Form 1120-PC: Filing Requirements and Instructions

Form 1120-PC, the U.S. Property and Casualty Insurance Company Income Tax Return, is the federal tax form used by property and casualty (P&C) insurance companies. These companies use it to report their annual income, gains, losses, deductions, and credits to calculate their income tax liability. The form is distinct from returns for other corporations because it addresses the unique financial structure of the P&C industry. It provides a framework for translating financial results from statutory accounting principles, used for state regulators, into the taxable income figures required by the Internal Revenue Code.

Filing Requirements for Form 1120-PC

A corporation must file Form 1120-PC if it qualifies as a property and casualty (P&C) insurance company. For tax purposes, a P&C insurance company is one where more than half of its business during the taxable year is issuing insurance or annuity contracts or reinsuring risks underwritten by other insurance companies. This definition distinguishes it from a life insurance company, which files Form 1120-L.

An election is available for certain small insurance companies with annual net written premiums not exceeding $2.85 million for the 2025 tax year. This election allows them to be taxed only on their net investment income. Companies that make this election still file Form 1120-PC but complete a different part of the form, focusing the tax calculation on investment earnings rather than underwriting income.

The due date for filing Form 1120-PC is the 15th day of the fourth month after the end of the corporation’s tax year, which is April 15 for calendar-year companies. An automatic six-month filing extension can be obtained by submitting Form 7004 by the original due date. An extension to file is not an extension to pay, and the company must estimate and pay its tax liability by the original deadline to avoid penalties.

Information and Documentation Needed

Before preparing Form 1120-PC, a company must assemble a comprehensive set of financial records and supporting documents. The foundation of the return is the company’s general corporate information, including its legal name, Employer Identification Number (EIN), principal business address, and the date of incorporation. The year-end income statement and the balance sheet are also necessary, as the balance sheet information is used to complete Schedule L.

The following detailed records are also required for specific schedules:

• Records of gross premiums written, return premiums paid to policyholders, and data on reinsurance assumed from or ceded to other companies.
• Reports of all losses paid to policyholders and the estimated amounts for unpaid losses at the beginning and end of the year.
• Data on loss adjustment expenses (LAE), which are the costs associated with investigating and settling claims, as well as expected salvage and subrogation recoveries.
• Detailed records of all investment income, such as taxable and tax-exempt interest, dividends received, and any capital gains or losses from the sale of investments.
• Records of all other underwriting and general business expenses not accounted for elsewhere, such as salaries, rent, and taxes.
• Information regarding tax payments, including federal estimated tax payments made and any overpayment from the prior year credited to the current year.

Completing Key Schedules and Calculations

The completion of Form 1120-PC relies on several schedules unique to insurance company taxation. These schedules translate the accounting data of a P&C insurer into figures used to determine taxable income.

Schedule A – Unearned Premiums

Schedule A calculates the change in unearned premiums, which are premiums collected for the unexpired part of a policy period. The calculation begins with the unearned premiums from the end of the prior year. The company then adds the net premiums written during the current year and subtracts the unearned premiums from the end of the current year. The result is the earned premiums for the year, which is recognized as income.

Schedule B – Losses Incurred

Schedule B determines the deduction for losses incurred. The calculation starts with the discounted unpaid losses at the end of the current tax year. To this figure, the company adds items including losses paid during the year and all loss adjustment expenses paid. From this total, several items are subtracted, including the discounted unpaid losses from the end of the prior year and the discounted estimated salvage and subrogation recoverable for the current year. The result is the total losses incurred deduction.

Part I – Taxable Income

The results from the schedules flow into Part I to calculate taxable income. Earned premiums from Schedule A are reported as income, while losses incurred from Schedule B are taken as a deduction. Investment income is added, and other underwriting and general business deductions are subtracted. The result is the company’s taxable income before any net operating loss deductions.

Part II – Tax Computation

In Part II, the tax liability is computed from the taxable income determined in Part I. The taxable income is multiplied by the 21% corporate income tax rate to find the gross tax. From this amount, the company subtracts any applicable tax credits, such as the foreign tax credit or general business credits, to find the final tax liability.

Filing and Payment Procedures

Once Form 1120-PC is completed and the tax liability is calculated, the company must follow specific procedures for filing the return and remitting any payment due. Adhering to these procedural requirements is the final step in fulfilling the company’s annual federal income tax obligation.

Most corporations are required to file their income tax returns electronically using the IRS e-file system. For companies that receive a waiver from this requirement, a paper return can be filed. The mailing address for paper returns is provided in the form’s official instructions.

Payment of any tax due must be made electronically through the Electronic Federal Tax Payment System (EFTPS). This is a free service from the Department of the Treasury that companies must enroll in to use. EFTPS allows for secure, online payments of federal taxes, including corporate income and estimated taxes.

The tax return must be signed and dated by an authorized corporate officer, such as the president, vice president, treasurer, or chief accounting officer. The signature affirms, under penalties of perjury, that the officer has examined the return and believes it to be true, correct, and complete. The company should retain a complete copy of the submitted return for its records. If the return is e-filed, the company will receive an electronic confirmation from the IRS acknowledging receipt.