Form 1120-F for foreign corporations doing business in the U.S.
2 min read
October 25, 2022
October 25, 2022
At a glance
Find out what IRS Form 1120-F is used for by the IRS, including who files and penalties for forgetting to file.
If you’re the owner of a foreign corporation and you do business in the U.S., your business has specific tax filing obligations. One of these tax obligations is filing Form 1120-F, which serves as your corporation’s U.S. income tax return.
Learn more about Form 1120-F below, including what it is, who has to file, and other useful information to help you out come tax time.
What is Form 1120-F?
Tax form 1120-F, U.S. Income Tax Return of a Foreign Corporation, is used by foreign corporations.
Your business may have to file this form if:
- You had U.S. source income, the tax on which hasn’t fully been paid,
- You’re making a protective filing
- You’re making treaty-based claims
- You have income that is “effectively connected” with a U.S. trade or business.
The term “effectively connected income” is technical, but you can understand it generally as income generated by services provided or a trade or business carried on in the United States.
Foreign corporations should file IRS form 1120-F to report their U.S. income, gains, losses, deductions, credits, and to figure their U.S. income tax liability similar to how a domestic corporation would report these on their tax return.
One thing to note is that because the rules regarding income being “effectively connected” to a U.S. trade or business are not clear cut, whether your foreign corporation needs to file Form 1120-F should be determined by a qualified tax professional.
Understanding the term “protective tax return”
Tax form 1120-F is sometimes known as a “protective return” because a filing it protects a foreign corporation’s rights to receive deductions and credits. This term is only used when activities conducted within the U.S. are so limited that no gross income that is effectively connected was generated.
Who must file Form 1120-F?
A foreign corporation with business ties to the U.S. must file this form. If you’re supposed to and you don’t, you may be penalized 5% of the unpaid tax, up to a maximum of 25%.
Was this article helpful?
See what expats have to say about their experience with us.
H&R Block Expat Tax has always been fast, efficient and answers my questions. For 10 years I filed everything myself and never received a refund. Now I get a big refund every year! Wish I had known sooner. I highly recommend HRB Expat Tax.
H&R Block U.S. Expat Tax Services does a really great job! Fast and reliable. Tax Organizer was very easy to use. And what I really like most is very quick and precise answers whenever you have a question. Thank you!
I live in Kenya now and run my own online digital marketing business. Using this service has helped me save tons of time and energy on my taxes. I am also really relieved that they will help if I need it during audits. It really makes living abroad and doing taxes a million times better.
I have been using H&R block for a few years now. I live abroad, but don't make a lot of money. Filing with H&R block is as painless as doing taxes gets and my Advisor is wonderful and answers all my questions.
Expat taxes made easy. I had a great experience this year - I used HR Block last year and was very impressed with the efficiency and accuracy and professionalism throughout the whole process.
No one offers more ways to get tax help than H&R Block.
Easy online filing designed for expats. Experienced experts if you need them. Get your taxes done in the way that’s right