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IRSCorporate Tax (1120 Series)

Official form guide

Form 1120FM1: 1120-F Schedules M-1, M-2

Form 1120-F Schedules M-1 and M-2 reconcile a foreign corporation’s taxable income and its book income, and track its earnings and profits. They are attached to the main Form 1120-F filing for a U.S. tax year.

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Form Overview

IRS Form 1120FM1 - 1120-F Schedules M-1, M-2

Form 1120-F Schedules M-1 and M-2 reconcile a foreign corporation’s taxable income and its book income, and track its earnings and profits. They are attached to the main Form 1120-F filing for a U.S. tax year.

Schedule M-1 reports differences between book and tax income; Schedule M-2 reports the corporation’s beginning and ending earnings and profits.

Risk Radar

Scan points
  • 1A single mis‑calculated earnings‑and‑profits figure can trigger a penalty.
  • 2Mismatched beginning and ending earnings‑and‑profits balances
  • 3Forgot to adjust for tax‑exempt interest or foreign tax credits
  • 4Arithmetic errors between Schedule M‑1 and the main form
  • 5Using book income from a different accounting method

Plain English

These schedules show how a foreign company’s accounting profit turns into the profit the IRS taxes, and they keep a running total of the company’s earnings that have already been taxed. You fill them out whenever you file a Form 1120-F for a calendar or fiscal year.

Submission Date

  • Filing date: 2025-12-22 12:10:42
  • Preparation window: collect IDs, supporting records, and signatures in advance.
  • Final review: verify names, dates, and required fields before submission.

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Glossary Terms

fiscal yearforeignincomefiscal

Hover a term to preview the meaning.

What this form is for

  • Use when a foreign corporation has U.S. source taxable income.
  • Do not use if the corporation files Form 1120‑L (limited partnership) or Form 1120‑S (S corporation).
  • Check Form 1120‑F instructions if the corporation has no U.S. source income but still needs to file.

Form selector

Use this form or another form?

No U.S. source income

No Schedule M‑1/M‑2 required

✓ Verify source‑income threshold

Form 1120‑F with no schedules

Foreign corporation elects to be treated as a domestic corporation

Different earnings‑and‑profits rules

✓ Confirm election filing

Form 1120

Deadline or filing window

The filing deadline is the 15th day of the fourth month after the corporation’s tax year ends. If the due date falls on a weekend or holiday, the deadline moves to the next business day. Extensions can be requested with Form 7004, extending the deadline by six months.

  • —Taxable income (Schedule M‑1) | Book income +/- adjustments | Taxable income | Verify all adjustments are allowed

Checklist

What you need before filling it out

1

Schedule M‑1 line 1 – Book income

Financial statements · Income statement

⚠ Using GAAP vs. tax basis✕ Medium
2

Schedule M‑1 line 2 – Tax‑exempt interest

1099‑INT or bank statements · Interest statements

⚠ Forgetting to exclude✕ Low
3

Schedule M‑2 beginning balance

Prior year Schedule M‑2 · Prior year filing copy

⚠ Transposition error✕ High
4

Schedule M‑2 distributions

Board minutes or dividend vouchers · Distribution records

⚠ Missing small cash payouts✕ Medium

Before you submit

  1. 1All required signatures are present
  2. 2Form 1120‑F and both schedules are attached in the correct order
  3. 3Totals on Schedule M‑1 match the taxable income line on Form 1120‑F
  4. 4Beginning earnings‑and‑profits equals prior year ending balance
  5. 5All arithmetic checked with a calculator or spreadsheet
  6. 6Attachments (e.g., statements for adjustments) are included
  7. 7Correct IRS mailing address or e‑file transmission confirmation
  8. 8Copy of the filing retained for records

How to file this form

  1. 1Prepare the corporation’s year‑end financial statements.
  2. 2Complete Schedule M‑1 line‑by‑line using the adjustments list in the instructions.
  3. 3Calculate beginning earnings‑and‑profits from last year’s Schedule M‑2.
  4. 4Enter current year taxable income, subtract distributions, and compute ending earnings‑and‑profits on Schedule M‑2.
  5. 5Transfer the Schedule totals to the appropriate lines on Form 1120‑F.
  6. 6Review all numbers, sign, and attach schedules.
  7. 7Mail to the IRS address or submit electronically via approved software.

Known limitations

  1. 1Instructions do not detail every possible tax adjustment; consult a tax professional for complex items.
  2. 2The form does not accept electronic signatures; a physical signature is required for paper filing.
  3. 3Earnings‑and‑profits calculations rely on consistent accounting methods across years.
  4. 4IRS may update the form after the 2024 edition; always verify the latest version before filing.

Field map

Compact field-by-field guide

9 fields

Entity Info

2 items

Corporation Name and EIN

Full legal name of the corporation and its Employer Identification Number.

Requiredtext
Address and Date Incorporated

Current mailing address and date of incorporation.

Requiredtext

Income

3 items

Gross Receipts or Sales

Total revenue from business operations before deducting costs.

Requiredamount
Cost of Goods Sold

Direct costs attributable to producing goods sold by the corporation.

amount
Total Income

Gross receipts minus cost of goods sold and returns/allowances.

Requiredamount

Deductions

1 items

Total Deductions

Sum of all business expenses including compensation, rent, interest, taxes, and depreciation.

Requiredamount

Tax

2 items

Taxable Income

Total income minus total deductions.

Requiredamount
Total Tax

Tax calculated on taxable income using the applicable corporate tax rate, minus any credits.

Requiredamount

Signatures

1 items

Officer Signature

An authorized corporate officer must sign and date the return.

Requiredsignature
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Current form status
IRS

Form 1120-F and its schedules are currently in the 2024 edition. The IRS updates the form annually; verify the edition date before filing.

What changed or needs a fresh check

  • Edition date – verify the form is the 2024 version
  • Fee – no filing fee for Form 1120‑F, but check for any state fees
  • Mailing address – use the address in the 2024 instructions
  • Electronic filing eligibility – confirm software supports Schedule M‑1/M‑2
  • Signature line – ensure an authorized officer signs

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Quick Facts

Foreign corporations that have U.S. source income and must file Form 1120-F file these schedules.
Schedule M-1 reports differences between book and tax income; Schedule M-2 reports the corporation’s beginning and ending earnings and profits.
File with the Form 1120-F by the 15th day of the fourth month after the corporation’s tax year ends (generally April 15 for calendar‑year filers).
Mail the completed Form 1120-F and attached Schedules M‑1 and M‑2 to the IRS address listed in the Form 1120-F instructions, or e‑file if the software supports it.
Errors on these schedules cause mismatched earnings‑and‑profits calculations, leading to penalties, interest, or an audit trigger.
1. Gather the corporation’s financial statements for the year. 2. Reconcile book income to taxable income line‑by‑line on Schedule M‑1, noting tax‑adjusted items. 3. Compute beginning earnings‑and‑profits from the prior year’s Schedule M‑2, add current year taxable income, subtract distributions, and record the ending balance on Schedule M‑2. 4. Transfer totals to the appropriate lines on Form 1120-F and review for arithmetic accuracy.

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After you file

  1. 1Keep a complete copy of the filed Form 1120‑F and schedules.
  2. 2Store supporting documents (financial statements, adjustment calculations) for at least three years.
  3. 3Monitor any IRS notices for mismatched earnings‑and‑profits balances.
  4. 4If an extension was filed, note the new due date and file by that deadline.
  5. 5Update the beginning earnings‑and‑profits balance for the next year’s Schedule M‑2.
  6. 6Record the filing date and confirmation number (if e‑filed) in the corporate records.

Sources

  • SRCForm 1120‑F instructionsschedule descriptions
  • SRCIRS Publication 542corporate earnings and profits
  • SRCIRS Form 1120‑F 2024 editionlayout and deadline statement
  • SRCIRS Form 7004 instructionsextension rules
  • SRCIRS e‑file eligibility listconfirms electronic filing option
  • SRCNot clearly stated in the provided official source

Common confusion points

Book income vs. tax income

Different accounting bases cause mismatched numbers

→ Verify the accounting method used

Where to report foreign tax credits

Credits appear on Form 1120‑F, not Schedule M‑1

→ Check credit lines in the main form

Beginning earnings‑and‑profits

Often taken from the prior year’s Schedule M‑2

→ Re‑open last year’s filing to confirm

Treatment of nondeductible expenses

May be added back on Schedule M‑1

→ Review the adjustment list carefully

Distribution timing

Distributions made after year‑end affect next year’s Schedule M‑2

→ Align dates with corporate records

Workflow map

Related forms and next steps

5 signals

Before

Form 1120‑F – main corporate income tax return

Current

1120FM1

After

Form 7004 – request for filing extension if needed

Often used with

Schedule M‑1 – reconciles book to tax incomeSchedule M‑2 – tracks earnings and profits

⚠ If something goes wrong

  • Form 1120‑X – amendment of Form 1120‑F

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Public DomainCreated by the U.S. federal government. Not subject to copyright (17 USC § 105). Freely copyable without restriction.
Public DomainCreated by the U.S. federal government. Not subject to copyright (17 USC § 105). Freely copyable without restriction.
Public DomainCreated by the U.S. federal government. Not subject to copyright (17 USC § 105). Freely copyable without restriction.
Public DomainCreated by the U.S. federal government. Not subject to copyright (17 USC § 105). Freely copyable without restriction.
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