Instructions For Form 1120-Pc - 2016 (Page 4 of 23) in pdf

The corporation must use electronic

part of a month the return is late, up to a

treatment of any material item. To do so,

funds transfer to make installment

maximum of 25% of the unpaid tax. The

the corporation generally must file Form

payments of estimated tax.

minimum penalty for a return that is over

3115, Application for Change in

Use Form 1120-W, Estimated Tax for

60 days late is the smaller of the tax due

Accounting Method. See the Instructions

Corporations, as a worksheet to compute

or $205 (adjusted for inflation). The

for Form 3115 for more information and

estimated tax. See the Instructions for

penalty will not be imposed if the

exceptions, including filing exceptions for

Form 1120-W.

corporation can show that the failure to file

qualified small taxpayers and filing

Penalties may apply if the corporation

on time was due to reasonable cause. See

exceptions for certain first-year tangible

does not make required estimated tax

Caution, earlier.

property changes for small business

payment deposits. See Estimated tax

taxpayers. Also, see Pub. 538.

Late payment of tax. A corporation that

penalty below.

does not pay the tax when due generally

Safe harbor method of accounting for

If the corporation overpaid estimated

may be penalized

of 1% of the unpaid

premium acquisition expenses.

tax, it may be able to get a quick refund by

tax for each month or part of a month the

Insurance companies subject to tax under

filing Form 4466, Corporation Application

tax is not paid, up to a maximum of 25% of

section 831 are provided with a safe

for Quick Refund of Overpayment of

the unpaid tax. See Caution, earlier.

harbor method of accounting for premium

Estimated Tax.

acquisition expenses. Form 3115 must be

Trust fund recovery penalty. This

filed in order to change to the safe harbor

See the instructions for lines 14c and

penalty may apply if certain excise,

method. For more information, see the

14e, Form 1120-PC, later.

income, social security, and Medicare

Instructions for Form 3115.

taxes that must be collected or withheld

Estimated tax penalty. A corporation

are not collected or withheld, or these

Certain changes in method of account-

that does not make estimated tax

taxes are not paid. These taxes are

ing for organizations to which section

payments when due may be subject to an

generally reported on:

833 applies. Blue Cross or Blue Shield

underpayment penalty for the period of

Form 720, Quarterly Federal Excise

organizations under section 833(c)(2), or

underpayment. Generally, a corporation is

Tax Return;

organizations described in section 833(c)

subject to the penalty if its tax liability is

Form 941, Employer's QUARTERLY

(3), can obtain automatic consent to

$500 or more and it did not timely pay at

Federal Tax Return;

change the method of accounting for

least the smaller of:

Form 944, Employer's ANNUAL

unearned premiums resulting from either a

Its tax liability for the current year, or

Federal Tax Return; or

failure to meet the medical loss ratio

Its prior year tax.

Form 945, Annual Return of Withheld

(MLR) requirements of section 833(c)(5),

See section 6655 for details and

Federal Income Tax.

or meeting the MLR requirements after

exceptions, including special rules for

failing to do so in a prior year. Form 3115

The trust fund recovery penalty may be

large corporations.

must be filed in order to make this change

imposed on all persons who are

Use Form 2220, Underpayment of

in accounting method. See the

determined by the IRS to be responsible

Estimated Tax by Corporations, to see if

Instructions for Form 3115.

for collecting, accounting for, or paying

the corporation owes a penalty and to

over these taxes, and who acted willfully in

See Rev. Proc. 2015-14, 2015-5 I.R.B.

figure the amount of the penalty. If Form

not doing so. The penalty is equal to the

450, or any successor. Also, see section

2220 is completed, enter the penalty on

full amount of the unpaid trust fund tax.

3.08 of Notice 2010-79, 2010-49 I.R.B.

line 15. See the instructions for line 15.

See the Instructions for Form 720 or Pub.

809 and Notice 2011-4, 2011-2 I.R.B. 282.

15 (Circular E), Employer's Tax Guide, for

Foreign insurance companies,

Accounting Period

details, including the definition of

see Notice 90-13, 1990-1 C.B.

responsible persons.

321, before computing estimated

An insurance company must figure its

CAUTION

tax.

taxable income on the basis of a tax year.

Other penalties. Other penalties can be

A tax year is the annual accounting period

imposed for negligence, substantial

Interest and Penalties

an insurance company uses to keep its

understatement of tax, reportable

records and report its income and

transaction understatements, and fraud.

expenses.

If the corporation receives a notice

See sections 6662, 6662A, and 6663.

about penalties after it files its

Accounting Methods

As a general rule under section 843,

return, send the IRS an

CAUTION

the tax year for every insurance company

explanation and we will determine if the

Figure taxable income using the method of

is the calendar year. However, if an

corporation meets reasonable cause

accounting regularly used in keeping the

insurance company joins in the filing of a

criteria. Do not attach an explanation

corporation's books and records. In all

consolidated return, it may adopt the tax

when the corporation's return is filed.

cases, the method used must clearly show

year of the common parent corporation

taxable income. Permissible methods

even if that year is not a calendar year.

Interest. Interest is charged on taxes

include cash, accrual, or any other method

paid late even if an extension of time to file

authorized by the Internal Revenue Code.

Rounding Off to Whole

is granted. Interest is also charged on

penalties imposed for failure to file,

The gross amounts of underwriting and

Dollars

negligence, fraud, substantial valuation

investment income should be computed

The corporation can round off cents to

misstatements, substantial

on the basis of the Statement of Income of

whole dollars on its return and schedules.

understatements of tax, and reportable

the NAIC annual statement to the extent

If the corporation does round to whole

transaction understatements from the due

not inconsistent with the Internal Revenue

dollars, it must round all amounts. To

date (including extensions) to the date of

Code and its Regulations. In all cases, the

round, drop amounts under 50 cents and

payment. The interest charge is figured at

method used must clearly show taxable

increase amounts from 50 to 99 cents to

a rate determined under section 6621.

income.

the next dollar. For example, $1.39

Late filing of return. A corporation that

Change in accounting method.

becomes $1 and $2.50 becomes $3.

does not file its tax return by the due date,

Generally, the corporation must get IRS

including extensions, may be penalized

consent to change either an overall

If two or more amounts must be added

5% of the unpaid tax for each month or

method of accounting or the accounting

to figure the amount to enter on a line,

Instructions for Form 1120-PC (2016)

-4-

Instructions For Form 1120-Pc - 2016 Page 4

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