Articles · Basics · Corporate Tax and Form 1120
Form 1120 Basics: How C Corporations Are Taxed
Form 1120 is the federal income tax return for C corporations. Unlike pass-through returns, it calculates tax that the corporation pays itself.
How the return works
The return starts with gross receipts and cost of goods sold, adds other income, subtracts deductions, and reaches taxable income. Section 11 applies a flat 21% rate.
A calendar-year return is generally due April 15. Form 7004 gives an automatic six-month extension to file, but not to pay.
Key schedules
Schedule L is the balance sheet. Schedule M-1 reconciles book income to taxable income, while larger corporations with total assets of $10 million or more use Schedule M-3. Schedule M-2 analyzes retained earnings. Small corporations may be excused from Schedules L, M-1, and M-2.
Common items to watch
Preparers should look for accrued expenses, depreciation differences, meals limits, charitable contribution limits, and the dividends received deduction. Corporations also make quarterly estimated payments under Section 6655.
Dividends paid to shareholders are not deductible, which creates the second layer of tax.
Key takeaways
- C corporations pay a flat 21% federal rate.
- Schedules L, M-1, and M-2 should tie to the books.
- An extension to file is not an extension to pay.
For general education only, not tax advice. Tax law changes often, so confirm current rules and amounts with primary sources.