C Corp Tax Return: Everything You Need to Know
Corporate income taxes are involved and complicated; this is due to the forms and schedules that must be accurate and complete when filed3 min read
The C corp tax return uses Form 1120 to file a federal tax return in order to pay applicable taxes due to the Internal Revenue Service (IRS).
C Corporations and Income Tax
Corporate income taxes are involved and complicated; this is due to the forms and schedules that must be accurate and complete when filed.
As noted, Form 1120 is used to file a corporation's tax return. It is also used by other entities, such as a limited liability company (LLC) that have elected to be taxed as a corporation. Form 1120 is not used by a Subchapter S corporation to file income tax; Form 1120S is used instead.
General Information for Form 1120
The following is an outline of some of the sections and details needed to fill out the form. It is recommended that you look at Form 1120 to make sure you have all of the pertinent information to answer the required questions.
When filling, you will need the corporation name and address, the date of incorporation, the total assets of the corporation, and your Employer Identification Number (EIN). Any additional information about finances and any other information should be available through your financial officers and board secretary.
Your financial officers will have access to information about the corporation's total assets. For this part of the form, you will need a breakdown of the income by category. These include capital gains, cost of goods sold, dividends, interest, rents, and royalties.
The deductions will include the C corporation's tax deductible expenses. You will need documentation for the following areas in case the IRS requests an audit:
- Officer compensation
- Other wages and salaries
- Maintenance and repairs
- Bad debts
- Taxes and licenses
- Interest expense
- Contributions to charities
- Depreciation, which uses Form 4562
- Plans such as pension and profit-sharing
- Benefit programs for employees
- Domestic production activities use Form 8903
- Other deductions as outlined in the schedule
Tax, Refundable Credits, and Payments
This area covers refunds and taxes owed. There may be additional forms to fill out that are required, such as a balance sheet, and other informational schedules.
Cost of Goods Sold
This is a lengthy section requiring quite a bit of information. For service businesses, this schedule is not required. For those that do need to complete the form, the following will give you an idea of what is needed:
- The cost of goods sold
- Compensation of officers
- Dividends and any special deductions
- Credits and other taxes
- The balance sheet for the beginning and end of year figures
- Analysis of unappropriated retained earnings
- Reconciliation of income/loss, accounting method
- NAICS classification
- Shareholder information
- Ownership of stock
The due date for filing Form 1120 is usually required after the end of the tax year for the corporation on the 15th day of the third month after this occurs but the IRS has made changes. Going forward, the new due date is April 15. For years beginning after 2025, tax returns will be due by October 15. If an extension is needed, file Form 7004, which extends the due date to September 15 to keep taxes in alignment with the government's fiscal year. For C corporations that have tax years ending on June 30, September 15 will continue to be the due date until 2015.
Penalties for Filing Taxes Late
Like most everything else, if you're late, the IRS will charge penalties for late filing and for paying the tax late.
- If the tax return is filed late, there is a 5 percent penalty on the unpaid tax charged for each whole month or part of a month it is late. The current maximum is 25 percent of the amount that is unpaid.
- Returns that are over 60 days late are charged the smaller of the tax that is due or a flat $135. The standard penalty charge if the return was not filed on time is not imposed if it was due to a reasonable cause. In this case, the penalty is one-half of one percent of the unpaid tax for a partial or full month that is not paid with a maximum set at 25 percent.
- There may be other penalties involved such as fraud, negligence, and understatements of reportable transactions and tax.
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