Deductions for Qualified Business Income

S corporations can take advantage of a special tax deduction called the Qualified Business Income (QBI) deduction. The QBI deduction allows shareholders to deduct up to 20% of their share of the corporation’s qualified business income, subject to certain limitations and restrictions. This deduction is available to S corporations with pass-through income from a qualified trade or business and can help reduce the tax burden on shareholders.

Keep in mind that salaries paid to shareholders who are also employees of the S corporation are not considered part of the QBI and are therefore not eligible for the QBI deduction. Shareholder employee salaries are subject to payroll taxes and must be reported on a W-2 form.

State and Local Tax Compliance

State-level form 1120s filings.

For S corporations in the United States, it is important to comply with both federal and state-level tax requirements. While the federal tax return for an S corporation is filed using Form 1120S with the Internal Revenue Service, each state has its own requirements and forms for S corporations. The general process often includes filing an S corporation-specific state tax return, along with any required state-specific schedules and attachments.

For example, in California , S corporations must file Form 100S while in New York , they are required to file Form CT-3-S . It is essential for S corporations to be aware of and adhere to the filing requirements in their respective states, as deadlines, forms, and tax rates may vary.

Local Tax Considerations

Local tax regulations for S corporations may differ depending on the jurisdiction, including county and city taxes. These taxes may include:

Sales tax : Some localities may impose sales taxes on goods and services provided by S corporations. These taxes typically apply to the retail sale, lease, or rental of
Property tax : S corporations may be subject to property taxes, which are typically levied on real estate and, sometimes, personal property owned by the corporation.
Income tax : In some cases, cities and counties may impose a local income tax on S corporations, although this is less common.
Payroll tax : Some localities may have payroll-related taxes that apply to employers, including S corporations.

It is crucial for S corporations to be aware of and comply with local tax regulations in their area, as failing to do so may result in penalties and fees.

Overall, state and local tax compliance is a key aspect of operating as an S corporation. Properly filing Form 1120S at the federal level and adhering to state and local tax requirements is essential to avoid penalties and maintain good standing with relevant tax authorities.

Filing Support and Resources

Irs assistance and resources.

The IRS website provides valuable resources for those looking to file Form 1120-S for their S Corporation. To begin, the IRS offers a PDF version of the form, including detailed instructions to guide taxpayers through the process. To access this, simply search “Form 1120-S” on the IRS website.

Next, be sure to obtain the appropriate business activity code as it applies to your specific corporation’s industry. This code is crucial when completing the IRS Form 1120-S and can be found within the instructions.

For additional support, the IRS offers resources for individuals who may benefit from information on Family and Medical Leave Credit in relation to their S Corporation tax filing. This is a reference for business owners interested in understanding the financial benefits of offering paid family leave to their employees.

Professional Tax Help

In some cases, seeking the assistance of a professional tax accountant may be necessary to ensure accuracy and compliance. Tax accountants can provide expert guidance on complex tax matters, as well as help navigate through the specific requirements for filing Form 1120-S. Furthermore, a tax professional can assist in maximizing deductions and credits, ensuring your corporation is taking advantage of all applicable benefits.

In summary, both the IRS website and professional tax accountants serve as valuable resources for those filing Form 1120-S. The IRS provides essential forms, instructions, and additional information, while tax professionals offer specialized support through the entire filing process.

Special Filing Addresses & Situations

This section discusses special filing addresses and situations for IRS Form 1120S, including where to file, foreign and military filing, and requests for extension to file. The information is designed to be brief, clear, and easily understood for a wide audience.

Where to File

When filing IRS Form 1120S, S corporations generally send their completed forms to one of two addresses, depending on their location:

Kansas City, MO: Corporations located in states with ZIP codes that begin with 0, 1, 2, 3, 4, 5, or 6 should send their Form 1120S to the IRS processing center in Kansas City, Missouri.
Ogden, UT: Corporations located in states with ZIP codes that begin with 7, 8, or 9 should send their Form 1120S to the IRS processing center in Ogden, Utah.

It’s important to verify the specific mailing address for your tax situation on the IRS website , as these locations might change.

Foreign and Military Filing

S corporations that operate primarily in a foreign country or U.S. possession may have different filing requirements. To file Form 1120S, mail the form to a specific address:

P.O. Box 409101: S corporations operating in a foreign country or U.S. possession should mail their completed Form 1120S to P.O. Box 409101, Ogden, Utah.

Military personnel filing on behalf of an S corporation should also use this mailing address.

Requests for Extension to File

If an S corporation requires more time to file, it may request an extension by submitting Form 7004, “Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns.” This form should be filed before the due date of Form 1120S.

Extensions are generally granted for six months, allowing S corporations additional time to gather necessary information and complete their filing accurately. Keep in mind that an extension to file is not an extension to pay any taxes owed; corporations should estimate and pay their taxes by the original due date to avoid penalties.

Frequently Asked Questions

What is the purpose of irs form 1120s.

IRS Form 1120S is a U.S. Income Tax Return for an S Corporation. This form is used by S Corporations to report their income, deductions, and credits. It helps determine the tax liability of the corporation and ensures that the pass-through taxation to shareholders is accurately calculated.

How does IRS Form 1120 differ from Form 1120S?

IRS Form 1120 is for regular C Corporations, while Form 1120S is specifically for S Corporations. The main difference between the two forms lies in their tax treatment. C Corporations are taxed at the corporate level, while S Corporations are considered pass-through entities, meaning their income, deductions, and credits pass through to shareholders, who then report this information on their individual tax returns.

Is electronic filing an option for IRS Form 1120S?

Yes, electronic filing is an option for IRS Form 1120S. Businesses can use the IRS e-file system to submit their tax returns online, offering a more convenient and efficient way to file compared to paper filing. E-filing also provides confirmation when the form is received by the IRS and often leads to faster processing times.

Which entities are required to file a 1120S tax form?

IRS Form 1120S is specifically for S Corporations. An S Corporation is a corporation that has made an S election under the Internal Revenue Code. Typically, corporations and limited liability companies (LLCs) that elect to be treated as S Corporations must file Form 1120S.

What are the recent changes to IRS Form 1120S for the current tax year?

There have been recent developments and updates to the 2021 S Corporation Instructions for Schedules K-2 and K-3 (Form 1120S), including changes to address international tax provisions. It’s essential for tax professionals and S Corporations to be aware of these updates to ensure accurate preparation and filing of the tax return.

Where can I find instructions for completing IRS Form 1120S?

Instructions for completing IRS Form 1120S can be found on the Internal Revenue Service website. You can access the current revision of Form 1120S and the accompanying instructions in PDF format for easy reference and guidance while preparing the tax return.

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S Corp Expenses: Everything You Need to Know

One type of limited liability company that can be beneficial to many small businesses is an S corporation or Subchapter S corporation (S corp). 3 min read updated on February 01, 2023

Updated July 8, 2020:

One type of limited liability company that can be beneficial to many small businesses is an S corporation or Subchapter S corporation (S corp). Small businesses and companies elect or choose to be classified as an S corp after they have been incorporated. The election allows the business to act as a separate entity while protecting the owners from certain financial and legal liabilities. It also lets the owners avoid having to pay corporate-level taxes.

Classified by the IRS as limited liability corporations ( LLCs ), S corps are limited to:

100 shareholders or owners
Individuals
Special estates and trusts.

Like LLCs, S corps are “pass-through” entities, or businesses whose profits, expenses and losses, deductions, and credits go to the owners, who then report that information on their personal income tax returns.

Reporting S Corporation Profits and Losses

Although S corporations do not personally pay taxes because the tax responsibility is passed on to the owners, each S corp is required to file Form 1120S with the IRS. Form 1120S, or an Income Tax Return for an S Corp, gives the IRS details on the S corporation's financial activities to compare with the individual shareholders' returns.

Each shareholder reports the S corps income and expenses based on his or her percentage of ownership on individual returns via form Schedule K-1. For owners, S corp profits are divided into two categories:

Shareholder wages — a wage paid to owners that is subject to a 15.3 percent tax.
Distributive share — a division of income, loss, deduction, or credit from the S corp to the owners or partners, based on each shareholder's percentage of ownership. It is not subject to tax

S Corporation Deductions

Typically, S corporation deductions are “ ordinary and necessary ” business expenses incurred by the S corp that reduce the taxable income. These expenses can include:

Business losses
Advertising
Employee benefits.

They must be claimed on the S corporations Form 1120S, as well as the owners' individual returns and K-1 forms.

Other deductions , which can save your business hundreds of dollars, include:

Using your home as an office or renting your home to your S corporation.
Health insurance.
Business vehicle expense deductions.
Avoiding Medicare taxes.
Medical Expense Reimbursement Plans or MERPS.

S Corporation Expenses and Reimbursements

Expenses are those costs the S corporation incurs during the course of its business activities. In addition to the deductions discussed above, which are reimbursable expenses, there are some expenses that are not reimbursable or deductible. These may include:

The use of a personal vehicle for business activities
Parking and tolls
Meals and entertainment
Other out-of-pocket expenses.

The owners being reimbursed under an accountable plan receive the greatest tax savings because the payments are usually tax-free. The S corporation also benefits because it can deduct the amount of the reimbursement from the business income.

Advantages and Disadvantages

Many of the benefits of an S corporations are tax-related. This can help owners reduce their tax burden and avoid double taxation To benefit from the many advantages and tax breaks, S corp owners need to know:

How to report S corp finances on their returns
How taxes are determined
What business expenses are deductible or reimbursable
Other deductions or credits available.

The three primary disadvantages to an S corporation are:

S corporations being subject to the same filing requirements as standard corporations. They must regularly file various business, government, and tax forms as well as financial documents.
Keeping S corporation and personal expenses separate and well-documented, which requires ample time, effort, and money.
Being in a state that does not acknowledge S corporations, and thus losing the tax benefits, or being in a state that significantly limits the tax breaks available.

Comprehensive research and accurate bookkeeping are useful in keeping track of expenses, losses, and profits, ensuring reimbursement will be easier to manage. Proper accounting practices assist in avoiding mixing up personal and business finances, which can cause you to miss deductions and credits or having some of those benefits discounted by the IRS . An "Employee Expense Report" form, which breaks down all employee-related expenses, can be useful your S corp in keeping everything organized.

If you need help with S Corporation expenses, you can post your legal need or job on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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Tax Deductions for Business Travelers

When you are self-employed, you generally can deduct the ordinary and necessary expenses of traveling away from home for business from your income. But before you start listing travel deductions, make sure you understand what the Internal Revenue Service (IRS) means by "home," "business," and "ordinary and necessary expenses."

Ordinary vs. necessary expenses

Business home, not home sweet home, transportation expenses on a business trip are deductible, fees for getting around are deductible, lodging, meals and tips are deductible.

Key Takeaways

Typically, you can deduct travel expenses if they are ordinary (common and accepted in your industry) and necessary (helpful and appropriate for your business).
You can deduct business travel expenses when you are away from both your home and the location of your main place of business (tax home).
Deductible expenses include transportation, baggage fees, car rentals, taxis and shuttles, lodging, tips, and fees.
You can also deduct 50% of either the actual cost of meals or the standard meal allowance, which is based on the federal meals and incidental expense per diem rate.

The IRS defines expense ordinary and necessary expenses this way:

An expense is ordinary if it is common and accepted in your industry
An expense is necessary if it is helpful and appropriate for your business

You can claim business travel expenses when you're away from home but "home" doesn't always mean where your family lives. You also have a tax home—the city where your main place of business is located—which may not be the same as the location of your family home.

For example, if you live in Petaluma, California but your permanent work location is in San Jose where you stay in hotels and eat out during the work week, you typically can't deduct your expenses in San Jose or your transportation home on weekends.

In this situation San Jose is your tax home , so no deductions are permitted for ordinary and necessary expenses there.
Your trips to your home in Petaluma are not mandated by business.

Go by plane, train or bus—the actual cost of the ticket to ride is deductible, as well as any baggage fees. If you have to pay top dollar for a last-minute flight, the high-priced ticket is a business expense, but if you use frequent-flyer miles for a free ticket, the deduction is zero.

If you decide to rent a car to go on a business trip, the car rental is deductible. If you drive your own vehicle, you can usually take actual costs or the IRS standard mileage rate. For 2023 the rate is 65.5 cents per mile. You also can add tolls and parking costs onto your deduction. This amount increases to 67 cents per mile for 2024.

TurboTax Tip: Even if you use the federal meals and incidental expense per diem rates to calculate your deductions, be sure to keep receipts from all your meals and incidental expenses.

Fares for taxis or shuttles can be deducted as business travel expenses. For example, you can deduct the fare or other costs to go to:

Airport or train station
Hotel from the airport or train station
Between your hotel and the work location
Between clients in the area

If you rent a car when you arrive at your destination, the expense is deductible as long as the car is used exclusively for business. If you use it both for business and personal purposes, you can only deduct the portion of the rental used for business.

The IRS allows business travelers to deduct business-related meals and hotel costs, as long as they are reasonable considering the circumstances—not lavish or extravagant.

You would have to eat if you were home, so this might explain why the IRS limits meal deductions to 50% of either the:

Actual cost of the meal
Standard meal allowance

This allowance is based on the federal meals and incidental expense per diem rate that depends on where and when you travel.

Generally, you can deduct 50% of the cost of meals. Alternatively, if you do not incur any meal expenses nor claim the standard meal allowance, you can deduct the amount of $5 per day for incidental expenses. You can also deduct incidental expenses, such as:

Fees and tips given to hotel staff
Fees for porters and baggage carriers

But don't forget to keep track of the actual costs.

Let a local tax expert matched to your unique situation get your taxes done 100% right with TurboTax Live Full Service . Your expert will uncover industry-specific deductions for more tax breaks and file your taxes for you. Backed by our Full Service Guarantee . You can also file taxes on your own with TurboTax Premium . We’ll search over 500 deductions and credits so you don’t miss a thing.

Get unlimited advice, an expert final review and your maximum refund, guaranteed .

~37% of taxpayers qualify. Form 1040 + limited credits only .

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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New Rules in 2023 Take a Bite out of Business Meal Deductions

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If you’ve splurged on expensive meals for business associates or sprung for high-priced tickets to sporting events or concerts for clients in the past, take heed: the tax deductions aren’t what they used to be.

Prior to the Tax Cuts and Jobs Act (TCJA) of 2018, businesses could deduct up to 50% of entertainment and meal expenses, provided they were associated with conducting or discussing business. The TCJA eliminated the deduction for most forms of entertainment but allowed taxpayers to continue deducting 50% of the cost of business meals.

In 2021, the Consolidated Appropriations Act (CAA) allowed businesses to deduct 100% of certain business meal expenses in 2021 and 2022. But the deduction was temporary, designed to boost the restaurant industry during COVID.

As of 2023, deductions are now back where they were prior to 2021. The majority of business meals are now 50% deductible, and most entertainment expenses are not deductible at all.

What’s Deductible in 2023

Exactly what is deductible, and to what extent, depends on the circumstances. Following are some general guidelines:

100% Deductible

Food for recreational employee events, such as holiday parties, summer picnics, or team-building events
Food provided to the public to promote goodwill (e.g., snacks or coffee for customers)
Food for events in support of a charitable cause
Meals that are an essential part of your business function (for example, if you’re a food critic or food blogger)
Meals provided to the employees for the convenience of the employer (e.g., dinner for employees who work late at the office)
Meals included as taxable compensation to employees or independent contractors
Meals sold to a client or customer

50% Deductible

Business meals
Meals provided in-office for meetings of employees, stockholders, agents, or directors
Employee meals at a company cafeteria if the annual revenue of the facility is equal to or greater than the costs
Food items, such as soda, coffee, or snacks, for employees
Meals while traveling for work
Meals at a conferences

Not Deductible

Entertainment

The Internal Revenue Code defines entertainment as “any activity which is of a type generally considered to constitute entertainment, amusement, or recreation, such as entertaining at night clubs, cocktail lounges, theaters, country clubs, golf, and athletic clubs, sporting events, and on hunting, fishing, vacation, and similar trips….”

Note that you also cannot deduct the costs of renting out an entertainment facility or the cost of membership dues.

Entertainment and meals that are part of your actual business may be deductible. For example, if you own a piano bar, the cost of the piano player would probably be deductible. Similarly, if you are a food blogger or a theater critic, you should be able to deduct the cost of meals or plays that you are actively reviewing.

You may be able to deduct meals at entertainment events if the costs can be separated. For example, while the cost of renting a room at a country club for a business function most likely isn’t deductible, the cost of catering for that function might be.

Criteria for Deductions

To deduct business meals, you must be self-employed or operating a business. As of 2018, employees with W2 jobs do not qualify for business meal deductions.

Business meals can be deducted only when the taxpayer or an employee is present at the meal along with a current or potential client, business contact, or consultant. Meals for guests, such as spouses, are not deductible.

In most cases, meals must be provided by a restaurant or, in the case of larger events, a caterer, to be eligible. Food purchased at a grocery or convenience store is not deductible.

In all cases, the meal must not be “lavish or extravagant” relative to the business context.

Documenting Deductions

You should keep receipts for any business meal over $75, and you should keep a record of all business meals, regardless of cost. Records should include:

The date of the meal
Purpose of the meal as it relates to business
Names, titles, and affiliations of people who attended
Name of the venue
Total amount of the bill, including tax and tip.

How to Report Your Meal Deductions

How you report your deductions to the IRS depends on what kind of business you have. If you’re a sole proprietor or single-member LLC, you can report your expenses on Schedule C . Partnerships and multi-member LLCs should report them on Form 1065 . C corporations should report them on Form 1120 , and S corporations on Form 1120S .

Don’t Forget the Per Diem

Alternatively, taxpayers can choose to use a per diem, an annually updated tax deduction for meals and incidental expenses incurred while traveling away on business. The amount allowed varies depending on the location of travel. To be eligible, a business owner or employee must be traveling away from home for business.

In 2023, the meal per diem is $74 a day for high-cost areas in the continental United States and $64 a day for lower-cost areas.

Tonneson + Co Can Help

Many lucrative and long-lasting business relationships are nurtured over personal interactions that include meals, drinks, or coffee. These interactions can also help business owners reduce their tax liability, provided they are recorded and reported appropriately.

We recommend working with one of our qualified CPAs to determine which of your business expenses are tax deductible, how much you can deduct, and whether to itemize your deductions or use the per diem method. Contact us today.

If you’re interested in working with Tonneson + Co, please reach out to us. We look forward to hearing from you!

Protecting your business: irs’s efforts against covid tax fraud, irs oversight and modernization: navigating 1099-k reporting and direct file challenges, breaking down the $78 billion tax bill: a comprehensive look at the tax relief for american families and workers act of 2024.

Accounting | How To

How To Fill Out Form 1120 for Tax Year 2023 (With Example)

Published February 23, 2024

Published Feb 23, 2024

WRITTEN BY: Tim Yoder, Ph.D., CPA

1. Required Information
2. General Information Section
3. Income & Deductions Section
4. Schedule C
5. Schedule J
6. Schedule K
7. Schedule L
8. Schedule M-1
9. Schedule M-2

How To Assemble Form 1120

Bottom line.

All domestic C corporations (C-corps) must file IRS Form 1120, U.S. Corporation Income Tax Return, every year they are in business, even if they don’t have any taxable income. The financial information in Form 1120 is pretty straightforward—as long as you have your balance sheet and profit and loss statement prepared.

The more difficult part of completing this form is all the detailed questions you’re asked. We will walk you through how to fill out Form 1120 to help you fill out the financial information using sample financial statements. We will also provide tips on the detailed questions and suggestions for where to find more information for filling out Form 1120.

Form 1120 is due by the 15th day of the fourth month after your tax year ends, which is April 15 for calendar year corporations. If you need more time to complete your return, you can do so by requesting an automatic extension using IRS Form 7004 . It extends the time to file the form but not to pay the tax you estimate will be due.

Example Financial Statements

We’ve made a sample profit and loss (P&L) statement and balance sheet, which you can see below, to help you better understand how to fill out Form 1120. You might also want to keep the IRS’s Form 1120 instructions close by as we fill out the form to help you with your corporation’s tax return.

Profit and loss statement showing 2023 net income for ABC Company.

Sample profit & loss statement

Balance sheet showing the beginning and ending balances of assets, liabilities, and equity for ABC Company.

Sample balance sheet

Step 1: Collect the Required Information

Whether you decide to use a tax professional, use tax software, or complete this form by hand, you’ll need your corporation’s financial information and documentation to complete Form 1120. Much of this information can be found on your prior-year tax return:

Details about your corporation: This includes the name of the business, the date of incorporation, the date of the election to be treated as a corporation, your employer identification number (EIN), and your mailing address.

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. If you need help acquiring one, read our guide on how to get an EIN .

Tax year: You need to know if you’re filing on a calendar year or fiscal year—like June 30. This must match your prior-year return unless you ask the IRS permission to change it.
Business activity: A description of the business activity of the C-corp, the main product or service you offer, and the business activity code that reflects your industry. You can find a complete list of the business activity codes on page 28 of the IRS’s instructions for Form 1120 .
Accounting method: Most C-corps may use either the cash or accrual method of accounting , although large corporations may be required to use accrual. You must use the same accounting method as the prior year—unless the IRS permits you to change.
P&L statement: This financial report—also called an income statement —is a summary of the corporation’s income and expenses for the year.
Balance sheet report: A balance sheet is a financial statement that summarizes all assets, liabilities, and owner’s equity as of the end of the tax year.
Fixed asset purchases report: Print the general ledger (GL) for each of your fixed asset accounts, which should show all the purchases and sales of fixed assets during the year. Fixed assets are things like machinery, vehicles, buildings, and improvements to buildings. This information is necessary when figuring out how much the C-corp can deduct for MACRS depreciation , bonus depreciation , and section 179 expense this year.
Payroll expense report: You should also print out a report showing compensation paid to the officers of the C-corp. This detail is necessary because compensation for officers is reported on a separate line item from salaries and wages paid to other employees.
Capital accounts: Create a detailed list of all transactions that affect the capital accounts of the shareholders, such as capital contributions, distributions, dividends, and buyouts.
Loans: Create a complete record of every financial transaction involving shareholder loans and repayments, including any interest paid or received.
Forms 1099: If your corporation paid an independent contractor or freelancer during the year, you may need to report the payment on your Form 1120. Our guide on Form 1099 reporting can help you figure out if you’re required to issue any 1099s.

Step 2: Complete the General Information Section

You may wish to download IRS Form 1120 from the IRS website to follow along with this guide.

General information for ABC Company at the top of Form 1120, page 1.

IRS Form 1120 General Information

Initial return: If this is your corporation’s first tax return, write the date it was formed where it says “tax year beginning” at the top of Form 1120. You should also mark the box for initial return in item E. (1). This date should match your corporation’s date of incorporation in item C.
Item B: Enter your corporation’s EIN assigned by the IRS in this section or “Applied For” if you’ve applied but haven’t yet received your number.
Item D: Enter the total assets of your corporation as shown on your balance sheet. This must match the ending total assets shown on Schedule L of Form 1120 discussed later. Our sample company has $35,587 in total assets at the end of the year according to our balance sheet provided above.

Step 3: Fill Out Income & Deductions Section

You must list your corporation’s income and deductions on the first page of Form 1120. We have completed Lines 1a through 37 using the example P&L statement of our fictitious C-corp above.

Income: Lines 1–11

Line 1: Gross receipts from the sale of your goods or services
Line 2: Your cost of goods sold is reported on line 2 and must match the cost of goods sold calculation done on Form 1125-A, which is not illustrated in this article.
Line 4: C-corps treat dividend income differently than other taxpayers, as we’ll discuss when completing Schedule C. After you calculate the includible dividends on Schedule C, place that income on line 4.
Lines 5–7: Income from interest, rent, and royalties must be separated from the income reported on Line 1 and reported on lines 5, 6, and 7.
Line 8: If you have any capital gains or losses, you need to complete Schedule D and then report the net capital gain on this line. The most common sources of capital gains and losses are the sale of investment property and capital gain distributions from mutual funds.
Line 9: You need to complete Form 4797 to calculate any gain or loss if you sold business assets during the year like buildings or equipment. You’ll report all or a portion of the gain from Form 4797 on this line.

Form 1120, Page 1, income on lines 1 through 11 completed with ABC Company's sample income information.

Form 1120, Page 1, Lines 1–11

Deductions: Lines 12–29

Report the deductions shown on your Profit and Loss statements in this section. Most of the lines are straightforward, but here are some helpful tips.

Line 12: Report any compensation paid to officers on line 12 and then attach Form 1125-E to provide additional details. Be sure to remove any officer compensation from total wages and salaries reported on Line 13.
Line 13: All salaries and wages paid during the year—except for those paid to officers—are reported on Line 13.
Line 19: Charitable contributions must be made to qualified charities and are generally limited to 10% of taxable income. See the instructions for line 19 if you think your deduction might be limited.
Line 20: Depreciation reported on Line 20 comes from Form 4562 and includes the deductions for depreciation, bonus depreciation, and section 179 expense.
Line 25 : The energy efficiency commercial buildings deduction is new for 2023. Owners of commercial buildings that qualify as energy efficient can claim this special deduction. See the IRS’s instructions for Form 7205 for more information.
Line 26: Report your deductible meals along with any other expenses not reported elsewhere.

Form 1120, Page 1, Lines 12 - 20 completed with the sample deductions for ABC Company.

Form 1120, Page 1, Lines 12–29

In general, a corporation can only deduct 50% of the amount that would otherwise be allowed for meals paid for or incurred as part of its trade or business. For more on this topic, see our in-depth guide on the meals and entertainment deduction .

Tax & Payments: Lines 30–37

Lines 31 & 33: Report the total tax and total payments and credits calculated on Schedule J, discussed later in this article.
Line 34: If you owe tax with your return, you may also owe an underpayment penalty. The underpayment penalty is interest owed to the IRS for not paying your tax liability timely throughout the year. There are several exceptions to this period as explained on Form 2220.
Line 37: If you have an overpayment of tax, you can choose to apply your overpayment to your 2024 tax liability. This is usually a good idea if you plan on making estimated tax payments next year.

Form 1120, Page 1, Lines 30 - 37 completed with the tax and payments information for ABC Company.

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

Schedule C is used to report dividends, interest, and any other income from corporations in which your corporation has an ownership interest. If your corporation doesn’t own stock in other corporations, you can skip this section. In our example, ABC Company did not get any dividends, so the fields on this form will be left blank.

It’s pretty rare for small businesses to have subsidiary corporations that pay dividends. However, if you do, then be sure to complete this section and report your dividends received deduction on page 1, line 29b.

Step 5: Complete Schedule J—Part I & Part II

Schedule j, part i, tax computation and payment.

Part of Schedule J is used to calculate all the taxes owed by your C-corp. If you have positive income on line 30 of page 1, then you should show tax on line 1 of this form. The other taxes and credits shown in Schedule J, Part I are less common.

While we don’t present any detailed calculations of these less-common items, read on to learn the basics of each line and whether it might apply to you.

Form 1120, Schedule J, Part I showing the tax liability of ABC Company.

IRS Form 1120 Schedule J Part I & Part II—Tax Computation

Line 1: This line is your regular federal income tax and is calculated as 21% of your taxable income shown on line 30 of page 1. Federal income tax for ABC Company is $20,900 times 21%, or $4,389.

Special Taxes for Very Large Corporations: Lines 2 & 3

Line 2: The base erosion minimum tax is only applicable if the C-corp had at least $500 million of gross receipts in any of the prior three years.
Line 3: Only corporations with an average of $1 billion in financial statement income over the prior three years are subject to the corporate alternative minimum tax.

Tax Credits: Line 5

Line 5a: You might be eligible for a foreign tax credit if you paid any income tax to a foreign government. The most common instance of this for small businesses is when you receive foreign investment income through a mutual fund. These mutual funds often must pay tax to foreign governments for which the investors can claim a credit.
Line 5b: Complete Form 8834 if you have an electric vehicle credit carryover for vehicles placed in service before 2007. Credit for electric vehicles placed in service in 2023 are reported on Form 8936 and are part of the general business credit reported Line 5c.
Line 5c: Many small businesses qualify for one or more of the general business credits reported on Form 3800.
Line 5d: This line is only applicable if you’ve paid alternative minimum tax in the prior year.
Line 5e: If you own any tax credit bonds, claim your tax credit on Form 8912 and then report it here. Learn more about tax credit bonds through IRS Form 8912 .

Other Taxes: Lines 8 & 9

Line 8: If at least 60% of your income is from passive investments like stocks, bonds, and rental activities, then your corporation might be a personal holding company (PHC) and subject to a special PHC tax if you failed to pay enough in dividends.
Claimed an investment credit or low-income housing credit in a prior year
Reported long-term contracts using the percentage complete method
Reported depreciation of property under the income forecast method
Operated a United States flag vessel of more than 6,000 tons for shipping activities
Deferred tax on installment obligations

Schedule J, Part II: Payments and Refundable Credits

Part II of Schedule J is used to report payments or refundable credits. The most common item to report is any estimated tax payments you made during the year, which go on line 14.

Form 1120, Schedule J, Part II showing ABC Company made no tax payments during the year.

IRS Form 1120 Schedule J Part II—Payments and Refundable Credits

Line 13: Report on this line any portion of your 2022 refund that was applied toward your 2023 estimated tax. You can find this amount on line 37 of your 2022 Form 1120.
Line 14: Enter any estimated tax payments made during 2023 or January 2024 applied to the 2023 tax year.
Line 15 : Although rarely done, if you requested a quick refund of your 2023 estimated tax payments on Form 4466 because they far exceeded your expected liability, enter the refunded amount here.
Line 17: If you’ve extended this 2023 Form 1120, enter any payment of tax you made with the extension. This will be shown on line 8 of the Form 7004 filed to receive the extension.
Line 18: While rare for corporations, enter any federal income tax withheld on income received.
Line 20a: If you received a Form 2439 for undistributed long-term capital gains (rare), then enter any tax paid as shown in box 2.
Line 20b: Report any credit for federal taxes paid on fuel from Form 4136. The most common source of this credit comes from using fuel that includes federal taxes for nonhighway use. For instance, farmers or landscapers who purchase their fuel from a typical gas station can claim a credit if the fuel is used in off-road tractors or lawn equipment.

Step 6: Complete Schedule K—Other Information

All corporations must fill out Schedule K, and understanding the complex questions on this schedule is one of the hardest parts of self-preparing your Form 1120. Fortunately, most small businesses will answer no to most of the questions. We’ll help you identify which questions might apply to your corporation.

Schedule K, Lines 1 & 2

Line 1: Select your overall method of accounting as either cash, accrual, or other—which is generally a hybrid of cash or accrual. Your accounting method has to be the same as last year unless you request the IRS to change it on Form 3115.
Line 2: Enter your business activity, product or service, and business activity code. The business activity code will generally be the same as last year, but you can verify the code to use by referring to the IRS’s Form 1120 instructions .

Form 1120, Schedule K, lines 1 and 2 completed with ABC Company's basic information.

Form 1120, Schedule K, Lines 1 & 2

Schedule K, Lines 3 & 4

Lines 3 and 4 deal with the owners of this corporation.

Line 3: If the corporation is owned 80% or more by another corporation but chooses to file a separate return instead of being included in a consolidated return, then mark yes and enter the name of the corporation with 80% or more ownership.
Answer yes to Line 4a if the 20% owner is a corporation, partnership, trust, or tax-exempt entity and then attach Schedule G.
Answer yes to Line 4b if the 20% owner is an individual or estate.

Most small businesses will answer yes to Line 4b.

Form 1120, Schedule K, Lines 3 & 4

Schedule K, Line 5

Line 5 gathers information about any entities for which this corporation owns directly 20% or more, or indirectly through related parties 50% or more.

Line 5a: Answer yes and provide a list of any corporations owned.
Line 5b: Answer yes and provide a list of any partnerships owned or trusts with a beneficial interest.

Form 1120, Schedule K, lines 3 and 4 completed showing that ABC Corporation has an individual owning at least 20% of the stock.

Form 1120, Schedule K, Line 5

Schedule K, Lines 6–12

Line 6: Answer yes if you paid shareholder distributions in excess of earnings and profits, which are similar to retained earnings but calculated with some tax adjustments. These excess distributions are generally treated as capital distributions instead of dividend income to the shareholder. This is pretty rare.
Line 7: If the corporation was owned 25% or more by a foreign person, then answer yes and provide the percentage owned and owner’s country.
Line 8 : Check this box if the corporation issued public debt with an original issue discount (OID), which is pretty rare for a small business.
Line 9 : Enter any tax-exempt interest that was received. This is usually interest received on municipal bonds. Note that interest received on most federal bonds and treasury notes are not tax-exempt and must be reported as taxable on page 1.
Line 10: Enter the number of shareholders at the end of the year if less than 100. Most small businesses will have to enter a number here.
Line 11: If you are reporting a loss for the year, check this box if you want to carry the loss forward to future years rather than carry it back to previous years. If your loss is a significant amount, you should consult a tax pro before making this election.
Line 12: If you have a loss being carried forward from prior years, enter the amount here. You should also enter the amount of the NOL being used to offset current-year income on page 1, line 29a.

Form 1120, Schedule K, line 5 completed showing that ABC Company did not own 20% or more of any entity.

Form 1120, Schedule K, Lines 6 – 12

Schedule K, Line 13

Answer yes to line 13 if the corporation had less than $250,000 in gross receipts (page 1, line 1a) and less than $250,000 in total assets at the end of 2023. If yes, then also disclose the amount of distributions made on the line provided.

Small corporations answering yes to line 13 are not required to complete Schedules L, M-1, or M-2.

Form 1120, Schedule K, Line 13

Schedule K, Lines 14–20

Line 14: Mark yes if you’re claiming an uncertain tax position in this tax return. An uncertain tax position is one that you are not confident will be allowed if reviewed by the IRS. I’d recommend consulting a tax pro if you think this might apply to you.
Line 15: Answer yes if the corporation made payments during the year that were required to be reported on Form 1099. If you answered yes to line a, be sure to file the form as required and also mark yes to line b. Many small businesses will answer yes to this question because of payments made to contractors that must be reported on Form 1099-NEC. Learn more through our guide to 1099 reporting .
Line 16: Answer yes if the corporation had an 80% change in ownership during the year, which is rare.
Line 17: If you disposed of more than 65% of your assets during the year answer yes to line 17.
Line 18: A section 351 transfer is when a corporation receives assets from a new or current shareholder in exchange for issuing that shareholder stock. It is most common when an existing business is transferred into a corporation. Mark yes to this line if you received property worth $1 million or more in exchange for stock. We have a guide on the Section 351 exchange if you want to learn more.
Line 19: If you made payments to foreign persons that represent US source income to that person, you must file Form 1042 or Form 1042-S and mark yes to this question.
Line 20: If the corporation is being operated as a CO-OP, mark yes to line 20. This is rare for a small business.

Form 1120, Schedule K, lines 14 to 20 completed for ABC Company.

Form 1120, Schedule K, Lines 14-20

Schedule K, Lines 21–25

Line 21: If you made interest payments to related parties during the year, you might be unable to deduct the interest—unless the related party reports the interest as taxable income. If your related party interest is nondeductible, then answer yes and provide the amount in the space provided.

Related parties include a corporation and a shareholder, but the interest is deductible by the corporation as long as the shareholder reports it as interest income.

Line 22: Only mark yes if you have gross receipts of at least $500 million in any of the prior three years.
Line 23: The section 163(j) election is not applicable to corporations with average annual gross receipts of less than $29 million over the prior 3 years, so small businesses can answer no to this question.
Line 24: This line determines if a corporation is subject to the limitation on interest expense. Most small businesses with average annual gross receipts of less than $29 million over the prior three years can answer no to this question.
Line 25: Answer yes if you are applying for certification as a Qualified Opportunity Fund, which is rare for small businesses.

Form 1120, Schedule K, lines 21 through 25 completed for ABC Company.

Form 1120, Schedule K, Lines 21 – 25

Schedule K, Lines 26–28

Line 26: This line is asking if you’ve moved your company’s assets offshore by selling substantially all the assets to a related foreign corporation. This is rare for a small business, but if you think it might apply, then definitely seek the help of a tax pro.
Line 27 : If the corporation received or disposed of digital assets—most commonly cryptocurrency—during the year, then mark yes. Paying expenses with digital assets qualifies as disposing of them.
Line 28: If this corporation is a member of a controlled group, answer yes and complete Schedule O where you’ll need to show how certain tax benefits will be split among members of the group. Controlled groups include both brother-sister corporations and parent-subsidiary corporations.

If the owners of this corporation also own another corporation, the corporations are a brother-sister-controlled group. This is the most common form of a controlled group for small businesses.

Form 1120, Schedule K, Lines 26 through 28 completed for ABC Company.

Form 1120, Schedule K, Lines 26 – 28

Schedule K, Lines 29–31

Line 29: This line determines if the Corporate Alternative Minimum Tax applies to this corporation; if you’re a small business, then it does not. Answer no to all the questions for line 29 unless you’ve ever had a three-year period with adjusted financial statement income of over $1 billion.
Line 30: Answer no unless you are a publicly traded company and repurchased shares during the year.
Line 31: Answer no if the corporation’s gross receipts for the year are less than $1 billion.

Form 1120, Schedule K, lines 29 through 31 completed for ABC Company.

Form 1120, Schedule K, Lines 29–31

Step 7: Complete Schedule L—Balance Sheets per Books

This section is optional for corporations that answer yes to Schedule K, line 13, but we recommend completing it anyway as it demonstrates to the IRS that your books are in good order. The information for Schedule L comes directly from your balance sheet, so it’s pretty straightforward to complete.

Here is the Schedule L based on ABC Company’s balance sheet presented at the top of the article:

Form 1120, Schedule L showing the balance sheet detail for ABC Company.

Form 1120 Schedule L Balance Sheet

Step 8: Complete Schedule M-1—Reconciliation of Income (Loss) per Books With Income per Return

As with Schedule L, Schedule M-1 is not required if you answered yes to Schedule K, Line 13. While it can be a bit confusing to complete, we recommend at least giving it a try before leaving it blank. Schedule M-1 shows all the differences between the net income on your profit and loss statement and taxable income reported on page 1 of this 1120.

To complete Schedule M-1 you’ll need to go line-by-line down page 1 of income and deductions and find any instances in which the amount reported there differs from the amount reported on your profit and loss statement. For ABC Company, the only difference is $500 of meals expense shown on the profit and loss statement, which is nondeductible and therefore not shown on page 1.

Form 1120, Schedule M-1 reconciling taxable income and book income for ABC Company.

Form 1120, Schedule M-1, Reconciliation of income

Line 1: The net income shown on line 1 must match the net income shown on your profit and loss statement.
Line 2: Federal income tax expense is not deductible on page 1, so if there is any federal income tax expense shown on your profit and loss statement, it must be entered on line 2.
Line 3: If your profit and loss statement shows capital losses in excess of capital gains, that excess must be entered here as capital losses in excess of capital gains cannot be deducted on page 1.
Line 4 : If there is any income on page 1 that is not on your profit and loss statement, enter on line 4. This is most often a timing difference where income is being recognized for tax this year but recognized for book purposes in a different year.
Line 5: Any expenses on your profit and loss statement that exceed the amount deducted on page 1 must be reported here. For example, if tax depreciation shown on page 1 exceeds the depreciation expense on your profit and loss statement, enter the excess on line 5a. Any nondeductible expenses like entertainment or penalties can be listed below line c.
Line 7: Any income shown on your profit and loss statement this year but isn’t shown on page 1 must be entered here. As with line 4, this is usually a timing difference between when income is recognized on the tax return versus when it’s recognized on the books.
Line 8: Any deductions on page 1 that are greater than the expense shown on the profit and loss statement are entered on line 8.

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

As with Schedules L and M-1, Schedule M-2 isn’t required if you answer yes to line 13 of Schedule K. However, this schedule is the final bit of proof you can provide to the IRS that your books are in order and your tax return balances as discussed next.

Form 1120, Schedule M-2 showing the 2023 change in retained earnings for ABC Company.

Form 1120, Schedule M-2, Analysis of Retained Earnings

For your tax return to balance, the following must hold true:

Line 1 must agree to Schedule L, line 25, column a
Line 2 must agree to Schedule M-1, line 1
Line 8 must agree to Schedule L, line 25, column d

You’ll likely have additional forms and schedules that need to be attached to your Form 1120. If you’re filing on paper, you need to arrange the forms according to the Attachment Sequence No. As an example, we’ve highlighted this number for Form 4797:

Blank header for Form 4797 with the attachment sequence number highlighted.

IRS Form 4797 Header with Attachment Sequence Number

If you have any supporting statements or attachments, then they will be at the very end of the return, behind all schedules and forms. Ensure they are labeled with which schedule or form they support and then place them in the same order as the schedules and forms. Also, include the name and EIN of the corporation on each attachment.

Frequently Asked Questions (FAQs)

What if i need to make changes to my already filed form 1120.

If you have already filed Form 1120 and need to make changes, you will need to use Form 1120-X, Amended U.S. Corporation Income Tax Return, to correct a previously filed Form 1120.

What happens if I don't pay my corporate taxes on time?

A corporation that fails to pay the tax when it is due may be fined 1/2 of 1% of the unpaid tax for each month or part of a month that the tax is not paid, up to a maximum penalty of 25% of the unpaid tax. If you fail to file, the penalty is 5% of the unpaid taxes for each month or part of a month that the tax return is late, not to exceed 25% of your unpaid taxes.

How do I file Form 1120 if I dissolve my C-corp?

A C-corp that has dissolved generally must file by the 15 th day of the fourth month after the date it dissolved. Additionally, if this is the corporation’s final Form 1120 return, you should check the “Final return” box in the return in item E.

The income, gains, losses, deductions, and credits of a corporation, as well as the amount of income tax that must be paid, must all be reported and calculated by the U.S. Corporation Income Tax Return using Form 1120. You can start your return by downloading IRS Form 1120 and filling it out by hand, or you can do it all electronically to have it complete in time for the filing date.

About the Author

Find Timothy On LinkedIn

Tim Yoder, Ph.D., CPA

Tim worked as a tax professional for BKD, LLP before returning to school and receiving his Ph.D. from Penn State. He then taught tax and accounting to undergraduate and graduate students as an assistant professor at both the University of Nebraska-Omaha and Mississippi State University. Tim is a Certified QuickBooks ProAdvisor as well as a CPA with 28 years of experience. He spent two years as the accountant at a commercial roofing company utilizing QuickBooks Desktop to compile financials, job cost, and run payroll. Tim has spent the past 4 years writing and reviewing content for Fit Small Business on accounting software, taxation, and bookkeeping.

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Form 8825: Tracking Your Rental Income and Expenses

Key Takeaways: – IRS Form 8825 is used to report rental income and expenses for partnerships or S corporations. – Form 8825 is not used by sole proprietors or single-member LLCs, who use Schedule E (Form 1040) instead. – The form allows you to record financial information for up to eight different properties. – Expenses that can be included on Form 8825 include advertising, cleaning and maintenance, commissions, insurance, legal fees, interest, repairs, taxes, utilities, wages and salaries, depreciation, and others. – Filling out Form 8825 involves entering your name and EIN, listing the physical address of each property, entering gross income and expenses for each property, and calculating net gain or loss. – Form 8825 should be attached to Form 1065 for partnerships or Form 1120S for S corporations. – LLCs that are partnerships or S corporations for tax purposes should use Form 8825, while single-member LLCs should use Schedule E (Form 1040). – Form 8825 and Schedule E (Form 1040) are similar but used for different entities. – Schedule K-1 is used to determine each partner’s share of net income or loss from rental real estate activities in partnerships, estates, and trusts. – Partnerships and S corporations must complete Schedule K-1 to report income or loss on Form 8825. – Sole proprietors and single-member LLCs do not need to complete Schedule K-1. BiggerPockets:

Although filling out IRS tax forms each year isn’t any fun, it is a necessary part of real estate investing. Thankfully, the tax forms for rental properties aren’t complicated. If you are investing as a member of a partnership or as an S corporation, you will need to report your earnings on Form 8825.

Making sure you fill out Form 8825 correctly is vitally important. Accurate financial reporting is required and could help you determine if you qualify for certain tax deductions .

What Is Form 8825?

IRS Form 8825 is a special tax form specifically for reporting the rental income and expenses of a partnership or S corporation. The form allows you to record the financial information for eight different properties. If you have more than eight, the additional properties can be reported on a second Form 8825.

Form 8825 is not to be used by sole proprietors or single-member LLCs. If you are filing as a sole proprietor or single-member LLC, you will record your rental real estate activities on Schedule E (Form 1040), which is used to report supplemental rental real estate income and expenses.

Who Uses Form 8825?

Form 8825 reports the rental income of partnerships or S corporations in the United States. Suppose your S corporation owns two apartment buildings, a self-storage facility, and three single-family rental homes. In that case, you will need to include the income and expenses of each property on the form.

If you are reporting partnership income, Form 8825 should be attached to Form 1065 (U.S. Return of Partnership Income). If you report S corporation income, Form 8825 should be attached to Form 1120S (U.S. Income Tax Return for an S Corporation).

It’s important to point out that Form 8825 can be used if your partnership is an LLC, but it doesn’t have to be used for all LLCs. A single-member LLC, for example, would use Schedule E (Form 1040).

What Type of Expenses Go On Form 8825?

The IRS only taxes rental real estate activity on the net income earned. Net income simply refers to gross income less expenses. To derive the taxable net income, Form 8825 includes lines to enter certain expenses, which include:

Advertising
Auto and travel
Cleaning and maintenance
Commissions
Legal and other professional fees
Wages and salaries
Depreciation

If you aren’t sure whether a particular operating expense qualifies, check the Internal Revenue Service website. You can also consult a tax professional like a CPA to clarify the issue.

How Do You Fill Out Form 8825?

Although IRS form 8825 may appear somewhat intimidating when you first look at it, it’s not complicated. The form is logical and easy to follow. The required information for each line is clearly labeled, and the instructions are included when you download the form.

Enter your name and employer identification number (EIN). It’s important to ensure you include this information on all the tax forms you submit. This will help to prevent errors or delays if a form is lost or misplaced.
List the physical address of each property you own. You must also include the property type (multi-family, single-family, short-term rental, etc.). You will also need to indicate the number of days the property was rented and the number of days it was used for personal use (if any).
Enter the gross income for each property. Be sure to match the right income to the right property. For example, the income you list in column A must match the property you listed in row A.
Enter all of your expenses for each property. If you have any expenses not listed, you can include them in the section labeled “Other.” Add all of your expenses for each property to determine the total. You then subtract the total expenses from the gross income for each property to determine the income or loss.
Add your gross rental income (line 2, columns A-H) and gross rental expenses (line 16, columns A-H).
Enter the net gain or loss from the sale of rental real estate property. This information is found on Form 4797, Part II, line 17.
Enter your net income or loss from any rental real estate activity that is from a partnership, estate, or trust where the S corporation or partnership is a beneficiary or partner. This information is obtained from Schedule K-1.
Enter the names and EIN of the partnerships, estates, or trusts from the previous step.
Determine your net rental real estate income or loss. This is done by adding everything in steps 5-7. You will then enter the amount either on Form 1065 (for partnerships) or Form 1120S (for S corporations).

What Does a Practical Example Look Like?

The best way to understand how to fill out Form 8825 is with a practical example. Let’s say you are in a real estate partnership that owns the following properties:

One multi-family property
Three single-family homes
Two self-storage facilities

Because you are in a partnership and your rental real estate activities are not from a sole proprietor or single-member LLC, you must complete Form 8825 to report your rental real estate income.

After filling out the name and EIN number on Form 8825, you will enter each property’s physical address and the number of days it was used as a rental in rows A-H. Be sure to list each of the single-family homes and self-storage facilities separately.

You will then enter your gross rental income and expenses for each property in columns A-H to obtain your net gain or loss. Next, enter the income or loss from Schedule K-1 on line 20a. Enter the name of each partner and the EIN, and then combine lines 18a-20a. You will then enter the result on either Form 1065 (for partnerships) or Form 1120S (for S corporations).

That’s all there is to it. Although many tax forms have earned reputations for being difficult and time-consuming, Form 8825 is simple and easy.

How Do You List LLCs on Form 8825?

Many real estate investment partnerships form limited liability companies (LLCs) to protect their personal assets in case they are sued. If someone slips and falls in a rental unit, the owner’s bank accounts, homes, and other personal assets are protected if the suit is successful. LLCs can be either single-member (one owner) or multi-member.

Because Form 8825 is only for partnerships or S corporations, you will only list LLCs on the form that are either partnerships or S corporations for tax purposes. If you have a single-member LLC, rental income will be reported on Schedule E (Form 1040).

Is Form 8825 the Same as Schedule E?

Form 8825 and Schedule E (Form 1040) are similar insofar as they are used to report rental real estate income. They are, however, two separate and distinct forms.

The primary difference between the two forms is that Form 8825 is used if you declare on behalf of a partnership or S-corporation. On the other hand, Schedule E is used to report an individual owner’s earnings. Schedule E is also used to report other forms of supplemental income.

The process for reporting rental real estate income and expenses on Schedule E is similar to Form 8825. You must include the physical address of each property and its type and the number of days it was used as a rental. You will then enter your gross rental income and itemize your expenses to determine your profit or loss for each property.

What Is Schedule K-1?

Schedule K-1 is a form you will need to fill out to obtain important information included on Form 8825. The form determines the net income or loss from rental real estate activities from partnerships, estates, and trusts. Instead of reporting the full income or loss, Schedule K-1 determines each partner’s share.

Let’s assume a partnership has four members and earns $200,000 annually. Each partner will complete a Schedule K-1 to report $50,000 in individual earnings (assuming the profit is split evenly). This amount is then transferred to line 20a of Form 8825.

The Bottom Line

If you are a sole proprietor or a single-member LLC, you don’t have to worry about Form 8825. If your rental real estate activities are part of a partnership or your business is an S corporation for tax purposes, however, you must include the form when submitting your income taxes.

Thankfully, Form 8825 isn’t complicated or difficult to understand. It can be filled out in just a few minutes, which allows you to finish your taxes and get back to doing what you do best—closing more deals and growing your portfolio.

Dreading tax season?

Not sure how to maximize deductions for your real estate business? In The Book on Tax Strategies for the Savvy Real Estate Investor , CPAs Amanda Han and Matthew MacFarland share the practical information you need to not only do your taxes this year—but to also prepare an ongoing strategy that will make your next tax season that much easier.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

Source link Property Chomp’s Take: Filling out IRS tax forms may not be the most enjoyable task, but it is a necessary part of real estate investing. Thankfully, when it comes to reporting rental properties, the tax forms are not complicated. In this article, we will specifically discuss Form 8825 and its importance in accurately reporting rental income and expenses for partnerships and S corporations.

Form 8825 is a special tax form designed for reporting the rental income and expenses of a partnership or S corporation. It allows you to record the financial information for up to eight different properties. If you own more than eight properties, you can use a second Form 8825 to report the additional properties. It’s important to note that sole proprietors or single-member LLCs should use Schedule E (Form 1040) to report their rental real estate activities.

Partnerships and S corporations in the United States use Form 8825 to report rental income. For example, if your S corporation owns multiple properties such as apartment buildings, self-storage facilities, and single-family rental homes, you will need to include the income and expenses of each property on this form. If you are reporting partnership income, you should attach Form 8825 to Form 1065 (U.S. Return of Partnership Income). If you report S corporation income, you should attach Form 8825 to Form 1120S (U.S. Income Tax Return for an S Corporation).

It’s important to note that although Form 8825 can be used for LLCs, it is not mandatory for all LLCs. Single-member LLCs, for example, should use Schedule E (Form 1040) instead.

Form 8825 includes lines for entering various expenses related to rental real estate activities. These expenses include advertising, auto and travel expenses, cleaning and maintenance costs, commissions, insurance, legal and professional fees, interest, repairs, taxes, utilities, wages and salaries, depreciation, and other miscellaneous expenses. If you are unsure whether a particular expense qualifies, you can consult the IRS website or seek advice from a tax professional.

Filling out Form 8825 may seem intimidating at first, but it is straightforward. The form is designed logically and provides clear labels for the required information. When filling out the form, make sure to enter your name and employer identification number (EIN) accurately. This information should be consistent across all the tax forms you submit. You will then list the physical address of each property you own, along with the property type and the number of days it was rented or used for personal purposes.

Next, you will enter the gross income for each property and match it with the corresponding property. You will also list all the expenses for each property, including any additional expenses not mentioned on the form. After calculating the total expenses, subtract them from the gross income to determine the net income or loss for each property. You will then add up the gross rental income and expenses for all properties to obtain the total.

Other sections of Form 8825 include entering the net gain or loss from the sale of rental real estate property, reporting net income or loss from rental activities in partnerships, estates, or trusts, and entering the names and EINs of the partnerships, estates, or trusts. Finally, you will determine your net rental real estate income or loss by combining all the relevant information and enter this amount on either Form 1065 or Form 1120S.

To provide a practical example, let’s say you are part of a real estate partnership that owns one multi-family property, three single-family homes, and two self-storage facilities. After filling out the necessary information, including the physical addresses and rental days for each property, you will enter the gross rental income and expenses for each property to calculate the net gain or loss. You will then transfer this information to Schedule K-1, enter the names and EINs of the partners, and combine the lines to be entered on either Form 1065 or Form 1120S.

For LLCs, it is important to note that only partnerships or S corporations for tax purposes should be listed on Form 8825. Single-member LLCs should use Schedule E (Form 1040) instead.

While Form 8825 and Schedule E both report rental real estate income, they are separate forms with different purposes. Form 8825 is used for partnerships and S corporations, while Schedule E is used for individual owners. The process for reporting rental income and expenses on Schedule E is similar to Form 8825, but it also allows for reporting other forms of supplemental income.

Schedule K-1 is another important form that determines the net income or loss from rental real estate activities for partnerships, estates, and trusts. It calculates each partner’s share of the income or loss, which is then transferred to Form 8825.

In conclusion, Form 8825 is a crucial tax form for accurately reporting rental income and expenses for partnerships and S corporations in real estate investing. While it may seem daunting at first, following the instructions and accurately entering the required information will ensure compliance with IRS regulations. If you have any doubts or questions, consulting a tax professional can provide valuable guidance.

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Exclusions From Electronic Filing

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:

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 .

When To File

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 .

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.

Who Must Sign

The return must be signed and dated by:

The president, vice president, treasurer, assistant treasurer, chief accounting officer; or

Any other corporate officer (such as tax officer) authorized to sign.

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.

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:

Sign the return in the space provided for the preparer's signature,

Include their Preparer Tax Identification Number (PTIN), and

Give a copy of the return to the taxpayer.

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:

Give the IRS any information that is missing from the return;

Call the IRS for information about the processing of the return or the status of any related refund or payment(s); and

Respond to certain IRS notices about math errors, offsets, and return preparation.

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.

Schedule N (Form 1120).

Schedule D (Form 1120).

Form 1125-A.

Form 965-B.

Form 8936, Schedule A.

Additional schedules in alphabetical order.

Additional forms in numerical order.

Supporting statements and attachments.

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 .

Tax Payments

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.

Electronic Deposit Requirement

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.

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.

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 .

Estimated Tax Payments

Generally, the following rules apply to the corporation's payments of estimated tax.

The corporation must make installment payments of estimated tax if it expects its total tax for the year (less applicable credits) to be $500 or more.

The installments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the tax year. If any date falls on a Saturday, Sunday, or legal holiday, the installment is due on the next regular business day.

The corporation must use electronic funds transfer to make installment payments of estimated tax.

If, after the corporation figures and deposits estimated tax, it finds that its tax liability for the year will be more or less than originally estimated, it may have to refigure its required installments. If earlier installments were underpaid, the corporation may owe a penalty. See Estimated tax penalty below.

If the corporation overpaid estimated tax, it may be able to get a quick refund by filing Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax. See the instructions for Schedule J, Part II, line 15 .

See section 6655 and Pub. 542, Corporations, for more information on how to figure estimated taxes.

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:

Its tax liability for the current year, or

Its prior year's tax.

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.

Interest and Penalties

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.

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.

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.

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:

Form 720, Quarterly Federal Excise Tax Return;

Form 941, Employer's QUARTERLY Federal Tax Return;

Form 943, Employer's Annual Federal Tax Return for Agricultural Employees;

Form 944, Employer's ANNUAL Federal Tax Return; or

Form 945, Annual Return of Withheld Federal Income Tax.

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 can be imposed for negligence, substantial understatement of tax, reportable transaction understatements, and fraud. See sections 6662, 6662A, and 6663.

Accounting Methods

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.

A corporation, or a partnership that has a corporation as a partner, cannot use the cash method of accounting unless it is a small business taxpayer (defined later). A tax shelter (defined in section 448(d)(3)) may never use the cash method. See sections 448(a)(1) through (a)(3). However, see Nonaccrual experience method for service providers in the instructions for line 1a.

Unless it is a small business taxpayer (defined below), a corporation must use an accrual method for sales and purchases of inventory items. See the instructions for Form 1125-A.

A corporation engaged in farming must use an accrual method. For exceptions, see section 447 and Pub. 225.

Special rules apply to long-term contracts. See section 460.

Dealers in securities must use the mark-to-market accounting method. Dealers in commodities and traders in securities and commodities can elect to use the mark-to-market accounting method. See section 475.

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.

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.

Accounting Period

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 .

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.

Other Forms and Statements That May Be Required

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.

Any listed transaction, which is a transaction that is the same as or substantially similar to one of the types of transactions that the IRS has determined to be a tax avoidance transaction and identified by notice, regulation, or other published guidance as a listed transaction.

Any transaction offered under conditions of confidentiality for which the corporation (or a related party) paid an advisor a fee of at least $250,000.

Certain transactions for which the corporation (or a related party) has contractual protection against disallowance of the tax benefits.

Certain transactions resulting in a loss of at least $10 million in any single year or $20 million in any combination of years.

Any transaction identified by the IRS by notice, regulation, or other published guidance as a “transaction of interest.”

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.

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.

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.

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.

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).

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).

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.

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).

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:

The corporation's name, address, and EIN;

A statement that the corporation is applying or applied section 3.01(1), (2), or (3) of Rev. Proc. 2021-48, and for what tax year, as applicable;

The amount of tax-exempt income from forgiveness of the PPP loan that the corporation is treating as received or accrued and for which tax year; and

Whether forgiveness of the PPP loan has been granted as of the date the return is filed.

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.

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.

Specific 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 has a tax year of less than 12 months that begins and ends in 2024, and

The 2024 Form 1120 is not available at the time the corporation is required to file its return.

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.

Item A. Identifying Information

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.

Items of gross income and deductions.

A computation of taxable income.

Balance sheets, as of the beginning and end of the tax year.

A reconciliation of income per books with income per return.

A reconciliation of retained earnings.

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.

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:

It elects to use a 52-53-week tax year that ends with reference to the calendar year or tax year elected under section 444;

It can establish a business purpose for a different tax year and obtains the approval of the IRS (see the Instructions for Form 1128 and Pub. 538); or

It elects under section 444 to have a tax year other than a calendar year. To make the election, use Form 8716, Election To Have a Tax Year Other Than a Required Tax Year.

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.

Item B. Employer Identification Number (EIN)

Enter the corporation's EIN. If the corporation does not have an EIN, it must apply for one. An EIN can be applied for:

Online—Go to IRS.gov/EIN . The EIN is issued immediately once the application information is validated.

By faxing or mailing Form SS-4, Application for Employer Identification Number.

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 this is the corporation's first return, check the “Initial return” box.

If this is the corporation's final return and it will no longer exist, check the “Final return” box.

If the corporation changed its name since it last filed a return, check the “Name change” box. Generally, a corporation must also have amended its articles of incorporation and filed the amendment with the state in which it was incorporated.

If the corporation has changed its address since it last filed a return (including a change to an “in care of” address), check the “Address change” box.

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.

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 1. 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.

To report income from long-term contracts, see section 460.

For rules that allow a limited deferral of advance payments beyond the current tax year, see section 451(c). Also, see Regulations sections 1.451-8(c), (d), and (e). For applicability dates, see Regulations section 1.451-8(h).

For information on adopting or changing to a permissible method for reporting advance payments for services and certain goods by an accrual method corporation, see the Instructions for Form 3115.

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.

Dispositions of property used or produced in the trade or business of farming.

Certain dispositions of timeshares and residential lots reported under the installment method for which the corporation elects to pay interest under section 453(I)(3).

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:

The services are in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting; or

The corporation meets the section 448(c) gross receipts test for all prior years.

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.

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.

Recoveries of bad debts deducted in prior years under the specific charge-off method.

Any amount includible in income from Form 6478, Biofuel Producer Credit.

Any amount includible in income from Form 8864, Biodiesel, Renewable Diesel, or Sustainable Aviation Fuels Credit.

Refunds of taxes deducted in prior years to the extent they reduced the amount of tax imposed. See section 111 and the related regulations. Do not offset current-year taxes against tax refunds.

Ordinary income from trade or business activities of a partnership (from Schedule K-1 (Form 1065)). Do not offset ordinary losses against ordinary income. Instead, include the losses on line 26. Show the partnership's name, address, and EIN on a separate statement attached to this return. If the amount entered is from more than one partnership, identify the amount from each partnership.

The transferred loss amount identified as “Section 91 Transferred Loss Amount,” which is required to be recognized when substantially all the assets of a foreign branch are transferred to a specified 10% owned foreign corporation (as defined in section 245A(b)) with respect to which the corporation was a U.S. shareholder immediately after the transfer. See section 91.

Any LIFO recapture amount under section 1363(d). The corporation may have to include a LIFO recapture amount in income if it:

Used the LIFO inventory method for its last tax year before the first tax year for which it elected to become an S corporation, or

Transferred LIFO inventory assets to an S corporation in a nonrecognition transaction in which those assets were transferred basis property.

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 .

The ratable portion of any net positive section 481(a) adjustment. See Section 481(a) adjustment , earlier.

Part or all of the proceeds received from certain corporate-owned life insurance contracts issued after August 17, 2006. Corporations that own one or more employer-owned life insurance contracts issued after this date must file Form 8925, Report of Employer-Owned Life Insurance Contracts. See Form 8925.

Income from cancellation of debt (COD) from the repurchase of a debt instrument for less than its adjusted issue price.

The corporation's share of the following income from Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund.

Ordinary earnings of a qualified electing fund.

Gain or loss from marking passive foreign investment company (PFIC) stock to market.

Gain or loss from sale or other disposition of section 1296 stock.

Excess distributions from a section 1291 fund allocated to the current year and pre-PFIC years, if any.

See Form 8621 and the Instructions for Form 8621 for details.

Any payroll tax credit taken by an employer on its 2023 employment tax returns (Forms 941, 943, and 944) for qualified paid sick and qualified paid family leave under FFCRA and ARP (both the nonrefundable and refundable portions). The corporation must include the full amount of the credit for qualified sick and family leave wages in gross income for the tax year that includes the last day of any calendar quarter in which the credit is allowed.

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.

Limitations on Deductions

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:

Direct costs of assets produced or acquired for resale, and

Certain indirect costs (including taxes) that are properly allocable to property produced or property acquired for resale.

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.

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.

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.

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:

Trade or business activities in which the corporation did not materially participate for the tax year; and

Rental activities, regardless of its participation.

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:

At any time during the last half of the tax year more than 50% in value of its outstanding stock is directly or indirectly owned by or for not more than five individuals, and

The corporation is not a personal service corporation.

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)).

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.

Work opportunity credit (Form 5884).

Credit for increasing research activities (Form 6765).

Orphan drug credit (Form 8820).

Disabled access credit (Form 8826).

Empowerment zone employment credit (Form 8844).

Credit for employer social security and Medicare taxes paid on certain employee tips (Form 8846).

Credit for small employer pension plan start-up costs (Form 8881).

Credit for employer-provided childcare facilities and services (Form 8882).

Low sulfur diesel fuel production credit (Form 8896).

Credit for employer differential wage payments (Form 8932).

Credit for small employer health insurance premiums (Form 8941).

Employer credit for paid family and medical leave (Form 8994).

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.

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.

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.

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:

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.

Federal income taxes.

Foreign or U.S. territory income taxes if a foreign tax credit is claimed.

Taxes not imposed on the corporation.

Taxes, including state or local sales taxes, that are paid or incurred in connection with an acquisition or disposition of property (these taxes must be treated as a part of the cost of the acquired property or, in the case of a disposition, as a reduction in the amount realized on the disposition).

Taxes assessed against local benefits that increase the value of the property assessed (such as for paving, etc.).

Taxes deducted elsewhere on the return, such as those reflected in cost of goods sold.

See section 164(d) for information on apportionment of taxes on real property between seller and purchaser.

Line 18. Interest

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.

Interest on indebtedness incurred or continued to purchase or carry obligations if the interest is wholly exempt from income tax. See section 265(b) for special rules and exceptions for financial institutions. Also, see section 265(b)(7) for a de minimis exception for financial institutions for certain tax-exempt bonds issued in 2009 and 2010.

For cash basis taxpayers, prepaid interest allocable to years following the current tax year. For example, a cash basis calendar year taxpayer who in 2023 prepaid interest allocable to any period after 2023 can deduct only the amount allocable to 2023.

Interest and carrying charges on straddles. Generally, these amounts must be capitalized. See section 263(g).

Interest on debt allocable to the production of designated property by a corporation for its own use or for sale. The corporation must capitalize this interest. Also, capitalize any interest on debt allocable to an asset used to produce the property. See section 263A(f) and Regulations sections 1.263A-8 through 1.263A-15 for definitions and more information.

Interest paid or incurred on any portion of an underpayment of tax that is attributable to an understatement arising from an undisclosed listed transaction or an undisclosed reportable avoidance transaction (other than a listed transaction) entered into in tax years beginning after October 22, 2004.

Special rules apply to:

Forgone interest on certain below-market-rate loans (see section 7872).

Original issue discount (OID) on certain high yield discount obligations. See section 163(e)(5) to determine the amount of the deduction for OID that is deferred and the amount that is disallowed on a high yield discount obligation. The rules under section 163(e)(5) do not apply to certain high yield discount obligations issued after August 31, 2008, and before January 1, 2011. See section 163(e)(5)(F).

Interest which is allocable to unborrowed policy cash values of life insurance, endowment, or annuity contracts issued after June 8, 1997. See section 264(f). Attach a statement showing the computation of the 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.

Line 19. Charitable Contributions

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).

Generally, the total amount claimed cannot be more than 10% of taxable income (line 30) computed without regard to the following.

Any deduction for contributions.

The special deductions on line 29b.

The limitation under section 249 on the deduction for bond premium.

Any net operating loss (NOL) carryback to the tax year under section 172.

Any capital loss carryback to the tax year under section 1212(a)(1).

Deduction for income attributable to domestic production activities of specified agricultural or horticultural cooperatives.

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).

Certain corporations can deduct contributions of qualified conservation property without regard to the general 10% limit. This applies to:

A qualified farmer or rancher (as defined in section 170(b)(1)(E)(v)) that does not have publicly traded stock; and

A Native Corporation (as defined in section 170(b)(2)(C)(iii)) that contributes property which was land conveyed under the Alaska Native Claims Settlement Act.

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).

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.

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:

Inventory and other property to certain organizations for use in the care of the ill, needy, or infants (see section 170(e)(3)), including qualified contributions of “apparently wholesome food”; and

Scientific equipment used for research to institutions of higher learning or to certain scientific research organizations (other than by personal holding companies and service organizations). See section 170(e)(4).

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.

Line 23. Pension, Profit-Sharing, etc., Plans

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.

Annual Return/Report of Employee Benefit Plan.

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 .

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.

Line 26. Other Deductions

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.

Amortization. See Part VI of Form 4562.

Certain costs of a qualified film, television, or live theatrical production commencing before January 1, 2026 (after December 31, 2015, and before January 1, 2026, for a live theatrical production). This deduction does not apply to any portion of the aggregate cost of the production above $15 million. There is a higher allowance for production in certain areas. See section 181 and the related regulations.

Certain business start-up and organizational costs (discussed earlier, under Limitations on Deductions ).

Reforestation costs. The corporation can elect to deduct up to $10,000 of qualifying reforestation expenses for each qualified timber property. The corporation can elect to amortize over 84 months any amount not deducted. See the Instructions for Form T (Timber).

Insurance premiums.

Legal and professional fees.

Supplies used and consumed in the business.

Travel, meals, and entertainment expenses. Special rules apply (discussed later).

Ordinary losses from trade or business activities of a partnership (from Schedule K-1 (Form 1065)). Do not offset ordinary income against ordinary losses. Instead, include the income on line 10. Show the partnership's name, address, and EIN on a separate statement attached to this return. If the amount is from more than one partnership, identify the amount from each partnership.

Any extraterritorial income exclusion (from Form 8873).

Any net negative section 481(a) adjustment, or in the case of an eligible terminated S corporation, the ratable portion of any negative section 481(a) adjustment. See Section 481(a) adjustment , earlier.

Dividends paid in cash on stock held by an employee stock ownership plan.

Paid in cash directly to the plan participants or beneficiaries;

Paid to the plan, which distributes them in cash to the plan participants or their beneficiaries no later than 90 days after the end of the plan year in which the dividends are paid;

At the election of such participants or their beneficiaries (a) payable as provided under (1) or (2) above, or (b) paid to the plan and reinvested in qualifying employer securities; or

Used to make payments on a loan described in section 404(a)(9).

Do not deduct expenses such as the following.

Amounts paid or incurred to, or at the direction of, a government or governmental entity for the violation, or investigation or inquiry into the potential violation, of a law. However, see Fines or similar penalties , later.

Any amount that is allocable to a class of exempt income. See section 265(b) for exceptions.

Lobbying expenses. However, see exceptions discussed later.

Amounts paid or incurred for any settlement, payout, or attorney fees related to sexual harassment or sexual abuse, if such payments are subject to a nondisclosure agreement. See section 162(q).

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:

That individual is an employee of the corporation, and

That individual’s travel is for a bona fide business purpose and would otherwise be deductible by that individual.

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)):

Meals must not be lavish or extravagant, and

An employee of the corporation must be present at the meal.

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:

Transportation in a commuter highway vehicle between the employee's residence and place of employment,

Any transit pass, and

Qualified parking.

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.

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:

Amounts that constitute restitution or remediation of property,

Amounts paid to come into compliance with the law,

Amounts paid or incurred as the result of orders or agreements in which no government or governmental entity is a party, and

Amounts paid or incurred for taxes due.

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).

Generally, lobbying expenses are not deductible. These expenses include:

Amounts paid or incurred in connection with influencing federal, state, or local legislation; or

Amounts paid or incurred in connection with any communication with certain federal executive branch officials in an attempt to influence the official actions or positions of the officials. See Regulations section 1.162-29 for the definition of “influencing legislation.”

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.

Line 28. Taxable Income Before NOL Deduction and Special Deductions

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:

Holding real property placed in service by the taxpayer before 1987;

Equipment leasing under sections 465(c)(4), (5), and (6); or

Any qualifying business of a qualified corporation under section 465(c)(7).

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.

If an ownership change (described in section 382(g)) occurs, the amount of the taxable income of a loss corporation that may be offset by the pre-change NOL carryovers may be limited. See section 382 and the related regulations. A loss corporation must include the information statement as provided in Regulations section 1.382-11(a) with its income tax return for each tax year that it is a loss corporation in which an ownership shift, equity structure shift, or other transaction described in Temporary Regulations section 1.382-2T(a)(2)(i) occurs. If the corporation makes the closing-of-the-books election, see Regulations section 1.382-6(b).

The limitations under section 382 do not apply to certain ownership changes after February 17, 2009, made pursuant to a restructuring plan under the Emergency Economic Stabilization Act of 2008. See section 382(n).

For guidance in applying section 382 to loss corporations whose instruments were acquired by Treasury under certain programs under the Emergency Economic Stabilization Act of 2008, see Notice 2010-2, 2010-2 I.R.B. 251.

If a corporation acquires control of another corporation (or acquires its assets in a reorganization), the amount of pre-acquisition losses that may offset recognized built-in gain may be limited (see section 384).

If a corporation elects the alternative tax on qualifying shipping activities under section 1354, no deduction is allowed for an NOL attributable to the qualifying shipping activities to the extent that the loss is carried forward from a tax year preceding the first tax year for which the alternative tax election was made. See section 1358(b)(2).

For more details on the NOL deduction, see section 172 and the Instructions for Form 1139.

See the instructions for Schedule C.

Line 30. Taxable Income

The corporation's taxable income cannot be less than the largest of the following amounts.

The inversion gain of the corporation for the tax year, if the corporation is an expatriated entity or a partner in an expatriated entity. See section 7874(a).

The sum of the corporation's excess inclusions from its residual interest in a REMIC from Schedules Q (Form 1066), line 2c, and the corporation's taxable income determined solely with respect to its ownership and high-yield interests in FASITs. See sections 860E(a) and 860J (repealed).

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:

The aggregate amount of NOLs arising in tax years beginning after December 31, 2017, carried to such tax year; or

80% of the excess, if any, of taxable income determined without any NOL deduction, section 199A deduction, or section 250 deduction, over any NOL carryover to the tax year from tax years beginning before January 1, 2018.

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).

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:

The annualized income or adjusted method is used, or

The corporation is a large corporation (as defined in the Instructions for Form 2220) computing its first required installment based on the prior year's tax.

If Form 2220 is attached, check the box on line 34, and enter any penalty on this line.

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:

It cannot pay the full amount shown on line 35,

The total amount owed is $25,000 or less, and

The corporation can pay the liability in full in 24 months.

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.

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.

Schedule C. Dividends, Inclusions, and Special Deductions

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.

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:

Received from less-than-20%-owned domestic corporations subject to income tax, and

Qualified for the 50% deduction under section 243(a)(1).

Also, include on line 1 the following.

Taxable distributions from an IC-DISC or former DISC that are designated as eligible for the 50% deduction and certain dividends of Federal Home Loan Banks. See section 246(a)(2).

Dividends (except those received on certain debt-financed stock acquired after July 18, 1984) from a regulated investment company (RIC). The amount of dividends eligible for the dividends-received deduction under section 243 is limited by section 854(b). The corporation should receive a notice from the RIC specifying the amount of dividends that qualify for the deduction.

Report so-called dividends or earnings received from mutual savings banks, etc., as interest. Do not treat them as dividends.

Enter on line 2:

Dividends (except those received on certain debt-financed stock acquired after July 18, 1984) that are received from 20%-or-more-owned domestic corporations subject to income tax and that are subject to the 65% deduction under section 243(c), and

Taxable distributions from an IC-DISC or former DISC that are considered eligible for the 65% deduction.

Enter the following.

Dividends received on certain debt-financed stock acquired after July 18, 1984, from domestic and foreign corporations subject to income tax that would otherwise be subject to the dividends-received deduction under section 243(a)(1), 243(c), or 245(a). Generally, debt-financed stock is stock that the corporation acquired by incurring a debt (for example, it borrowed money to buy the stock).

Dividends received from a RIC on debt-financed stock. The amount of dividends eligible for the dividends-received deduction is limited by section 854(b). The corporation should receive a notice from the RIC specifying the amount of dividends that qualify for the deduction.

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:

Are received from less-than-20%-owned foreign corporations, and

Qualify for the 50% deduction under section 245(a). To qualify for the 50% deduction, the corporation must own at least 10% of the stock of the foreign corporation by vote and value.

Also, include dividends received from a less-than-20%-owned FSC that:

Are attributable to income treated as effectively connected with the conduct of a trade or business within the United States (excluding foreign trade income), and

Qualify for the 50% deduction under section 245(c)(1)(B).

Are received from 20%-or-more-owned foreign corporations, and

Qualify for the 65% deduction under sections 243 and 245(a).

Also, include dividends received from a 20%-or-more-owned FSC that:

Qualify for the 65% deduction under section 245(c)(1)(B).

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:

All of its outstanding stock is directly or indirectly owned by the domestic corporation receiving the dividends, and

All of its gross income from all sources is effectively connected with the conduct of a trade or business within the United States.

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:

Are received from specified 10%-owned foreign corporations (as defined in section 245A(b)), including, for example, gain from the sale of stock of a foreign corporation that is treated as a dividend under sections 1248(a) and (j); and

Qualify for the section 245A deduction.

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.

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.

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:

Is paid out of the corporation's accumulated IC-DISC income or previously taxed income, or

Is a deemed distribution under section 995(b)(1).

Include the following.

Dividends (other than capital gain distributions reported on Schedule D (Form 1120), Capital Gains and Losses, and exempt-interest dividends) that are received from RICs and that are not subject to the 50% deduction.

Dividends from tax-exempt organizations.

Dividends (other than capital gain distributions) received from a REIT that, for the tax year of the trust in which the dividends are paid, qualifies under sections 856 through 860.

Dividends not eligible for a dividends-received deduction, which include the following.

Dividends received on any share of stock held for less than 46 days during the 91-day period beginning 45 days before the ex-dividend date. When counting the number of days the corporation held the stock, you cannot count certain days during which the corporation's risk of loss was diminished. See section 246(c)(4) and Regulations section 1.246-5 for more details.

Dividends received on any share of preferred stock which are attributable to periods totaling more than 366 days if such stock was held for less than 91 days during the 181-day period that began 90 days before the ex-dividend date. When counting the number of days the corporation held the stock, you cannot count certain days during which the corporation's risk of loss was diminished. See section 246(c)(4) and Regulations section 1.246-5 for more details. Preferred dividends attributable to periods totaling less than 367 days are subject to the 46-day holding period rule discussed above.

Dividends on any share of stock to the extent the corporation is under an obligation (including a short sale) to make related payments with respect to positions in substantially similar or related property.

Any other taxable dividend income not properly reported elsewhere on Schedule C.

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.

Schedule J. Tax Computation and Payment

Part i—tax computation.

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.

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.

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 .

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.

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.

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.

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.

Enter any allowable credit from Form 8827, Credit for Prior Year Minimum Tax—Corporations. Complete and attach Form 8827.

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.

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:

At least 60% of its adjusted ordinary gross income for the tax year is personal holding company income, and

At any time during the last half of the tax year more than 50% in value of its outstanding stock is directly or indirectly owned by five or fewer individuals.

See Schedule PH (Form 1120) for definitions and details on how to figure the tax.

Include any of the following taxes and interest.

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.

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.

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.

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.

Enter any alternative tax on qualifying shipping activities from Form 8902.

Include any interest on deferred tax attributable to certain nondealer installment obligations (section 453A(c)).

Include any interest on deferred tax attributable to dealer installment obligations (section 453(l)).

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.

Recapture of Indian employment credit. Generally, if an employer terminates the employment of a qualified employee less than 1 year after the date of initial employment, any Indian employment credit allowed for a prior tax year because of wages paid or incurred to that employee must be recaptured. For details, see Form 8845 and section 45A.

Recapture of new markets credit (see Form 8874 and Form 8874-B, Notice of Recapture Event for New Markets Credit).

Recapture of employer-provided childcare facilities and services credit (see Form 8882).

Tax and interest on a nonqualified withdrawal from a capital construction fund (section 7518(g)).

Interest due on deferred gain (section 1260(b)).

Interest due under section 1291(c)(3). See Form 8621 and the Instructions for Form 8621.

Recapture of section 45Q carbon oxide sequestration credit (see Form 8933, Part III, line 22).

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.

Deferred tax on the corporation's share of undistributed earnings of a qualified electing fund. See the Instructions for Form 8621.

Deferred LIFO recapture tax (section 1363(d)). This tax is the part of the LIFO recapture tax that will be deferred and paid with Form 1120-S in the future. To figure the deferred tax, first figure the total LIFO recapture tax. Follow the steps below to figure the total LIFO recapture tax and the deferred amount. Also, see Line 10. Other Income , earlier.

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.

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.

Part II—Payments and Refundable Credits

Enter any estimated tax payments the corporation made for the current tax year.

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 20. Refundable Credits

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.

Enter the total income tax credit claimed on Form 4136, Credit for Federal Tax Paid on Fuels. Attach Form 4136.

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.

Credit for tax withheld under Chapter 3 or 4 of the Internal Revenue Code that is shown on Form 1042-S, Form 8805, or Form 8288-A. Attach the applicable form.

Credit for tax on ozone-depleting chemicals. See section 4682(g)(2).

Credit under section 960(c) (section 960(b) for pre-2018 tax years of foreign corporations). If an increase in the limitation under section 960(c) (section 960(b) (pre-2018)) exceeds the total tax on Schedule J, Part I, line 11, for the tax year, the amount of the excess is deemed an overpayment of tax for the tax year. See section 960(c) (section 960(b) (pre-2018)) for more information regarding the circumstances under which such an excess arises.

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.

Schedule K. Other Information

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:

The corporation is a subsidiary in an affiliated group (defined below), but is not filing a consolidated return for the tax year with that group; or

The corporation is a subsidiary in a parent–subsidiary controlled group. For a definition of a parent–subsidiary controlled group, see the Instructions for Schedule O (Form 1120).

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.

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.

The common parent must own directly stock that represents at least 80% of the total voting power and at least 80% of the total value of the stock of at least one of the other includible corporations.

Stock that represents at least 80% of the total voting power and at least 80% of the total value of the stock of each of the other corporations (except for the common parent) must be owned directly by one or more of the other includible corporations.

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.

Question 5. Constructive Ownership of Other Entities

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.

Question 5b

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.

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.

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.

The term “foreign person” means:

An individual who is not a citizen or resident of the United States;

An individual who is a citizen or resident of a U.S. territory who is not otherwise a citizen or resident of the United States;

Any partnership, association, company, or corporation that is not created or organized in the United States;

Any foreign estate or trust within the meaning of section 7701(a)(31); or

A foreign government (or one of its agencies or instrumentalities) to the extent that it is engaged in the conduct of a commercial activity, as described in section 892.

However, the term "foreign person" does not include any foreign person who consents to the filing of a joint U.S. income tax return.

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.

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:

For 2023, the corporation's total assets equal or exceed $10 million;

The corporation or a related party issued audited financial statements reporting all or a portion of the corporation's operations for all or a portion of the corporation's tax year; and

The corporation has one or more tax positions that must be reported on Schedule UTP.

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.

Question 21

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.

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).

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.

Question 24

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.

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:

An electing real property trade or business,

An electing farming business, or

Certain utility businesses.

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.

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:

On or after December 22, 2017, a foreign corporation directly or indirectly acquired substantially all of the properties held directly or indirectly by the corporation; and

The ownership percentage with respect to the acquisition was greater than 50% (by vote or by value).

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.

Pursuant to a plan or series of related transactions, a foreign corporation must acquire directly or indirectly substantially all of the properties held directly or indirectly by a domestic corporation.

After the acquisition, the ownership percentage (by vote or value) must be at least 60%.

After the acquisition, the expanded affiliated group that includes the foreign acquiring corporation must not have substantial business activities in the foreign country in which the foreign acquiring corporation is created or organized.

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:

Received digital assets as payment for property or services provided;

Received digital assets as a result of a reward or award;

Received new digital assets as a result of mining, staking, and similar activities;

Received digital assets as a result of a hard fork;

Disposed of digital assets in exchange for property or services;

Disposed of a digital asset in exchange or trade for another digital asset;

Sold a digital asset; or

Otherwise disposed of any other financial interest in a digital asset.

The following actions or transactions in 2023, alone, generally do not require the corporation to check “Yes:"

Holding a digital asset in a wallet or account;

Transferring a digital asset from one wallet or account the corporation owns or controls to another wallet or account that it owns or controls; or

Purchasing digital assets using U.S. or other real currency, including through the use of electronic platforms such as PayPal and Venmo.

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.

If the adjusted basis of a partner's partnership interest differs from the partner's share of the partnership's adjusted basis of partnership property by $10 million or more at the end of the tax year and at any other relevant date (for example, at the time of a transfer of a partnership interest or the liquidation of a partnership) provide the partnership's name and TIN, partner's name and TIN, and the amount and allocation of such difference for each partner.

If a partnership makes a basis adjustment of $10 million or more at the end of the tax year and at any other relevant date, pursuant to section 743 (including section 743(d)) upon the transfer of a partnership interest in such partnership to a partner that is, directly or indirectly, a controlled group member, provide the partnership's name and TIN, name and TIN of the transferor partner and transferee partner, and the amount and allocation of the basis adjustment.

If a partnership makes a basis adjustment that is $10 million or more at the end of the tax year and at any other relevant date made pursuant to section 734 (including section 734(d)) upon the distribution of property to a controlled group member (directly or indirectly), provide the name and TIN of each partnership, the name and TIN of the controlled group member, and a schedule detailing the amount and allocation of the adjustment.

If a partnership distributed property, directly or indirectly, to a controlled group member, and the controlled group member's basis in the property under section 732(a) or (b) differs from the partnership's basis in the property immediately before the distribution by $10 million or more at the end of the tax year and at any other relevant date, provide the partnership's name and TIN, the name and TIN of the controlled group member, and the amount and allocation of the basis adjustment.

Schedule L. Balance Sheets per Books

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:

State and local government obligations, the interest on which is excludable from gross income under section 103(a), and

Stock in a mutual fund or other RIC that distributed exempt-interest dividends during the tax year of the corporation.

Some examples of adjustments to report on this line include:

Unrealized gains and losses on securities held “available for sale,”

Foreign currency translation adjustments,

The excess of additional pension liability over unrecognized prior service cost,

Guarantees of employee stock (ESOP) debt, and

Compensation related to employee stock award plans.

If the total adjustment to be entered on line 26 is a negative amount, enter the amount in parentheses.

Schedule M-1. Reconciliation of Income (Loss) per Books With Income per Return

In completing Schedule M-1, the following apply.

Corporations with total assets non-consolidated (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.

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. See the Instructions for Schedule M-3 (Form 1120) for more information.

Include any of the following applicable expenses.

Entertainment expenses not deductible under section 274(a).

Meal expenses not deductible under section 274(n).

Qualified transportation fringes not deductible under section 274(a)(4).

Expenses for the use of an entertainment facility.

The part of business gifts over $25.

Expenses of an individual over $2,000, allocable to conventions on cruise ships.

Employee achievement awards of nontangible or tangible property over $400 ($1,600 if part of a qualified plan).

The cost of skyboxes.

Nondeductible club dues.

The part of luxury water travel expenses not deductible under section 274(m).

Expenses for travel as a form of education.

Other nondeductible travel and entertainment 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:

A statement that the corporation is making adjustments in accordance with section 3.03 of Rev. Proc. 2021-48; and

The tax year for which tax-exempt income was originally reported, the amount of tax-exempt income that was originally reported for such tax year, and the amount of tax-exempt income being adjusted on Schedule M-2.

Instructions for Form 1120 - Notices

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

Table 2 – Taxpayer Burden for Entities Taxed as Taxable Corporations

Table 3 – Taxpayer Burden for Entities Taxed as Pass-Through Corporations

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.

Instructions for Form 1120 - Additional Material

Principal business activity codes.

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.

Agriculture, Forestry, Fishing, and Hunting

Construction, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, finance and insurance, real estate and rental and leasing, professional, scientific, and technical services, administrative and support and waste management and remediation services, health care and social assistance, arts, entertainment, and recreation, accommodation and food services, other services.

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IMAGES

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COMMENTS

Instructions for Form 1120-S (2023)
Rental activity expenses. Report these expenses on Form 8825 or line 3b of Schedule K. Deductions allocable to portfolio income. Report these deductions on line 12d of Schedule K and in box 12 of Schedule K-1 using code I or L. Nondeductible expenses (for example, expenses connected with the production of tax-exempt income).
S-Corporation Travel Expenses
as an employee of the Corporation, tax law change effective 2018-2025 make employee business expenses are no longer deductible. Travel, meals, and entertainment. Subject to limitations and restrictions discussed below, a corporation can deduct ordinary and necessary travel and meal expenses paid or incurred in its trade or business.
How to Deduct Business Travel Expenses
You can't deduct travel expenses for an indefinite work assignment (including any work assignment of more than a year). ... For corporations, show these expenses in the "Deductions" section of Form 1120. The information contained in this article is not tax or legal advice and is not a substitute for such advice. State and federal laws change ...
Publication 463 (2023), Travel, Gift, and Car Expenses
You figure the deductible part of your air travel expenses by subtracting 7 / 18 of the round-trip airfare and other expenses you would have had in traveling directly between New York and Dublin ($1,250 × 7 / 18 = $486) from your total expenses in traveling from New York to Paris to Dublin and back to New York ($750 + $400 + $700 = $1,850).
PDF 2023 Form 1120-S
1120-S Department of the Treasury Internal Revenue Service U.S. Income Tax Return for an S Corporation ... The corporation owns a pass-through entity with current, or prior year carryover, excess business interest expense. b ; The corporation's aggregate average annual gross receipts (determined under section 448(c)) for the 3 tax years ...
Travel and Entertainment Expenses: Learn How to Deduct
If you are a sole proprietor or own a single-member LLC, you need to deduct your travel and entertainment expenses on Schedule C (Form 1040), Profit or Loss from Business. Partners use Form 1065, U.S. Return of Partnership Income.. C corporation shareholders use Form 1120, U.S. Corporation Income Tax Return.S corporation shareholders use Form 1120S, U.S. Income Tax Return for an S Corporation.
IRS Form 1120S: A Comprehensive Guide for S Corporations
Additional expenses not listed on the form can be included under Line 20 - Other deductions. Claiming Tax Credits. Tax credits can reduce the S corporation's overall tax liability. Form 1120S filers should be aware of the credits most commonly claimed by S corporations, including: General Business Credit (attach Form 3800)
How to Do S Corp Tax Return
If you are filing as a partnership, file Form 1065. If you are filing as a C Corporation, file form 1120. The 1120S is only for S Corps. This tax form is due to be postmarked by March 15th, but you can file an extension on Form 7004. It's literally one page, 8 lines, and will take about 30 seconds.
How do I claim reimbursed expenses on my S Corp 1120S? Is it ...
I'm confused how to deduct reimbursed expenses on my 1120S. I am a pilot and charge all my travel expenses back to my clients. When they cut a check its for my services and my reimbursed expenses. Do I include services+reimbursed expenses under my Gross sales and receipts and deduct the expenses ...
How To Complete Form 1120S & Schedule K-1 (+Free Checklist)
Examples of other deductions include travel, telephone service, or postage. Step 4: Fill Out Form 1120S Tax & Payments Section. The purpose of this section is to calculate the federal taxes that apply if the corporation was previously a C corporation (C-corp) or engaged in a tax-free reorganization with a C-corp.
Form 1120-S
Form 1120-S - Standard Mileage Method for Vehicle Expenses. 1. Employee business expenses can be claimed only by Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses. Generally, the S-corporation reimburses the employee for vehicle expenses ...
S Corp Expenses: Everything You Need to Know
Form 1120S, or an Income Tax Return for an S Corp, gives the IRS details on the S corporation's financial activities to compare with the individual shareholders' returns. Each shareholder reports the S corps income and expenses based on his or her percentage of ownership on individual returns via form Schedule K-1.
10411: 1120S
Line 3b, "Travel and entertainment" - Meals and entertainment limitations are carried from amounts entered on the DED screen. ... The program automatically reduces the expense amount for Form 1120S, page 1, lines 8, 12, or 19, depending on the credit type. The decreased expense is a tax item only and does not generally decrease the book ...
Topic no. 511, Business travel expenses
Topic no. 511, Business travel expenses. Travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. You can't deduct expenses that are lavish or extravagant, or that are for personal purposes. You're traveling away from home if your duties require you to be away from the general ...
I have an S-Corp. How should I deduct business mileage?
You do not need to write yourself a check. You can deduct the mileage or percentage of actual expenses on your own return as a employee business expense the same as any other employee. Alternatively, the S-Corp could reimburse you and deduct the reimbursement. If done at the Government mileage rate for only business miles, it wouldn't be shown ...
Tax Deductions for Business Travelers
You can deduct business travel expenses when you are away from both your home and the location of your main place of business (tax home). Deductible expenses include transportation, baggage fees, car rentals, taxis and shuttles, lodging, tips, and fees. You can also deduct 50% of either the actual cost of meals or the standard meal allowance ...
Are Business Travel Expenses Tax Deductible? [2024]
For self-employed individuals, use Form 1040, Schedule C. Corporations should use Form 1120 to report travel expenses. Can I Deduct Travel Expenses if I Work from Home? Yes, if the travel is business-related and away from your home, which is your tax home in this case, the expenses are deductible.
New Rules in 2023 Take a Bite out of Business Meal Deductions
C corporations should report them on Form 1120, and S corporations on Form 1120S. Don't Forget the Per Diem. Alternatively, taxpayers can choose to use a per diem, an annually updated tax deduction for meals and incidental expenses incurred while traveling away on business. The amount allowed varies depending on the location of travel.
How To Fill Out Form 1120 for Tax Year 2023 (With Example)
P&L statement: This financial report—also called an income statement—is a summary of the corporation's income and expenses for the year. Balance sheet report: A balance sheet is a financial statement that summarizes all assets, liabilities, and owner's equity as of the end of the tax year. Fixed asset purchases report: Print the general ledger (GL) for each of your fixed asset accounts ...
Form 8825: Tracking Your Rental Income and Expenses
- Form 8825 should be attached to Form 1065 for partnerships or Form 1120S for S corporations. ... These expenses include advertising, auto and travel expenses, cleaning and maintenance costs, commissions, insurance, legal and professional fees, interest, repairs, taxes, utilities, wages and salaries, depreciation, and other miscellaneous ...
Instructions for Form 1120 (2023)
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) ... See Pub. 463, Travel, Gift, and Car Expenses, for instructions on figuring the inclusion amount.

How to Deduct Business Travel Expenses

Documenting Travel Expenses

How "Business Travel" Is Determined

Travel for Work Assignments

Deducting Lodging Expenses

What You Can Deduct for Business Travel

Deductions for Special Types of Travel

Where to Show These Expenses

Travel and Entertainment Expenses: Learn How to Deduct

Travel and entertainment

Entertainment

How to deduct expenses

Stay up to date on the latest accounting tips and training

IRS Form 1120S: A Comprehensive Guide for S Corporations

Key Takeaways

Understanding IRS Form 1120S

Eligibility and Filing Requirements

Filing Requirements for Form 1120S

Completing the Form 1120S

Deducting Expenses

Claiming Tax Credits

Attachments and Schedules

Balance Sheet Information

Other Schedules and Forms

Tax Calculations and Payments

Estimated Tax Payments

Reporting and Payment Deadlines

Special Tax Considerations

Tax Treatment of Loans and Distributions

Special Deductions for Qualified Business Income

State and Local Tax Compliance

Local Tax Considerations

Filing Support and Resources

Professional Tax Help

Special Filing Addresses & Situations

Where to File

Foreign and Military Filing

Requests for Extension to File

Frequently Asked Questions

How does IRS Form 1120 differ from Form 1120S?

Is electronic filing an option for IRS Form 1120S?

Which entities are required to file a 1120S tax form?

What are the recent changes to IRS Form 1120S for the current tax year?

Where can I find instructions for completing IRS Form 1120S?

S Corp Expenses: Everything You Need to Know

Reporting S Corporation Profits and Losses

S Corporation Deductions

S Corporation Expenses and Reimbursements

Advantages and Disadvantages

Tax Deductions for Business Travelers

Ordinary vs. necessary expenses

Key Takeaways

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How To Fill Out Form 1120 for Tax Year 2023 (With Example)

How To Assemble Form 1120

Example Financial Statements

Step 1: Collect the Required Information