IRS Form 1120 is the U.S. Corporation Tax Return. It's used to report income, gains, losses, deductions, credits, and figure the income tax liability of the corporations. Basically it's so the IRS can get their piece of the pie; and in the case of C Corps, the tax bill approaches 39% of the pie. That's a lot of pie.
Form 1120 must be filled out even if the corporation has no taxable income, and even if the corporation is in bankruptcy. Remember, one of the conditions of bankruptcy is that you have to stay in compliance with the U.S. tax code in order to stay in bankruptcy – this includes filing your returns.
Form 1120 usually must be filed by the 15th day of the 3rd month after the end of the corporations tax year (and the corporation can decide what dates their tax year is). IRS Form 7004 can be filed to request a 6 month extension. But…
For the 2017 filing season (for 2016 returns), that will be different. The IRS is making some changes to due dates including Partnership tax returns and FBAR's. The new due date for Form 1120 will be April 15th, and the extension will only change your due date to September 15th to keep in line with the government's fiscal year.
C Corps with tax years ending on June 30 will continue to have a due date of September 15 until 2025. For years beginning after 2025, the due date for these returns will be October 15.
There are, of course, penalties involved for late filing and late payment of tax. Corporations estimated tax payments (Form 1120-W) are due by the 15th day of the 4th, 6th, 9th, and 12th months of the year.
If the return is filed late, the penalty is:
- 5% of the unpaid tax for each month or part of a moth the return is late, up to a maximum of 25% of the unpaid tax. The minimum penalty for a return that is over 60 days late is the smaller of the tax due or $135. The penalty would not be imposed if the failure to file on time was due to reasonable cause.
If the tax is paid late, the penalty is:
- 1/2 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.
In the instructions for IRS Form 1120, they mention "other" penalties. They say they can be imposed for "negligence, substantial understatement of tax, reportable transaction understatements, and fraud". We went digging to find out exactly what these penalties are, but could find no record of standards. That makes it seem as if the IRS can simply make up penalties they think are appropriate.
And that? Is the most dangerous thing I've heard in a long time.
If you have a C Corp, know that you will be under the scrutinous eye of the IRS. Check back for updates on Corporations as we'll be tackling audits, S Corps, tax brackets, reportable transactions, and more.
And if you need assistance with your corporation, tax planning, or a tax problem, contact us. We can help. Call us at 888-727-8796 or email firstname.lastname@example.org.