Form 1120: the federal return, the extension and the 21% rate
The C corporation's federal return: due Apr 15, 2027 for a calendar year, 21% of taxable income, filed even in a loss year, and extended for filing only.
A C corporation is its own taxpayer. It files Form 1120 every year it exists, whether or not it has taxable income, and pays federal income tax at a flat 21% of taxable income. For a calendar year the return is due the 15th day of the 4th month after year end: Northwind's first return, for 2026, is due April 15, 2027.
Taxable income is not book income
The return starts from the books, which is why it waits on a closed year, and then adjusts for every place the tax law disagrees with GAAP: depreciation on a different schedule, expenses tax won't deduct, revenue it times differently. Those differences are what temporary differences and deferred tax assets track. A year that ends in a tax loss still files: the return records the net operating loss that offsets later income, up to the 80% cap.
Current federal income tax for 2027 at 21%
| Account | Debit | Credit |
|---|---|---|
| Income tax expense | 4,403.45 | |
| Income tax payable | 4,403.45 | |
| Balanced | 4,403.45 | 4,403.45 |
Booking the year's current tax at year end, on the illustration. The full provision under ASC 740 adds the deferred side.
The extension, and what it doesn't extend
Form 7004, filed by the original due date, extends the time to file by 6 months, to October 15, 2027 for Northwind's first return. It doesn't extend the time to pay. Tax still owed on April 15, 2027 starts accruing late-payment penalty and interest whatever the extension says.
File by Apr 15, 2027
- Good at
- One deadline, done.
- Delaware's assumed par method needs the same Schedule L figures anyway.
- Watch for
Needs a closed, reconciled year in the first weeks of the next one.
- Best for
- A company whose year is closed and reviewed by March.
Extend to Oct 15, 2027 with Form 7004
- Good at
- 6 more months to file, automatically.
- No reason has to be given.
- Watch for
- Tax is still due on the original date: the extension covers filing, not paying.
- A second deadline to keep.
- Best for
- A company still closing the year, or waiting on a K-1 or a valuation.
Wrong
We lost money, so there's nothing to file.
Right
We lost money, so we file to record the loss and carry it forward.
The late-filing penalty is computed on unpaid tax, so a loss year owes little of it, but the return is still required and the loss is only usable once it's on a filed return.
Form 1120 every year, loss or not, by the 15th day of the 4th month. Form 7004 buys time to file, never time to pay.
Where this lesson's rules come from
The sources behind this lesson's requirements, by kind. Anything marked as a convention is ours, not the rule-maker's.
- Federal statute
- 26 U.S.C. §11(b) (opens in a new tab)Tax imposed on corporationsFree to read
- IRS guidance
- Instructions for Form 1120 (2025), When To File (opens in a new tab)U.S. Corporation Income Tax Return — who must file, when, extensions, penaltiesFree to read
- Instructions for Form 7004 (Rev. 12/2025) (opens in a new tab)Automatic extension of time to file certain business income tax returnsFree to read
- Official form
- Form 1120 (opens in a new tab)U.S. Corporation Income Tax Return (PDF)PDF · Free to read
- Form 7004 (opens in a new tab)Application for Automatic Extension of Time To File Certain Business Income Tax (PDF)PDF · Free to read
The words this lesson teaches
Each links to its glossary definition, which also names the authority behind it and the components that render it.
- Form 1120The federal income tax return of a domestic C corporation, filed every year whether or not it has taxable income — due the 15th day of the 4th month after year end, April 15 for a calendar year, with tax at 21% of taxable income under IRC §11(b)
- Form 7004The IRS application for an automatic extension of time to file business income tax returns — six months for Forms 1120, 1120-S and 1065 — filed by the original due date. It extends the time to file, not the time to pay
- Net operating lossThe excess of tax deductions over gross income for a year. Federal NOLs arising after 2017 carry forward indefinitely, cannot be carried back (farming aside), and may offset only 80% of taxable income computed before the NOL deduction
- NOL deduction capA limit on how much of a year's income a loss carryforward may offset — federally 80% for post-2017 NOLs; in the states it varies: Pennsylvania caps pre-2025 losses at 40% and later ones at 50% in 2026, rising ten points a year to 80% from 2029, and some states suspend NOL deductions outright in deficit years
- Income tax expenseThe P&L charge for income taxes — current tax payable for the period plus the change in deferred tax assets and liabilities
- Temporary differenceA difference between an asset or liability's tax basis and its book carrying amount that will reverse in future years — the source of deferred taxes
In the founder glossary
This lesson’s ideas, explained for the founder running the company. Each has an entry in the founder glossary.
See also
- Journal entry for an income tax provisionAt period-end, debit Income tax expense for the total provision, credit Income taxes payable for current tax, and credit (or debit) the Deferred tax asset for the change in deferred tax, such as a net operating loss carryforward used this year.
- Form 1120: what to give your tax preparer, and whenWhat a startup hands its tax preparer for Form 1120: closed books, a balance sheet that ties to Schedule L, book-to-tax items, ownership and 1099s.
- Startup tax deadlines by month for a C-corpFederal tax deadlines for a calendar-year C-corp, month by month: W-2s, 1099s, Form 941, Form 1120, estimated taxes and Delaware franchise tax.
- Income tax provisionThe income tax expense in your financial statements: tax owed for this year, plus the future tax effect of differences between your books and your tax return.
- TaxFormTrackerVendors over the reporting threshold, with W-9 and TIN-match state.