A corporation writes a $300,000 check to its sole shareholder. Whether that check is a dividend, a return of capital, or a capital gain depends entirely on a ledger the corporation may never have formally kept.
A C corporation reports its income, deductions and tax each year on Form 1120, U.S. Corporation Income Tax Return. Every domestic corporation files Form 1120, whether or not it had any income. No minimum amount of gross receipts excuses the filing, and there is no exemption for a dormant corporation that never opened a bank account.
The filing due dates for Form 1120 depend on when the corporation's tax year ends. A calendar-year C corporation's return is due the 15th day of the fourth month after year end, which is April 15, 2026 for tax year 2025. A corporation with a June 30 fiscal year follows a special rule: its return is due September 15, the 15th day of the third month.
Four mechanical rules round out the filing calendar:
Common mistakes
- Netting current E&P against an accumulated deficit. A corporation with $100,000 of current E&P and a $400,000 accumulated deficit still pays a $100,000 dividend when it distributes that amount. The nimble dividend rule keeps the two layers separate, so the deficit never cancels current E&P.
- Adding the full 5% and 0.5% penalty rates. In a month when both penalties run, the combined charge is 5%, because the failure-to-file rate is reduced to 4.5%.
- Recognizing loss on a non-liquidating property distribution. When a corporation distributes property outside a liquidation, §311(b) recognizes gain only. Loss recognition arrives only in a complete liquidation under §336.
Bottom line
- Form 1120 due dates: 15th day of the 4th month, six-month Form 7004 extension, seven months for a June 30 year end, and §7503 shifts weekend and holiday dates forward.
- Penalties: 5% per month failure to file capped at 25%, 0.5% per month failure to pay, minimum late-file penalty the lesser of the tax due or $525 for returns filed in 2026.
- E&P adds back municipal interest, life insurance proceeds and the DRD, and subtracts federal tax, fines, disallowed meals and excess charitable gifts.
- Distribution ordering: dividend to the extent of current then accumulated E&P, then tax-free return of basis, then capital gain.
Exam shortcut
Run distributions in one fixed order every time: compute current E&P, add accumulated E&P, absorb the distribution through dividend, then basis, then gain. Never net a deficit against positive current E&P; that is the single most-tested distractor. When a stem gives you dividends received and a charitable contribution together, sequence is the whole question.
The full lesson (about 4,498 words, 30 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- 1
- 2
- 3A
- 3B
- 4
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