What is Form 1120?

Form 1120 is the U.S. Corporation Income Tax Return filed by C corporations to report income, gains, losses, deductions, and credits, and to calculate corporate income tax owed at the 21% flat federal rate. For professional service firms structured as C corporations, Form 1120 is the annual tax return with tax paid at the corporate level.

Key characteristics

• C corporation annual return

• Tax paid at the corporate level

• 21% flat federal rate

• Due April 15 for the calendar year

• No pass-through to shareholders

• Dividends are taxed again to shareholders

Why it matters for professional service firms

C corporations pay tax at the entity level, creating potential double taxation when profits are distributed as dividends. Understanding Form 1120 requirements helps professional service firm owners evaluate entity structure decisions and plan for retained earnings versus distributions.

Real-world example

Tom's C corporation had gross receipts of $650,000, deductions of $480,000, and taxable income of $170,000. Form 1120 calculated: federal tax at 21% equals $35,700. The corporation paid $35,700 tax. Remaining $134,300 available for retention or distribution. If distributed as a dividend, Tom would pay additional personal tax on the dividend (double taxation).