Form 1120-F: Complete guide for foreign corporations in the US
Filing a corporate tax return in the US takes more than filling out forms – it demands precision and insight. For a foreign corporation doing business across borders, especially in the US, Form 1120-F is the key to showing how income is connected to US activities and how deductions are properly claimed. It transforms complex tax data into a clear record of business presence, treaty relief, and compliance.
This article is brought to you by Taxes for Expats, a trusted partner helping foreign corporations navigate Form 1120-F with confidence. We follow official IRS instructions, verify treaty eligibility, and ensure every figure aligns with current tax rules. Learn more about our services or contact us to get started.
What is Form 1120 F?
Expanding across borders can be exciting – until the paperwork starts. Picture a Canadian company opening a small office in Texas, thrilled about its first US contracts, only to realize it must navigate a new layer of tax reporting. That’s where Form 1120-F steps in, bridging international opportunity with US compliance.
Form 1120-F is the federal return that foreign businesses use to report effectively connected income and US-source earnings, claim refunds when tax was over-withheld, and disclose treaty benefits in a structured way. When a foreign corporation earns revenue linked to business in the US, has ECI through a partnership, or needs to correct withholding, this form becomes essential.
Everything from filing thresholds to treaty relief is detailed in the official instructions for Form 1120-F provided by the IRS.
- The due date for Form 1120-F is generally the 15th day of the fourth month after the tax year ends if the business has a US office, or the 15th day of the sixth month when it doesn’t; a June 30 year-end follows special timing rules.
- Corporations can file Form 7004 to request a Form 1120-F extension, which grants extra time to submit the return but not to pay the tax due.
- The return also calculates branch profits tax under section 884, a 30 percent levy that may be lowered by treaty if the corporation qualifies.
- Section I is where US-source income not effectively connected with a trade or business is listed, particularly when seeking a refund under the 30 percent withholding rule or the 4 percent transportation income rule.
- Common attachments include Schedule H for expense allocation, Schedule I for interest computation, and Schedule P for partnership-linked income, with additional schedules required for larger or more complex entities.
Who must file Form 1120 F under US rules
A company files Form 1120-F when it conducts a trade or business in the US or earns income that’s effectively connected with American operations. Any foreign corporation that maintains US ties through a client, office, or agent is often required to file, both when profits arise from domestic business activity and when US withholding on FDAP income – such as dividends, interest, or royalties – was withheld in error or exceeds the correct amount. Where business ties are uncertain or treaty protection applies, submitting a protective return safeguards deductions and credits for up to 18 months beyond the due date.
How effectively connected income (ECI) determines your tax responsibility
ECI arises when business activity in the US is a key factor in generating profit and satisfies IRS requirements for a taxable presence.
“Income earned through a US partnership or tied to a US office often counts as effectively connected” – IRS instructions
Once income qualifies as ECI, it’s taxed at 21 percent like a domestic corporation, and reporting it on the company’s tax return keeps deductions intact.
NOTE! Filing Form 1120-F is not merely a procedural step; it is a legal requirement. The failure to file can result in significant penalties, often starting at 5% of the unpaid tax for each month the return is late, with a cap at 25%.
Filing deadlines with submission options
A UK investment trust once leased a staffed room in New York and learned that an American office can flip the filing clock. In Commissioner v. Scottish American Investment Co., the presence of an office mattered, and it still shapes how a foreign corporation handles timing and delivery today.
-
When Form 1120-F is due
Deadlines turn on whether the company keeps an office in the US. IRC 6072 and the IRS instructions outline the timetable for both calendar and fiscal filers. With a US office, file by the 15th day of the 4th month after year-end, such as April 15 for a calendar year, and use Form 7004 for a 6-month extension when needed. Without a US office, file by the 15th day of the 6th month after year-end, such as June 15 for a calendar year, with the same Form 7004 extension path available. -
Where to file (mail vs e-file)
Most filers transmit through Modernized e-File when the e-file requirements apply. Paper remains allowed, and Form 1120-F mailed returns route to Ogden. E-file is mandatory when a corporation files 10 or more returns in the calendar year, with waiver requests available under Notice 2024-18.
Mail the tax return to the IRS, P.O. Box 409101, Ogden, UT 84409, or use a private delivery service to 1973 Rulon White Blvd, Ogden, UT 84201.
How to file Form 1120-F step-by-step
Keep it simple, follow the official instructions, and choose the submission route that fits your setup. The quick sequence helps a busy team move fast.
Step 1: Confirm the filer is a foreign corporation and pin down filing requirements under IRC 6072 and related guidance.
Step 2: Set the due date and, if extra time is needed, file Form 7004 by the original deadline.
Step 3: Complete Form 1120-F using the instructions, reporting ECI in Section II and any refund claim for FDAP in Section I.
Step 4: Attach core schedules, such as Schedule H for allocating deductions and Schedule I for interest allocation and branch interest.
Step 5: When a treaty position or uncertainty exists, attach Form 8833 or file a protective return to preserve deductions within the 18-month window in Reg. 1.882-4.
Step 6: Submit by e-file if required or mail to Ogden, using the PDS street address when not using USPS.
Step 7: Keep 1042-S forms, residency proof, and working papers with the signed package for your records.
Key components of Form 1120-F
The form is divided into several parts, each requiring detailed information about the corporation's financial activities:
- Income Statement: This section reports the income and deductions to determine the taxable income.
- Tax Computation: Corporations calculate their tax liability, including any taxes already paid or credits owed.
- Schedules: Various schedules accompany the form, detailing specific types of income, deductions, and credits.
Comparing Form 1120 and Form 1120-F
While both the standard tax return for domestic corporations and the return for non-US entities report income, gains, losses, deductions, and credits, they apply to very different structures. A domestic C corporation uses Form 1120, which is built for a company incorporated in the US. On the other hand, Form 1120F is crafted specifically for a foreign corporation – that is, an entity incorporated outside the US that engages in a US trade or business or earns income effectively connected with US activities.
The major difference lies in the residency of the entity and the source of the income. Form 1120-F also incorporates special rules for a protective return and treaty-based positions, features not found in Form 1120.
US corporations vs foreign corporations
The distinction between US and foreign corporations defines how each entity is taxed and what reporting rules apply. A Delaware company expanding across state lines follows domestic rules under Form 1120, while a German branch selling in Texas faces separate filing duties through Form 1120-F and must account for treaty relief and source-based taxation to stay compliant.
| Domestic corporation (Form 1120) | Foreign corporation (Form 1120-F) | |
|---|---|---|
| Tax base | Reports corporate taxable income under general rules | Reports ECI in Section II and certain non-ECI FDAP items in Section I when a refund or credit is claimed |
| ECI and FIRPTA | Not applicable as a category for domestic status | ECI rules apply, and FIRPTA gains are treated as ECI for foreign persons |
| Due date | 15th day of the 4th month after year end, or 3rd month for June 30 year ends | With US office, 15th day of the 4th month; without US office, 15th day of the 6th month; June 30 year ends use the 3rd month rule |
| Extension | File Form 7004 by the original due date | File Form 7004 by the applicable original due date |
| E-file rule | Mandatory when the group files 10 or more returns in the calendar year, subject to waiver | Same rule applies; waiver process available under Notice 2024-18 |
| Common attachments | Schedule M-3 when total assets are at least 10 million | Schedule H for expense allocation, Schedule I for interest and branch interest, Schedule P for partnership items; M-3 when assets are at least 10 million |
| Special taxes | None comparable to the branch profits tax | Branch profits tax at 30 percent, absent treaty reduction and branch-level interest rules |
| Withholding context | Domestic payees are generally outside the FDAP regime | FDAP is generally subject to 30 percent withholding unless reduced by treaty or treated as ECI |
| Consolidated groups | Eligible if corporations are includible under section 1504 | Foreign corporations are excluded from the affiliated group |
Form 1120 F late filing penalties
The timelines look simple at first, yet this is where most surprises happen. Keep the due date for Form 1120-F in view to avoid automatic charges that stack up quickly.
- Failure to file penalty: 5% of the unpaid tax per month or part of a month, capped at 25%. If the return is over 60 days late, the minimum is 100% of the unpaid tax or $510 for returns due after December 31, 2024, whichever is less.
- Failure to pay penalty: 0.5% per month, up to 25%. When both penalties apply for the same month, the failure to file amount is reduced by the failure to pay amount.
- Interest: accrues on unpaid tax and on penalties until paid in full.
- Estimated tax underpayment: Corporations that miss required quarterly estimates may owe a separate section 6655 penalty, computed on Form 2220.
- Timely filing preserves deductions: A late return can forfeit deductions and credits against effectively connected income unless a timely filing standard is met, generally within 18 months of the original due date, subject to a limited waiver. Filing a protective Form 1120-F can preserve these rights.
- Related-party reporting tied to the return: When Form 5472 is required, a late or incomplete filing can trigger a $25,000 penalty per form, with additional $25,000 continuation penalties after IRS notice, and no maximum cap.
Exemptions from filing Form 1120-F
A foreign corporation generally has no filing requirement when it has no US trade or business during the year and any US tax on its income was fully satisfied by withholding at source. No filing is required when the only US source income is portfolio interest or certain bank deposit interest that is exempt under section 881. The instructions for Form 1120-F describe special cases that override these exceptions, including a qualified derivatives dealer and some opportunity fund filings.
Form 1120-F appears throughout corporate cross-border compliance, and each rule above applies to the return itself rather than to the owner’s citizenship.
Refunds and deductions
Foreign corporations can seek cash back when US withholding exceeds the tax shown on Form 1120-F, supported by complete 1042-S evidence and a clear basis statement.
To preserve deductions, timely filing is critical, and a protective Form 1120-F with waiver relief is only available in narrow circumstances.
- Possibility of claiming a refund: A valid 1120-F refund may arise where chapter 3 or 4 withholding at 30 percent or a treaty rate overshot liability; attach Form 1042-S and a brief statement of basis.
- Deductions foreign corporations can take advantage of: Allocate and apportion on Schedule H and compute interest on Schedule I; deductions are allowed only with a timely return under Reg 1.882-4.
- Filing on time to keep deductions: Know the due date for Form 1120-F to avoid losing deductions.
Protective filing made simple
A foreign corporation that operates in the US but believes its activities don’t create a taxable presence can still file a protective Form 1120-F. This approach preserves the right to claim deductions and credits later if the IRS determines that effectively connected income exists. Filing protectively can mean the difference between being taxed on net income and being taxed on gross receipts without deductions under section 882(c)(2).
A properly marked protective return must be filed on time (or with an approved extension) and include the corporation’s identifying details, treaty position, and supporting schedules. This strategy is widely recognized by the IRS as a prudent safeguard for companies uncertain about their filing obligations. It also signals compliance and transparency – two factors that often prevent disputes or penalties when a future audit questions US tax exposure.
Form 1120-F preview
Common mistakes and how to avoid them
Even well-intentioned foreign corporations can slip up when filing Form 1120-F, leading to penalties or lost deductions. Awareness and careful planning can prevent most issues before they happen.
- Skipping a protective return: Failing to file when US activity exists can cost valuable deductions if the IRS later deems income effectively connected.
- Late filing: Missing the due date for Form 1120-F can trigger loss of deduction rights and late-filing penalties, even when no tax is due.
- Ignoring treaty disclosure: Overlooking Form 8833 or omitting a treaty-based return position may void treaty benefits.
- Incomplete related-party reporting: Not filing Form 5472 for cross-border transactions leads to steep per-form penalties.
- Improper allocation of expenses: Misallocating interest or overhead between US and foreign operations can distort taxable income and raise audit risk.
- Overlooking electronic filing rules: Corporations filing 10 or more returns a year must e-file; paper submissions can be rejected.
- Poor record-keeping: Missing 1042-S forms, apportionment schedules, or transfer pricing documentation can delay refunds and increase scrutiny.
Get expert help with filing Form 1120-F
Expanding into the US is an exciting step for any foreign company, but the tax paperwork can quickly turn that excitement into stress. Form 1120-F has layers of detail – income sourcing, treaty claims, and deadlines – that can feel overwhelming without guidance. With the right help, compliance becomes simple, and your focus can stay on growing your business, not decoding tax code.
At Taxes for Expats, our specialists are here to guide you every step of the way so you can meet US tax requirements with clarity, confidence, and peace of mind.
Stay IRS-compliant with your business abroad – we’re ready to help