Form 1120 for startups: file it every year, even with no revenue
Every domestic C corporation must file Form 1120 for each tax year, even with no revenue, no income or a loss. The return is due April 15 for a calendar year (April 15, 2027 for 2026), or October 15 with Form 7004. The federal rate is 21% of taxable income. Late filing costs 5% of the unpaid tax a month, and a loss only carries forward if it is on a filed return.
Updated · 6 min read · By the Accountable team
The short version
- The IRS requires all domestic corporations to file an income tax return whether or not they have taxable income, so a pre-revenue Delaware C corporation files Form 1120 every year.
- Form 1120 is due April 15 for a calendar year, and Form 7004 extends the filing date by six months to October 15 but not the payment date.
- The federal corporate rate is 21%, and a net operating loss deduction is limited to 80% of taxable income for losses from 2018 onward.
- A corporation with total receipts and total assets under $250,000 may skip Schedules L, M-1 and M-2, but Delaware's franchise tax still needs its gross assets from the books.
- Startup costs and organizational costs are deducted, in a limited amount, by election on the first return after the business begins.
A startup with no revenue still files Form 1120
The IRS instructions say that, unless exempt, all domestic corporations must file an income tax return whether or not they have taxable income. A Delaware C corporation is a domestic corporation, so the year it was formed, the year it raised money and the year it earned nothing each need a Form 1120.
The return also records what the company lost. A net operating loss can reduce taxable income in a later year, and the deduction is claimed on the return for that later year with a statement showing the computation. To claim a loss later, the company needs it reported on a filed return.
A company formed partway through the year files a short-period return, due the 15th day of the fourth month after that short period ends.
The due dates are April 15 and, with an extension, October 15
| Item | Rule |
|---|---|
| Filing due date | The 15th day of the fourth month after year end: April 15, 2027 for 2026 |
| Extension | Form 7004 by the regular due date gives six months to file: October 15, 2027 |
| Payment due date | The regular due date, extension or not; interest runs from then |
| Late filing penalty | 5% of the unpaid tax a month or part of a month, up to 25% |
| Minimum late filing penalty | The smaller of the tax due or $525, for returns due in 2026 that are more than 60 days late |
| Late payment penalty | One half of 1% of the unpaid tax a month or part of a month, up to 25% |
| Underpayment of estimated tax | May apply when the tax is $500 or more and installments were short |
| Electronic filing | Required for a corporation that files 10 or more returns of any type in the year |
The 10-return rule catches nearly every startup with employees, because payroll returns and W-2s and 1099s count toward the 10. Expect to e-file.
A corporation that owes no tax at the deadline has no tax for the 5% penalty to apply to, so the dollar cost of a late return is usually small. The cost of skipping it is in the loss carryforward and in penalties on forms that ride along with the return, such as Form 5472.
A $310,000 loss in year one lowers the year-two tax bill from $105,000 to $39,900
Year 1: revenue $0, deductible expenses $310,000. Taxable income is a loss of $310,000. Tax owed: $0. File Form 1120 anyway.
Year 2: income before the loss deduction is $500,000.
Loss limit: 80% of $500,000 = $400,000. The available loss is $310,000, which is below the limit, so the full $310,000 is deductible.
Taxable income: $500,000 - $310,000 = $190,000. Tax at 21% = $39,900.
Without the filed year-1 loss: $500,000 x 21% = $105,000.
Real returns depend on which costs are deductible when, including the research costs covered in the section 174 guide. Ask your CPA how your own numbers land.
Schedule K questions decide which other forms ride along
Form 1120 has a Schedule K of yes-or-no questions that trigger extra forms. The one that catches startups most often is foreign ownership: a corporation that is at least 25% foreign-owned and had a reportable transaction with a related party files Form 5472 with the return, and the penalty for failing to is $25,000.
Schedules L, M-1 and M-2 are the balance sheet and two reconciliations. A corporation with total receipts and total assets under $250,000 at year end is not required to complete them if it answers Schedule K's question 13 yes. One with total assets of $10 million or more files Schedule M-3 instead of M-1.
- Form 1125-E for officer compensation, if total receipts are $500,000 or more.
- Form 4562 for depreciation and for the election to deduct start-up and organizational costs.
- Form 6765 for the research credit, including the election to use it against payroll tax (see the R&D credit guide).
Start-up costs are deducted by election on the first return
A corporation can elect to deduct a limited amount of start-up and organizational costs. The rest must generally be amortized over 180 months. The election is made by claiming the deduction on the return filed by its due date, including extensions, for the year the active business begins.
If the return was filed on time without the election, the corporation can still elect by filing an amended return within six months of the due date, excluding extensions. Choosing to capitalize instead is irrevocable, and applies to all start-up costs of that business.
Filing takes six steps once the year is closed
Step 1: Close the last month of the year, so every account is categorized and reconciled to its bank statement.
Step 2: Pull the year's profit and loss, balance sheet and general ledger, plus the cap table and any loan or SAFE documents.
Step 3: Send them to your CPA, along with the payroll reports and the 1099 list.
Step 4: Decide by March 15 whether to file by April 15 or request an extension with Form 7004.
Step 5: If you extend, pay your best estimate of the tax with Form 7004 by April 15, because the extension does not extend payment.
Step 6: E-file the return, keep the filing confirmation, and record any tax paid.
Accountable does not prepare or file the return. Its Tax › Return tab has the year's package for your CPA, ready to download once every month of the year is closed, and you can invite your CPA to read it in Accountable.
Questions founders ask
Do I need to file a tax return if my startup had no revenue?
Yes. The IRS says all domestic corporations must file an income tax return whether or not they have taxable income. A C corporation with no revenue files Form 1120 and reports its loss.
When is Form 1120 due?
April 15 for a calendar-year corporation, so April 15, 2027 for 2026. Form 7004 extends the filing date six months to October 15, but any tax owed is still due April 15.
What is the penalty for filing Form 1120 late?
5% of the unpaid tax for each month or part of a month, up to 25%. For returns due in 2026 that are more than 60 days late, the minimum is the smaller of the tax due or $525.
What tax rate does a C corporation pay?
The IRS instructions multiply taxable income by 21%. A startup with a loss owes nothing for the year.
Does a Delaware C corporation file in Delaware too?
It pays Delaware's franchise tax and files an annual report by March 1. A corporation that does business in Delaware also files a Delaware corporate income tax return by April 15.
The year's package for your CPA, once the year is closed
Accountable closes every month by the 1st. Tax › Return then holds the year's package for your CPA to download, so the return starts from reconciled books.
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