What do I give my tax preparer for Form 1120?

01The deadline, and what an extension does#

Under the Instructions for Form 1120, a corporation files by the 15th day of the 4th month after its tax year ends: April 15 for a calendar-year company. Form 7004, filed by that date, gives an automatic extension of time to file that is generally 6 months. It is an extension to file, not to pay. Form 7004’s instructions are explicit that it does not extend the time to pay any tax due.

A late return costs 5% of the unpaid tax for each month or part of a month it is late, up to 25%, and for returns due in 2026 more than 60 days late there is a minimum of $525 or the tax due, if smaller. Plan the books around the original date, and treat the extension as time for the preparer, not for the close.

02The books, closed and on one basis#

The return starts from book income, so the books have to be finished first. Schedule L is a balance sheet at the start and end of the year, and the instructions say plainly that the balance sheets should agree with the corporation’s books and records. That means the year-end close has to be done, not approximately done:

• A year-end trial balance, with December closed and locked.
• The income statement and balance sheet for the year, with the prior year beside them.
• Bank, card and payment-processor balances reconciled to their December statements.
• The schedules behind the balance sheet: prepaids, deferred revenue, fixed assets with depreciation, accrued expenses and any lease.
• Last year’s return, so opening balances and any losses carried forward start from what was filed.

03Where book income and taxable income differ#

Schedule M-1 is titled “Reconciliation of Income (Loss) per Books With Income per Return”. It exists because the tax rules and US GAAP disagree about some items, and your preparer needs your list of them rather than having to discover them. A corporation with total assets of $10 million or more at year end files the longer Schedule M-3 instead.

The common items for a startup each have their own form or rule. Depreciation and any Section 179 expensing come from Form 4562. The research credit is claimed on Form 6765, and the research costs themselves follow Section 174A. Losses carried forward from earlier years are deducted on line 30, generally limited to 80% of taxable income computed without that deduction. If the books are accrual and the return is on the cash method, the whole difference between the two methods lands here too.

04The questions only you can answer#

Some of the return is about the company rather than its numbers, and the books cannot answer it:

• Who owns the company: a current cap table. Schedule G is required when the corporation answers yes to question 4a or 4b about who owns its voting stock.
• Whether any foreign person owns 25% or more, by vote or by value. A 25% foreign-owned US corporation with a reportable transaction with a related party must file Form 5472, and the penalty for not filing it when due is $25,000.
• Officer pay: when total receipts are $500,000 or more, Form 1125-E lists compensation of officers.
• The 1099s you filed for the year, because Schedule K, question 15 asks about them.
• Where you have employees and customers, by state, so the preparer can decide which state returns apply.

05When the small-company exception applies#

Schedule K, question 13 asks whether the corporation’s total receipts (page 1, line 1a plus lines 4 through 10) and its total assets at the end of the year are both less than $250,000. If they are, the corporation is not required to complete Schedules L, M-1 and M-2. Cash in the bank is an asset, so a company holding more than $250,000 at year end does not qualify, whatever its revenue.