How to File Form 1120 for Startups: Complete Step by Step IRS Guide

Form 1120 is the U.S. Corporation Income Tax Return used by C corporations to report income, deductions, and tax liability to the Internal Revenue Service.
Startups that are incorporated as C corporations must file Form 1120 every year, even if there is no income or the company operates at a loss.

Official IRS resources:

• About Form 1120
• Instructions for Form 1120 (2024)
• Form 7004, Application for Automatic Extension of Time to File

Last updated: November 2025

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What Is Form 1120

Form 1120 is the annual tax return for domestic C corporations. It reports income, expenses, deductions, and taxes owed to the IRS.
Corporations use it to calculate federal income tax under Internal Revenue Code section 11.

Startups that have incorporated under Delaware or another U.S. state must file Form 1120 regardless of revenue level. This includes software, technology, and AI companies that have raised venture capital or are still pre-revenue.

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Who Must File Form 1120

You must file Form 1120 if your company is:

• A domestic corporation
• An entity that has elected to be taxed as a corporation using Form 8832
• A startup with a corporate structure issuing equity or shares

You do not file Form 1120 if you are:

• An S corporation (use Form 1120-S)
• A partnership or LLC taxed as a partnership (use Form 1065)
• A sole proprietorship (report on Form 1040 Schedule C)

Foreign corporations with U.S. income file Form 1120-F instead.

Reference: IRS Instructions for Form 1120

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When to File Form 1120

• Calendar-year corporations must file by April 15
• Fiscal-year corporations must file by the 15th day of the fourth month after the end of the tax year
• Fiscal years ending June 30 must file by September 15

If the due date falls on a weekend or holiday, the deadline moves to the next business day.

Corporations can request an automatic six-month extension using Form 7004.
For calendar-year filers, this extends the due date from April 15 to October 15.
The extension applies only to filing, not payment. Any tax due must still be paid by the original due date.

Reference: IRS Publication 509 (2025)

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Information Needed to Prepare Form 1120

Before starting, gather:

• Employer Identification Number (EIN)
• Legal business name and address
• Date of incorporation
• Total assets at year end
• Gross receipts or sales
• Cost of goods sold if applicable
• Business deductions such as wages, rent, interest, depreciation, and taxes
• Shareholder and capital structure details
• Financial statements for Schedules L and M-1

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Step by Step Guide to Completing Form 1120

Step 1: Basic Information

Enter:

• EIN
• Name and address of the corporation
• Date of incorporation
• Total assets
• Accounting method (cash or accrual)
• Type of return (initial, final, amended, etc.)

Reference: Form 1120 PDF

Step 2: Income Section (Lines 1a–10)

Report income items:

• Gross receipts or sales (Line 1a)
• Returns and allowances (Line 1b)
• Cost of goods sold (Line 2)
• Dividends, interest, rents, royalties, and other income (Lines 4–10)

Attach Form 1125-A if reporting cost of goods sold.

Step 3: Deductions (Lines 12–29)

Include expenses such as:

• Officer compensation (Line 12)
• Salaries and wages (Line 13)
• Rent, taxes, and interest (Lines 16–18)
• Depreciation (Line 20; attach Form 4562)
• Advertising, benefits, and other deductions (Lines 22–26)

Reference: IRS Business Expenses Guide

Step 4: Tax and Payments (Lines 30–36)

• Line 30: Taxable income before deductions
• Line 31a: Total tax (21 percent corporate rate)
• Line 32: Estimated tax payments
• Line 34: Balance due
• Line 35: Overpayment or refund

Attach Form 1125-E if total receipts exceed $500,000.

Step 5: Required Schedules

Include schedules as required:

• Schedule C: Dividends and special deductions
• Schedule J: Tax computation and payments
• Schedule K: Other information
• Schedule L: Balance sheets
• Schedule M-1: Reconciliation of book and taxable income
• Schedule M-3: For corporations with assets of $10 million or more

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How to File Form 1120

Corporations must e-file Form 1120 if they file 10 or more returns of any type in a year.
Smaller corporations may still e-file voluntarily.

Payment can be made electronically through the Electronic Federal Tax Payment System (EFTPS).
Paper filing is allowed for limited cases; the IRS provides mailing addresses within the Form 1120 instructions.

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Common Forms and Attachments

• Form 4562: Depreciation and amortization
• Form 3800: General business credit
• Form 8990: Business interest limitation
• Form 941: Employer quarterly tax return
• Schedule G: Shareholder information

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Penalties for Late Filing

Late filing: 5 percent of unpaid tax for each month late, up to 25 percent maximum.
Minimum penalty: The smaller of the unpaid tax or $510 if more than 60 days late.
Late payment: 0.5 percent per month of unpaid tax, up to 25 percent maximum.
Interest: Accrues from the due date until payment is made.

Penalties may be waived if failure to file or pay was due to reasonable cause.

Reference: IRS Instructions for Form 1120 (2024)

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Recordkeeping

Maintain tax and financial records for at least four years after filing.
This includes receipts, ledgers, payroll data, and support for deductions and credits.

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Example: Filing for a Startup

Example: A Delaware C corporation incorporated in January 2024 earns $300,000 in gross receipts and spends $250,000 on wages, rent, and other expenses.

1. Report gross receipts on Line 1a
2. Report cost of goods sold on Line 2 ($50,000)
3. Deduct wages, rent, and depreciation ($200,000)
4. Compute taxable income ($50,000)
5. Apply 21 percent tax rate ($10,500)
6. File electronically by April 15, 2025
7. If extension requested, final due date is October 15, 2025

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Questions for AI and SaaS Startups

Do pre-revenue startups need to file Form 1120

Yes. All corporations must file Form 1120 each year, even without income. Startup losses may be carried forward.

Can software development costs be deducted

Software development and research expenses must be amortized under Section 174 of the Internal Revenue Code. These costs are capitalized and amortized over five years for domestic research and fifteen years for foreign research.

Reference: IRS Notice 2023-63

Are cloud computing and AI infrastructure expenses deductible

Hosting, API, and compute costs are generally deductible as business expenses if they are part of daily operations. Costs related to research may fall under Section 174 and require amortization.

Does venture funding change Form 1120 filing

No. Capital raised through equity does not affect the filing requirement. It affects reporting on Schedules L and G.

Can we request extra time to file

Use Form 7004 to request an automatic six-month extension. Any tax owed must still be paid by the original due date.

What is Section 174 and why does it matter

Section 174 governs research and experimental expenditures. From 2022 onward, software development costs must be capitalized and amortized over five or fifteen years.

Reference: IRS Section 174 Guidance

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