IRSForm1120Instructions–2014.pdf

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2014
Instructions for Form 1120
U.S. Corporation Income Tax Return

Department of the Treasury
Internal Revenue Service

Section references are to the Internal Revenue
Code unless otherwise noted.
Contents Page
Photographs of Missing Children . . . . 1
Unresolved Tax Issues . . . . . . . . . . . 1
Direct Deposit of Refund . . . . . . . . . . 2
How To Make a Contribution To

Reduce Debt Held by the
Public . . . . . . . . . . . . . . . . . . . 2

How To Get Forms and
Publications . . . . . . . . . . . . . . . 2

General Instructions . . . . . . . . . . . . . 2
Purpose of Form . . . . . . . . . . . . . . . 2
Who Must File . . . . . . . . . . . . . . . . 2
When To File . . . . . . . . . . . . . . . . . 3
Where To File . . . . . . . . . . . . . . . . . 3
Who Must Sign . . . . . . . . . . . . . . . . 3
Paid Preparer Authorization . . . . . . . . 4
Assembling the Return . . . . . . . . . . . 4
Tax Payments . . . . . . . . . . . . . . . . 4
Estimated Tax Payments . . . . . . . . . 4
Interest and Penalties . . . . . . . . . . . . 4
Accounting Methods . . . . . . . . . . . . 5
Accounting Period . . . . . . . . . . . . . . 5
Rounding Off to Whole Dollars . . . . . . 5
Recordkeeping . . . . . . . . . . . . . . . . 5
Other Forms and Statements That

May Be Required . . . . . . . . . . . 5
Specific Instructions . . . . . . . . . . . . . 6
Period Covered . . . . . . . . . . . . . . . 6
Name and Address . . . . . . . . . . . . . 7
Identifying Information . . . . . . . . . . . 7
Employer Identification Number

(EIN) . . . . . . . . . . . . . . . . . . . 7
Total Assets . . . . . . . . . . . . . . . . . . 8
Initial Return, Final Return, Name

Change, or Address
Change . . . . . . . . . . . . . . . . . . 8

Income . . . . . . . . . . . . . . . . . . . . . 8
Deductions . . . . . . . . . . . . . . . . . . 9
Schedule C. Dividends and

Special Deductions . . . . . . . . . 15
Schedule J. Tax Computation and

Payment . . . . . . . . . . . . . . . . 17
Schedule K. Other Information . . . . . 19
Schedule L. Balance Sheets per

Books . . . . . . . . . . . . . . . . . . 21
Schedule M-1. Reconciliation of

Income (Loss) per Books With
Income per Return . . . . . . . . . . 21

Principal Activity
Codes . . . . . . . . . . . . . . . . . 23

Index . . . . . . . . . . . . . . . . . . . . . 26

Future Developments
For the latest information about
developments related to Form 1120 and
its instructions, such as legislation

enacted after they were published, go to
www.irs.gov/form1120.

What’s New
Information reporting requirements for
health insurance offers and coverage.
Under the Affordable Care Act, employers
that offer (or fail to offer) and others that
provide minimum essential coverage to
individuals are required under sections
6055 and 6056 to provide certain
information to the IRS and to the
individuals. The information is required for
calendar years beginning after December
31, 2014, but may voluntarily be filed with
the IRS and provided to individuals for
2014. For more information, see the final
regulations under sections 6055 and
6056. Also, for information related to the
Affordable Care Act, visit www.irs.gov/
ACA.
Deduction and capitalization of expen­
ditures related to tangible property.
Final regulations under sections 162(a)
and 263(a) provide guidance for taxpayers
that acquire, produce or improve tangible
property. The final regulations clarify and
expand the standards of previous
regulations under sections 162(a) and
263(a). The regulations generally apply to
tax years beginning after 2013. However,
certain provisions may retroactively be
applied to tax years beginning after 2011.
See TD 9636, 2013-43 I. R. B. 331, at
www.irs.gov/irb/2013-43.
Schedule M­3. For tax years ending
December 31, 2014, and later, Form 1120
filers that (a) are required to file
Schedule M-3 (Form 1120) and have less
than $50 million total assets at the end of
the tax year or (b) are not required to file
Schedule M-3 (Form 1120) and voluntarily
file Schedule M-3 (Form 1120), must
either complete Schedule M-3 (Form
1120) entirely or complete Form 1120,
Schedule M-1, instead of completing Parts
II and III of Schedule M-3 (Form 1120).
These filers are not required to file
Schedule B (Form 1120) nor Form
8916-A, Supplemental Attachment to
Schedule M-3. If these filers choose to
complete Form 1120, Schedule M-1,
instead of completing Parts II and III of
Schedule M-3 (Form 1120), line 1 of Form
1120, Schedule M-1, must equal line 11 of
Part I of Schedule M-3 (Form 1120). See
Schedule M-3 (Form 1120) and
Schedule M-1. Reconciliation of Income

(Loss) per Books With Income per Return,
later in the instructions.
Online payment agreement. The
corporation may be able to apply for an
installment agreement online if it has a
balance due when the corporation’s return
is filed. See the instructions for line 34.

Photographs of
Missing Children
The Internal Revenue Service is a proud
partner with the National Center for
Missing and Exploited Children.
Photographs of missing children selected
by the Center may appear in instructions
on pages that would otherwise be blank.
You can help bring these children home
by looking at the photographs and calling
1-800-THE-LOST (1-800-843-5678) if you
recognize a child.

Unresolved Tax Issues
The Taxpayer Advocate Service (TAS) is
your voice at the IRS. Its job is to ensure
that every taxpayer is treated fairly and
that you know and understand your rights.
TAS offers free help to guide you through
the often-confusing process of resolving
tax problems that you haven’t been able to
solve on your own. Remember, the worst
thing you can do is nothing at all.

As a taxpayer, the corporation has
rights that the IRS must abide by in its
dealings with the corporation. The TAS tax
toolkit at www.taxpayeradvocate.irs.gov/
can help the corporation understand these
rights.

TAS can help the corporation if:
A problem is causing financial difficulty

for the business.
The business is facing an immediate

threat of adverse action.
The corporation has tried repeatedly to

contact the IRS but no one has
responded, or the IRS hasn’t responded
by the date promised.

TAS have offices in every state, the
District of Columbia, and Puerto Rico.
Local advocates’ numbers are in their
local directories and at www.irs.gov/
Advocate/Local-Taxpayer-Advocate. The
corporation can also call TAS at
1-877-777-4778.

TAS also handles large-scale or
systemic problems that affect many
taxpayers. If the corporation knows of one
of these broad issues, please report it to
us through the Systemic Advocacy

Jan 08, 2015 Cat. No. 11455T

http://www.irs.gov/form1120

http://www.irs.gov/ACA

http://www.irs.gov/ACA

http://www.irs.gov/irb/2013-43_IRB/ar05.html

http://www.irs.gov/advocate

http://www.irs.gov/Advocate/Local-Taxpayer-Advocate

http://www.irs.gov/Advocate/Local-Taxpayer-Advocate

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Management System at www.irs.gov/
sams.

For more information, go to
www.irs.gov/advocate.

Direct Deposit of Refund
To request a direct deposit of the
corporation’s income tax refund into an
account at a U.S. bank or other financial
institution, attach Form 8050, Direct
Deposit of Corporate Tax Refund. See the
instructions for line 36.

How To Make a
Contribution To Reduce
Debt Held by the Public
To help reduce debt held by the public,
make a check payable to “Bureau of the
Public Debt.” Send it to: Bureau of the
Public Debt, Department G, P.O. Box
2188, Parkersburg, WV 26106-2188. Or,
enclose a check with the income tax
return.

Do not add the contributions to any tax
the corporation may owe. Contributions to
reduce debt held by the public are
deductible subject to the rules and
limitations for charitable contributions.

How To Get Forms
and Publications
Internet. You can access the IRS website
24 hours a day, 7 days a week, at IRS.gov
to:

Download forms, instructions, and
publications;

Order IRS products online;
Research your tax questions online;
Search publications online by topic or

keyword;
View Internal Revenue Bulletins (IRBs)

published in recent years; and
Sign up to receive local and national tax

news by email.
Tax forms and publications. The
corporation can download or print all of the
forms and publications it may need on
www.irs.gov/formspubs. Otherwise the
corporation can:

Go to www.irs.gov/orderforms to place
an order and have forms mailed to it, or

Call 1-800-829-3676 to order current
year forms, instructions, publications and
prior year forms and instructions (limited to
5 years).
The corporation should receive its order
within 10 business days.

General Instructions
Purpose of Form
Use Form 1120, U.S. Corporation Income
Tax Return, to report the income, gains,
losses, deductions, credits, and to figure
the income tax liability of a corporation.

Who Must File
Unless exempt under section 501, all
domestic corporations (including
corporations in bankruptcy) must file an
income tax return whether or not they
have taxable income. Domestic
corporations must file Form 1120, unless
they are required, or elect to file a special
return. See Special Returns for Certain
Organizations, below.
Entities electing to be taxed as corpo­
rations. A domestic entity electing to be
classified as an association taxable as a
corporation must file Form 1120, unless it
is required to, or elects to file a special
return listed under Special Returns for
Certain Organizations, below. The entity
must also file Form 8832, Entity
Classification Election, and attach a copy
of Form 8832 to Form 1120 (or the
applicable return) for the year of the
election. For more information, see Form
8832 and its instructions.
Limited liability companies (LLC). If an
entity with more than one owner was
formed as an LLC under state law, it
generally is treated as a partnership for
federal income tax purposes and files
Form 1065, U.S. Return of Partnership
Income. Generally, a single-member LLC
is disregarded as an entity separate from
its owner and reports its income and
deductions on its owner’s federal income
tax return. The LLC can file a Form 1120
only if it has filed Form 8832 to elect to be
treated as an association taxable as a
corporation. For more information about
LLCs, see Pub. 3402, Taxation of Limited
Liability Companies.
Corporations engaged in farming. A
corporation (other than a corporation that
is a subchapter T cooperative) that
engages in farming should use Form 1120
to report the income (loss) from such
activities. Enter the income and
deductions of the corporation according to
the instructions for lines 1 through 10 and
12 through 29.
Ownership interest in a Financial As­
set Securitization Investment Trust
(FASIT). Special rules apply to a FASIT in
existence on October 22, 2004, to the
extent that regular interests issued by the
FASIT before October 22, 2004, continue
to remain outstanding in accordance with
their original terms.

If a corporation holds an ownership
interest in a FASIT to which these special
rules apply, it must report all items of
income, gain, deductions, losses, and
credits on the corporation’s income tax
return (except as provided in section
860H). Show a breakdown of the items on
an attached statement. For more
information, see sections 860H and 860L
(repealed with certain exceptions).

Special Returns for
Certain Organizations

Instead of filing Form 1120, certain organizations,
as shown below, file special returns.
If the organization is a: File Form

▼ ▼

Exempt organization
with unrelated trade or
business income

990­T

Religious or apostolic
organization exempt
under section 501(d)

1065

Entity formed as a
limited liability company
under state law and
treated as a partnership
for federal income tax
purposes

1065

Subchapter T
cooperative association
(including a farmers’
cooperative)

1120­C

Entity that elects to be
treated as a real estate
mortgage investment
conduit (REMIC) under
section 860D

1066

Interest charge domestic
international sales
corporation (section 992)

1120­IC­DISC

Foreign corporation
(other than life and
property and casualty
insurance company filing
Form 1120-L or Form
1120-PC)

1120­F

Foreign sales
corporation (section 922) 1120­FSC

Condominium
management, residential
real estate
management, or
timeshare association
that elects to be treated
as a homeowners
association under
section 528

1120­H

Life insurance company
(section 801) 1120­L

Fund set up to pay for
nuclear
decommissioning costs
(section 468A)

1120­ND

Property and casualty
insurance company
(section 831)

1120­PC

Political organization
(section 527) 1120­POL

Real estate investment
trust (section 856) 1120­REIT

­2­ Instructions for Form 1120

http://www.irs.gov/Advocate/Systemic-Advocacy-Management-System-SAMS

http://www.irs.gov/Advocate/Systemic-Advocacy-Management-System-SAMS

http://www.irs.gov/advocate

http://www.irs.gov/formspubs

http://www.irs.gov/Forms-&-Pubs/Order-Products

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Regulated investment
company (section 851) 1120­RIC

S corporation (section
1361) 1120S

Settlement fund
(section 468B) 1120­SF

Electronic Filing
Corporations can generally electronically
file (e-file) Form 1120, related forms,
schedules, and attachments, Form 7004
(automatic extension of time to file) and
Forms 940, 941, and 944 (employment tax
returns). If there is a balance due, the
corporation can authorize an electronic
funds withdrawal while e-filing. Form 1099
and other information returns can also be
electronically filed. The option to e-file
does not, however, apply to certain
returns.

Certain corporations with total assets of
$10 million or more that file at least 250
returns a year are required to e-file Form
1120. See Regulations section
301.6011-5. However, these corporations
can request a waiver of the electronic filing
requirements. See Notice 2010-13,
2010-4 I.R.B. 327.

For more information, visit www.irs.gov/
Filing. Click on the “Self-Employed &
Small-es” and “Corporations”
links.

When To File
Generally, a corporation must file its
income tax return by the 15th day of the
3rd month after the end of its tax year. A
new corporation filing a short-period return
must generally file by the 15th day of the
3rd month after the short period ends. A
corporation that has dissolved must
generally file by the 15th day of the 3rd
month after the date it dissolved.

If the due date falls on a Saturday,
Sunday, or legal holiday, the corporation
can file on the next business day.
Private Delivery Services
Corporations can use certain private
delivery services designated by the IRS to
meet the “timely mailing as timely filing”
rule for tax returns. These private delivery
services include only the following.

Federal Express (FedEx): FedEx
Priority Overnight, FedEx Standard
Overnight, FedEx 2Day, FedEx
International Priority, and FedEx
International First.

United Parcel Service (UPS): UPS Next
Day Air, UPS Next Day Air Saver, UPS
2nd Day Air, UPS 2nd Day Air A.M., UPS
Worldwide Express Plus, and UPS
Worldwide Express.

The private delivery service can tell you
how to get written proof of the mailing
date.

For the IRS mailing address to use if
you are using a private delivery service, go
to IRS.gov and enter “private delivery
services” in the search box.

Private delivery services cannot
deliver items to P.O. boxes. You
must use the U.S. Postal Service

to mail any item to an IRS P.O. box
address.

Extension of Time To File
File Form 7004, Application for Automatic
Extension of Time To File Certain
Income Tax, Information, and
Other Returns, to request a 6-month
extension of time to file. Generally, the
corporation must file Form 7004 by the
regular due date of the return. See the
Instructions for Form 7004.

Who Must Sign
The return must be signed and dated by:

The president, vice president, treasurer,
assistant treasurer, chief accounting
officer; or

CAUTION
!

Any other corporate officer (such as tax
officer) authorized to sign.

If a return is filed on behalf of a
corporation by a receiver, trustee, or
assignee, the fiduciary must sign the
return, instead of the corporate officer.
Returns and forms signed by a receiver or
trustee in bankruptcy on behalf of a
corporation must be accompanied by a
copy of the order or instructions of the
court authorizing signing of the return or
form.

If an employee of the corporation
completes Form 1120, the paid preparer
space should remain blank. Anyone who
prepares Form 1120 but does not charge
the corporation should not complete that
section. Generally, anyone who is paid to
prepare the return must sign it and fill in
the “Paid Preparer Use Only” area.

The paid preparer must complete the
required preparer information and:

Sign the return in the space provided for
the preparer’s signature.

Give a copy of the return to the
taxpayer.
Note. A paid preparer may sign original or
amended returns by rubber stamp,

Where To File
File the corporation’s return at the applicable IRS address listed below.

If the corporation’s principal
business, office, or agency
is located in:

And the total assets at
the end of the tax year
are: Use the following address:

Connecticut, Delaware, District
of Columbia, Florida, Georgia,
Illinois, Indiana, Kentucky,
Maine, Maryland,
Massachusetts, Michigan,
New Hampshire, New Jersey,
New York, North Carolina,
Ohio, Pennsylvania, Rhode
Island, South Carolina,
Tennessee, Vermont, Virginia,
West Virginia, Wisconsin

Less than $10 million
and Schedule M-3 is not

filed

Department of the Treasury
Internal Revenue Service Center
Cincinnati, OH 45999-0012

$10 million or more or
less than $10 million and

Schedule M-3 is filed

Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0012

Alabama, Alaska, Arizona,
Arkansas, California,
Colorado, Hawaii, Idaho, Iowa,
Kansas, Louisiana, Minnesota,
Mississippi, Missouri,
Montana, Nebraska, Nevada,
New Mexico, North Dakota,
Oklahoma, Oregon, South
Dakota, Texas, Utah,
Washington, Wyoming

Any amount
Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0012

A foreign country or U.S.
possession Any amount

Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409

A group of corporations with members located in more than one service center area will
often keep all the books and records at the principal office of the managing corporation.
In this case, the tax returns of the corporations may be filed with the service center for
the area in which the principal office of the managing corporation is located.

Instructions for Form 1120 ­3­

http://www.irs.gov/Filing

http://www.irs.gov/Filing

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mechanical device, or computer software
program.

Paid Preparer
Authorization
If the corporation wants to allow the IRS to
discuss its 2014 tax return with the paid
preparer who signed it, check the “Yes”
box in the signature area of the return.
This authorization applies only to the
individual whose signature appears in the
“Paid Preparer Use Only” section of the
return. It does not apply to the firm, if any,
shown in that section.

If the “Yes” box is checked, the
corporation is authorizing the IRS to call
the paid preparer to answer any questions
that may arise during the processing of its
return. The corporation is also authorizing
the paid preparer to:

Give the IRS any information that is
missing from the return,

Call the IRS for information about the
processing of the return or the status of
any related refund or payment(s), and

Respond to certain IRS notices about
math errors, offsets, and return
preparation.

The corporation is not authorizing the
paid preparer to receive any refund check,
bind the corporation to anything (including
any additional tax liability), or otherwise
represent the corporation before the IRS.

The authorization will automatically end
no later than the due date (excluding
extensions) for filing the corporation’s
2015 tax return. If the corporation wants to
expand the paid preparer’s authorization
or revoke the authorization before it ends,
see Pub. 947, Practice Before the IRS and
Power of Attorney.

Assembling the Return
To ensure that the corporation’s tax return
is correctly processed, attach all
schedules and other forms after page 5 of
Form 1120 in the following order.

1. Schedule N (Form 1120).
2. Schedule D (Form 1120).
3. Schedule O (Form 1120).
4. Form 4626.
5. Form 8050.
6. Form 1125-A.
7. Form 4136.
8. Form 8941.
9. Form 3800.
10. Additional schedules in

alphabetical order.
11. Additional forms in numerical order.
12. Supporting statements and

attachments.
Complete every applicable entry space

on Form 1120. Do not enter “See

Attached” or “Available Upon Request”
instead of completing the entry spaces. If
more space is needed on the forms or
schedules, attach separate sheets using
the same size and format as the printed
forms.

If there are supporting statements and
attachments, arrange them in the same
order as the schedules or forms they
support and attach them last. Show the
totals on the printed forms. Enter the
corporation’s name and EIN on each
supporting statement or attachment.

Tax Payments
Generally, the corporation must pay any
tax due in full no later than the 15th day of
the 3rd month after the end of the tax year.
See the instructions for line 34.
Electronic Deposit
Requirement
Corporations must use electronic funds
transfer to make all federal tax deposits
(such as deposits of employment, excise,
and corporate income tax). Generally,
electronic funds transfers are made using
the Electronic Federal Tax Payment
System (EFTPS). However, if the
corporation does not want to use EFTPS,
it can arrange for its tax professional,
financial institution, payroll service, or
other trusted third party to make deposits
on its behalf. Also, it may arrange for its
financial institution to submit a same-day
payment (discussed below) on its behalf.
EFTPS is a free service provided by the
Department of the Treasury. Services
provided by a tax professional, financial
institution, payroll service, or other third
party may have a fee.

To get more information about EFTPS
or to enroll in EFTPS, visit www.eftps.gov,
or call 1-800-555-4477 (TTY/TDD
1-800-733-4829).
Depositing on time. For any deposit
made by EFTPS to be on time, the
corporation must submit the deposit by 8
p.m. Eastern time the day before the date
the deposit is due. If the corporation uses
a third party to make deposits on its
behalf, they may have different cutoff
times.
Same­day wire payment option. If the
corporation fails to submit a deposit
transaction on EFTPS by 8 p.m. Eastern
time the day before the date a deposit is
due, it can still make its deposit on time by
using the Federal Tax Collection Service
(FTCS). To use the same-day wire
payment method, the corporation will need
to make arrangements with its financial
institution ahead of time regarding
availability, deadlines, and costs.
Financial institutions may charge a fee for
payments made this way. To learn more
about the information the corporation will

need to provide to its financial institution to
make a same-day wire payment, visit the
IRS website at www.irs.gov/e-pay and
click on “Same-Day Wire Federal Tax
Payments.”

Estimated Tax Payments
Generally, the following rules apply to the
corporation’s payments of estimated tax.

The corporation must make installment
payments of estimated tax if it expects its
total tax for the year (less applicable
credits) to be $500 or more.

The installments are due by the 15th
day of the 4th, 6th, 9th, and 12th months
of the tax year. If any date falls on a
Saturday, Sunday, or legal holiday, the
installment is due on the next regular
business day.

The corporation must use electronic
funds transfer to make installment
payments of estimated tax.

Use Form 1120-W, Estimated Tax for
Corporations, as a worksheet to compute
estimated tax. See the Instructions for
Form 1120-W.

Penalties may apply if the corporation
does not make required estimated tax
payment deposits. See Estimated tax
penalty, below.

If the corporation overpaid estimated
tax, it may be able to get a quick refund by
filing Form 4466, Corporation Application
for Quick Refund of Overpayment of
Estimated Tax. See the instructions for
Schedule J, Part II, line 14, later.
Estimated tax penalty. A corporation
that does not make estimated tax
payments when due may be subject to an
underpayment penalty for the period of
underpayment. Generally, a corporation is
subject to the penalty if its tax liability is
$500 or more and it did not timely pay at
least the smaller of:

Its tax liability for the current year, or
Its prior year’s tax.
Use Form 2220, Underpayment of

Estimated Tax by Corporations, to see if
the corporation owes a penalty and to
figure the amount of the penalty. If Form
2220 is completed, enter the penalty on
line 33. See the instructions for line 33.

Interest and Penalties
If the corporation receives a
notice about penalties after it files
its return, send the IRS an

explanation and we will determine if the
corporation meets reasonable-cause
criteria. Do not attach an explanation
when the corporation’s return is filed.
Interest. Interest is charged on taxes
paid late even if an extension of time to file
is granted. Interest is also charged on
penalties imposed for failure to file,
negligence, fraud, substantial valuation

CAUTION
!

­4­ Instructions for Form 1120

http://www.eftps.gov

http://www.irs.gov/e-pay

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misstatements, substantial
understatements of tax, and reportable
transaction understatements from the due
date (including extensions) to the date of
payment. The interest charge is figured at
a rate determined under section 6621.
Late filing of return. A corporation that
does not file its tax return by the due date,
including extensions, may be penalized
5% of the unpaid tax for each month or
part of a month the return is late, up to a
maximum of 25% of the unpaid tax. The
minimum penalty for a return that is over
60 days late is the smaller of the tax due
or $135. The penalty will not be imposed if
the corporation can show that the failure to
file on time was due to reasonable cause.
See Caution, above.
Late payment of tax. A corporation that
does not pay the tax when due generally
may be penalized 1 2 of 1% of the unpaid
tax for each month or part of a month the
tax is not paid, up to a maximum of 25% of
the unpaid tax. See Caution, above.
Trust fund recovery penalty. This
penalty may apply if certain excise,
income, social security, and Medicare
taxes that must be collected or withheld
are not collected or withheld, or these
taxes are not paid. These taxes are
generally reported on:

Form 720, Quarterly Federal Excise Tax
Return;

Form 941, Employer’s QUARTERLY
Federal Tax Return;

Form 943, Employer’s Annual Federal
Tax Return for Agricultural Employees;

Form 944, Employer’s ANNUAL
Federal Tax Return; or

Form 945, Annual Return of Withheld
Federal Income Tax.

The trust fund recovery penalty may be
imposed on all persons who are
determined by the IRS to have been
responsible for collecting, accounting for,
and paying over these taxes, and who
acted willfully in not doing so. The penalty
is equal to the full amount of the unpaid
trust fund tax. See the Instructions for
Form 720, Pub. 15 (Circular E),
Employer’s Tax Guide, or Pub. 51
(Circular A), Agricultural Employer’s Tax
Guide, for details, including the definition
of responsible persons.
Other penalties. Other penalties can be
imposed for negligence, substantial
understatement of tax, reportable
transaction understatements, and fraud.
See sections 6662, 6662A, and 6663.

Accounting Methods
Figure taxable income using the method of
accounting regularly used in keeping the
corporation’s books and records. In all
cases, the method used must clearly show
taxable income. Permissible methods

include cash, accrual, or any other method …