Form 1120-F for Expats
Updated on December 31, 2024
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Table of Contents
What is Form 1120-F?
Form 1120-F is filed by foreign corporations (non-US company) doing business in the US to report their income, gains, losses, deductions, and credits and to calculate their US income tax liability.
This is a legal obligation issued by the IRS to recognize the business operations of foreign corporations in the US and ensure the adherence of these corporations to tax laws.
Additionally, corporations claim any applicable deductions and credits to reduce their US tax bill.
Who must file Form 1120-F?
A foreign corporation that does business in the US and meets certain criteria have to file Form 1120-F.
Foreign corporations that engage in a trade or business in the US but do not have a US source of income or have income that is exempt from tax under a tax treaty must also file Form 1120-F.
Who is eligible to file Form 1120-F?
Here are the criteria for being required to file Form 1120-F:
- The corporation was engaged in trade or business in the US.
- The corporation had income from a US source that was not subject to withholding tax.
- The corporation had income that was “effectively connected” to trade or business in the US.
- The corporation wants to claim benefits under a US tax treaty – in which case they must also file Form 8833.
- The corporation overpaid US tax and needs to claim a refund.
- The corporation wants to claim any US credits or benefits.
What is effectively connected income?
All income earned from sources within the US that are linked to the conduct of a trade or business is classified as effectively connected income.
This applies regardless of whether there is a direct connection between the income and the trade or business activities in the US during the tax year.
What details need to be provided on Form 1120-F?
Here are the key details to know per section of Form 1120-F:
- Header information: Corporation’s name, address, and employer identification number (EIN).
- Part I: Income: The corporation’s total income from all sources and other types of income, including gross receipts, dividends, and interest.
- Part II: Deductions: Allowable deductions like salaries, rent, and taxes already paid.
- Part III: Tax and payments: The amount of tax is determined by the applicable tax rate and the total tax after credits and prepayments.
- Part IV: Additional Information: Details regarding the corporation’s activities and ownership. And information about any previously filed US tax returns.
- Schedule M: Detailed balance sheet showing all assets, liabilities, and shareholder’s equity.
Who needs to sign Form 1120-F?
Form 1120-F can be signed and dated by the following:
- President
- Vice president
- Treasurer
- Assistant treasurer
- Chief accounting officer
- Any other corporate officer that is authorized to sign.
Own a foreign corporation? Connect with our experts to help you navigate Form 1120-F properly.
What is the deadline for filing Form 1120-F?
If the corporation has premises in the US, the deadline for filing Form 1120-F with the IRS is April 15. If the corporation does not have premises in the US, the deadline is June 15.
In both situations, a six-month extension can be requested by filing Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns.
What are the penalties for failing to file Form 1120-F?
The corporation can face penalties from the IRS that start at 5% of the unpaid corporate tax owed per month, which rises to a maximum of 25% after five months.
Moreover, if a US corporation fails to file Form 1120-F when they are engaged in US trade or business, the IRS may prohibit the corporation from claiming any deductions or credits.
Can Form 1120-F be filed electronically?
Generally, corporations can file Form 1120-F electronically through an authorized e-file provider.
Getting assistance from a tax professional can also ensure that the form has the correct details, saving time and headaches if there are any problems or mishaps throughout the process.
Where can I submit Form 1120-F?
If you are mailing the form, send it to the Department of the Treasury, Internal Revenue Service Center, Ogden, UT 84201, USA.
For services like FedEx or UPS, address it to the Internal Revenue Service, 1973 Rulon White Blvd., Ogden, UT 84201, USA.
What deductions can I claim on Form 1120-F?
Here are common deductions you can claim on Form 1120-F:
- Business expenses: Ordinary and necessary expenses such as salaries, wages, rent and utilities, and office supplies and equipment.
- Interest expense: Interest paid on business loans can be subject to deductions under certain requirements.
- Depreciation: The depreciation of tangible property or equipment used in US trade or business.
- Taxes: State and local taxes related to the US business operations.
What credits can I claim on Form 1120-F?
Here are common credits available for Form 1120-F:
- Foreign Tax Credit: This is also available for foreign corporations on their taxes paid to foreign countries on income subject to US tax. This helps avoid double taxation.
- General business credits: Eligible corporations can claim various business credits, such as the Research and Development (R&D) Credit or the Investment Credit.
- Withholding tax credit: The taxes withheld on US-sourced income can be credited against the corporation’s US tax liability.
