Tax Form 1120-F, U.S. Income Tax Return of a Foreign Corporation

Tax Form 1120-F Income Tax Return

Are you a foreign corporation doing business in the United States? If so, you may be required to file Tax Form 1120-F, also known as the U.S. Income Tax Return of a Foreign Corporation. In this blog post, we’ll break down all you need to know about Tax Form 1120-F and provide helpful tips for navigating its complexities. So grab your coffee, sit back and let’s dive into the world of U.S. corporate taxation!

This form is also known as the form for certain foreign corporations and is used to report the financial information to the IRS. The main purpose of the form is to serve as the foreign corporation’s income tax return in the US. It also includes the overview of the gains, losses and income of the corporation. The tax deductions and credits can also be claimed by the foreign corporations with the help of this form.

What is the Difference Between 1120 and 1120-F forms?

Before we get into the details about the Tax Form 1120-F, let us first find out how this is different from the Tax Form 1120. The main purpose of the form 1120 is that it is used by the corporations that need to file the income tax returns. It is also used to file corporation returns by the partnerships and S corporations. As for the 1120-F, this form is used by the foreign corporations that have a US office or branch

There are also other forms that are  included in the IRS 1120 series and each are formatted for various entities:

  • Form 1120 is the income tax return for domestic C corporations 
  • Form 1120-S is the income tax return for domestic S corporations 
  • Form 1120-C is the income tax return for domestic cooperative associations 
  • Form 1120-H is the income tax return for domestic homeowner associations 
  • Form 1120-F is the income tax return for certain foreign corporations

Read More-: Tax Form 1065

Filing the Form 1120-F: Who has to File them?

The foreign corporations that are effectively connected income with a US business or trade are essentially needed to file the tax form 1120-F. Most times, this implies that a foreign corporation either provides a service in the US or sells products. Also, it means that the foreign corporation has some kind of physical presence in America, like that of an office, employee, or warehouse. 

For instance, let’s assume that a certain corporation is based in Germany and is responsible for manufacturing machinery parts. According to their business model, and most of these US-based companies buy these products in bulk. Mostly, is such a scenario the corporation will need to connect the income and file the tax form 1120-F. 

But, one needs to bear in mind that the concept of effectively connected income is rather complicated. Hence, it is suggested that one should consult a tax specialist in order to determine whether you need to file this form or not. In case you do not file the form, then also you can still choose to do so, as this can be a smart move. There are corporations that can claim the deductions and tax credits that are not otherwise available. This is termed as protective filing, as it protects your rights to certain tax benefits.

The Due Date: Tax Form 1120-F

This greatly depends upon the extend of physical presence your foreign corporation has in the US. this could be:

  • In case you have a warehouse, office or a fixed place of trade or business within the US, the deadline is 15th March. 
  • In case you do not have a physical presence in the US, then the deadline is 15th of June.

One can request an extension of six months for the filing, by submitting the IRS form 7004. However, keep in mind that the extension time is not the extension to pay. In case the foreign corporation owes any taxes on your form 1120-F, then it is still necessary to pay the debt by the deadline.

The Penalty: When failing to File altogether

Now, there are times and chances that you might fail to file the tax form altogether. This can lead you to face the penalties. In this case the penalty is a 5% of the unpaid tax per month. This can go up to a maximum penalty of 25%. However, there are also various reliable platforms that that can help you cope with the penalties by using the IRS streamlined Filing Compliance Procedure.

How to File: The Procedure to Fill the Form 1120-F

To start with the tax for 1120-F comprises of eight pages. Here, the detailed information about the corporation’s financial status and income are stated. This is further used to calculate the US tax liability. According to the IRS, it will take approximately 70 hours to complete the form. However, this time frame is not inclusive of the time required to learn about the required documentation or the related laws. 

It is because of the form’s complex and time-consuming nature, that it is the best to take advice from a professional. For more details, it is always a good idea to visit the official page of the IRS website.

Likewise, one can also e-file the forms. This further applies to the other schedules, attachments, and forms. There are some cases, when the e-filing is rather mandatory. For instance, the corporations with a total asset valued at a minimum of $ 10 million, and who need to file for a minimum of 250 returns per year are generally required to e-file the forms. Also, if necessary, the individual can waive off these requirements in certain cases.

Also Read-: 2022 Instructions for Schedule 8812

The Schedules in the Form 1120-F

Now, that we know about the details inside the Tax Form 1120-F, let us take a look at the various portions and the schedules included within:

Schedule-D : Capital Gains and Losses

The Schedule D of the form comprises of:

  • Being able to calculate the overall losses and gains from the transactions that are reported within the Form 8949.
  • To be able to report specific transactions that are not meant to be reported by the corporations on the Form 8949.
  • To report the capital gain distributions that have not been reported directly on Form 1120.

Schedule-H: The Deductions Allocated to be able to connect Income under Regulations Section 1.861-8

This particular schedule is used by the foreign corporations that file Form 1120-F in order to report the amount of the Foreign corporations deductible expenses that have been allotted. These are also apportioned under the Regulations section 1.861-8 and 1.861-17 and Temporary section 1.861-8T between the non-ECI and ECI.

Schedule-I: Interest Expenses Allocation Under the Regulations Section 1.882-5

This schedule is used to report:

  • The amount of interest expenses that is allocable inorder to effectively connected Income ECI
  • The deductible amount of these allocation for the tax year within the section 882(c) and Regulations section 1.882-5.

Schedules M-1 and M-2: Reconciliations of the loss of Income and the Analysis of unappropriated retained Earnings Per book

This schedule deals with the foreign corporation which is necessary to complete the form. The section II must complete Schedule M-1 and M-2 of the form.

Schedules M-3: The Net Income (loss) Reconciliation for Foreign corporations with a reportable Asset of $10 Million or more

The Schedule M-3, Part I involves the adjusted financial net income of the non-consolidated foreign corporations filing form 1120-F, of the US Income Tax Return of a Foreign corporation. Schedule M-3, Part II and III reconcile the financial results with the taxable income associated with the corporation prior to the NOL deduction and also the special deductions on Form 1120-F.

Schedule P: The list of Foreign Partner Interests in Partnerships

This schedule is used to reconcile and identify the partnership interests that are held directly with the foreign corporations. Here the distributive shares of the partnerships effectively connected income ECI and the foreign corporation’s effectively connected outside tax basis in every interest.

Schedule S: The Exclusion of Income from the International Operations of Aircrafts or Ships Under the Section 883:

This needs to be filed by the foreign corporations in order to:

  • Claim an exclusion of the income under the section 883 and 
  • To provide reporting information necessary for the section 883 regulations.

Schedule V: The list of the Vessels or Aircraft, Owners and Operators.

This is filed by the foreign corporation inorder to report the basic information required for each aircraft or vessel with respect to which the corporation is subjected to a 4% rate of the US tax on the source gross transportation income USSGTI under the section 887.

Schedule UTP: The Uncertain Tax Position Statement

This section of the schedule requires the information related to the tax positions that affect the US federal income tax liabilities of specific corporations that are either issued are included within the audited financial statements and comprise of assets that are either equal to or more than $10 million.

Need Experts Help-: How to File Tax Form 3520-A


Taxes, their filing and their subsequent reporting can be complicated. However, one can always take professional help in order to eliminate errors. Likewise, if you still have issues concerning the process, be free to reach out 1800 964 3096 to us and our team of experts will be more than happy to help you out.

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đź’ Frequently Asked Questionsđź’ 

What is meant by the Term Protective Tax Return’?

Sometimes, the tax form 1120-F is also known as the protective return as it protects a foreign corporation’s rights to receive credits and deductions. However, the term is applicable only when the activities are conducted within the US and are limited in a manner that no gross income which was effectively connected was generated.

Who needs to File the Tax Form 1120-F?

Any foreign corporation that has business ties with the US needs to file this form. One can face a penalty of 5% of the unpaid tax and a maximum of 25%.

What is meant by Schedule UTP?

This is also known as Uncertain Tax position statement. Here one needs to provide the information about the tax position that affects the US federal Income tax liabilities of specific corporations that are issued or included in the audited financial statements and comprise of the assets that are either equal to or more than $10 Million.

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