Form 1120 - U.S. Corporation Income Tax Return

            Corporations are taxed on their income directly using Form 1120, U.S. Corporation Income Tax Return.  This form is filed on a calendar year or fiscal year basis, depending on the tax year of the corporation. 

            The starting point for the return is gross receipts or sales.  From this amount, cost of goods sold, if any, is subtracted to arrive at gross profit.  Adjustments are then added to gross profit, with the result being total income.  The items that are added as adjustments are dividends, interest, gross rents, gross royalties, capital gain net income, net gain or loss from Form 4797, and other income.  If there is an amount listed for capital gain net income, Schedule D must be attached to Form 1120 when filing.  If the corporation has any net gain or loss from Form 4797, then Form 4797 must be attached to the return.

            The next section of the form is for deductions.  The total amount of deductions is subtracted from total income, to arrive at the amount of taxable income before net operating loss deduction and other special deductions.  The deductions on Form 1120 are compensation of officers, salaries and wages, bad debts, rents, interest, repairs and maintenance, taxes and licenses, charitable contributions,  depreciation from Form 4562 not claimed on Schedule A or elsewhere on return, depletion, pension and profit-sharing plans, advertising, employee benefit programs, domestic production activities deduction, and other deductions.  If the corporation is deducting depreciation from Form 4562, the form must be attached and filed with the return.  Form 8903 must be attached if the corporation has a domestic production activities deduction.

            Next, any net operating loss deduction, or other special deductions from Schedule C, line 20, are deducted.  The result is taxable income.  The next amount on the return is total tax, which comes from Schedule J, line 10.  Any payments made during the year, prior year overpayments credited to the corporation in the current tax year, and taxes deposited are then subtracted from total tax, to determine either the amount the corporation owes, or the amount of the refund due to the corporation.

             Some of the schedules that supplement Form 1120 are Schedule A, Cost of Goods Sold; Schedule C, Dividends and Special Deductions; Schedule E, Compensation of Officers; Schedule J, Tax Computation; Schedule K, Other Information; Schedule L, Balance Sheets per Books; Schedule M-1, Reconciliation of Income (Loss) per Books With Income per Return; and Schedule M-2, Analysis of Unappropriated Retained Earnings per Books.  If the total receipts for the corporation for the year and the total assets of the corporation at year-end are less than $250,000, the corporation does not need to complete Schedules L. M-1, and M-2.

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