Tax glossary

Form 1120

Form 1120 — what it means, how it works, and a real example, explained without the jargon.

What is Form 1120?

Form 1120 is the income tax return a C corporation files to report its income and pay the flat 21% federal corporate tax.

How it works

Unlike the pass-through returns, this one actually calculates and pays tax at the entity level. The corporation reports revenue, deducts expenses, and pays 21% on the taxable profit — before any dividends to shareholders.

A quick example

A C corp with $1,000,000 of revenue and $700,000 of expenses has $300,000 of taxable profit and owes $63,000 in federal corporate tax.

What people get wrong

C corps can deduct owner salaries and benefits before that 21% hits — one reason owner-employees often take a salary rather than leaving all profit in the company.

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Frequently asked questions

What does Form 1120 mean?

Form 1120 is the income tax return a C corporation files to report its income and pay the flat 21% federal corporate tax.

How does Form 1120 work?

Unlike the pass-through returns, this one actually calculates and pays tax at the entity level. The corporation reports revenue, deducts expenses, and pays 21% on the taxable profit — before any dividends to shareholders.

What's the most common mistake with form 1120?

C corps can deduct owner salaries and benefits before that 21% hits — one reason owner-employees often take a salary rather than leaving all profit in the company.