General Instructions

Purpose of Form

Use Form 1120-C, U.S. Income Tax Return for Cooperative Associations, to report income, gains, losses, deductions, credits, and to figure the income tax liability of the cooperative.

Who Must File

Any corporation operating on a cooperative basis under IRC section 1381 and allocating amounts to patrons on the basis of business done with or for such patrons should file Form 1120-C (including farmers' cooperatives under section 521 whether or not it has taxable income).

Exceptions.   This does not apply to organizations which are:
  • Exempt from income tax under chapter 1 (other than exempt farmers' cooperatives under section 521);

  • Subject to Part II (section 591 and following), subchapter H, chapter 1 (relating to mutual savings banks);

  • Subject to subchapter L (section 801 and following), chapter 1 (relating to insurance companies); or

  • Engaged in generating, transmitting, or otherwise furnishing electric energy or providing telephone service to persons in rural areas.

Where To File

If the cooperative's principal business, office, or agency is located in the United States, file Form 1120-C at the following address:

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

If the cooperative's principal business, office, or agency is located in a foreign country or a U.S. possession, file Form 1120-C at the following address:

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

When To File

A cooperative can file its income tax return by the 15th day of the 9th month after the end of its tax year provided it meets the requirements of section 6072(d) prior to filing. Any cooperative not meeting the requirements of section 6072(d) must file its income tax return by the 15th day of the 3rd month after the end of its tax year.

If the due date falls on a Saturday, Sunday, or legal holiday, the cooperative can file on the next business day.

Private Delivery Services

Cooperatives 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.

  • DHL Express (DHL): DHL Same Day Service.

  • 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 Business Income Tax, Information, and Other Returns, to request a 6-month extension of time to file. Generally, the cooperative 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

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

If a return is filed on behalf of a cooperative by a receiver, trustee, or assignee, the fiduciary must sign the return, instead of the cooperative officer. Returns and forms signed by a receiver or trustee in bankruptcy on behalf of a cooperative 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 cooperative completes Form 1120-C, the paid preparer space should remain blank. Anyone who prepares Form 1120-C but does not charge the cooperative 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, mechanical device, or computer software program.

Paid Preparer Authorization

If the cooperative wants to allow the IRS to discuss its 2013 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 cooperative's return. It does not apply to the firm, if any, shown in that section.

If the “Yes” box is checked, the cooperative is authorizing the IRS to call the paid preparer to answer any questions that may arise during the processing of its return. The cooperative 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 cooperative is not authorizing the paid preparer to receive any refund check, bind the cooperative to anything (including any additional tax liability), or otherwise represent the cooperative before the IRS.

The authorization will automatically end no later than the due date (excluding extensions) for filing the cooperative's 2014 tax return. If the cooperative 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 cooperative's tax return is correctly processed, attach all schedules and other forms after Form 1120-C, page 5, in the following order.

  1. Schedule N (Form 1120).

  2. Schedule D (Form 1120).

  3. Schedule O (Form 1120).

  4. Form 4626.

  5. Form 1125-A.

  6. Form 4136.

  7. Form 8941.

  8. Form 3800.

  9. Additional schedules in alphabetical order.

  10. Additional forms in numerical order.

  11. Supporting statements and attachments.

Complete every applicable entry space on Form 1120-C. 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 cooperative's name and EIN on each supporting statement or attachment.

Tax Payments

The cooperative must pay any tax due in full no later than the 15th day of the 9th month after the end of the tax year.

Electronic Deposit Requirement

Cooperatives 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 cooperative 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 initiate a same-day wire 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 deposits made by EFTPS to be on time, the cooperative must initiate the deposit by 8 p.m. Eastern time the day before the date the deposit is due. If the cooperative uses a third party to make deposits on its behalf, they may have different cutoff times.

Same-day payment option.   If the cooperative fails to initiate a deposit transaction on EFTPS by 8 p.m. Eastern time the day before the date a deposit is due, it can still make the deposit on time by using the Federal Tax Application (FTA). Before using the same-day payment option, the cooperative will need to make arrangements with its financial institution ahead of time. Please check with the financial institution regarding availability, deadlines, and costs. To learn more about making a same-day payment and download the Same-Day Payment Worksheet, visit www.eftps.gov.

Estimated Tax Payments

Generally, the following rules apply to the cooperative's payments of estimated tax.

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

  • Use Form 1120-W as a worksheet to compute estimated tax. See the Instructions for Form 1120-W.

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

  • If the cooperative 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 lines 29b and 29c.

Estimated tax penalty.   A cooperative that does not make estimated tax payments when due may be subject to an underpayment penalty for the period of underpayment. Generally, a cooperative 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 cooperative owes a penalty and to figure the amount of the penalty. If Form 2220 is completed, enter the penalty on line 30. See the instructions for line 30.

Interest and Penalties

If the cooperative receives a notice about penalties after it files its return, send the IRS an explanation and we will determine if the cooperative meets reasonable cause criteria. Do not attach an explanation when the cooperative'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 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 cooperative 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 cooperative can show that the failure to file on time was due to reasonable cause. See Caution, above.

Late payment of tax.   A cooperative that does not pay the tax when due generally may be penalized ½ 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 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 cooperative's books and records. In all cases, the method used must clearly show taxable income. Permissible methods include:  

  • Cash,

  • Accrual, or

  • Any other method authorized by the Internal Revenue Code.

See Pub. 538, Accounting Periods and Methods, for more information.

Change in accounting method.   Generally, the cooperative must get IRS consent to change the method of accounting used to report taxable income (for income as a whole or for the treatment of any material item). To do so, the cooperative generally must file Form 3115, Application for Change in Accounting Method. For more information, see the Instructions for Form 3115, and Pub. 538.

  There are some instances when the cooperative can obtain automatic consent from the IRS to change to certain accounting methods. See Rev. Proc. 2011-14, 2011-4 I.R.B. 330, as modified and clarified by Rev. Proc. 2012-19, 2012-14 I.R.B. 689, and Rev. Proc. 2012-20, 2012-14 I.R.B. 700, or any successor.

Section 481(a) adjustment.

If the cooperative's taxable income for the current tax year is figured under a method of accounting different from the method used in the preceding tax year, the cooperative may have to make an adjustment under section 481(a) to prevent amounts of income or expense from being duplicated or omitted. The section 481(a) adjustment period is generally 1 year for a net negative adjustment and 4 years for a net positive adjustment. However, in some cases, a cooperative can elect to modify the section 481(a) adjustment period. The cooperative must complete the appropriate lines of Form 3115 to make an election. See the instructions for Form 3115.

If the net section 481(a) adjustment is positive, report it on line 10 as other income. If the net section 481(a) adjustment is negative, report it on line 23 as a deduction.

Accounting Period

A cooperative must figure its taxable income on the basis of a tax year. A tax year is the annual accounting period a cooperative uses to keep its records and report its income and expenses. Generally, cooperatives can use a calendar year or a fiscal year.

Change of tax year.   Generally, a cooperative must get the consent of the IRS before changing its tax year by filing Form 1128, Application to Adopt, Change, or Retain a Tax Year. However, under certain conditions, exceptions may apply. See the Instructions for Form 1128 and Pub. 538 for more information.

Rounding Off ToWhole Dollars

The cooperative can round off cents to whole dollars on its return and schedules. If the cooperative does round to whole dollars, it must round all amounts. To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar. For example, $1.39 becomes $1 and $2.50 becomes $3.

If two or more amounts must be added to figure the amount to enter on a line, include cents when adding the amounts and round off only the total.

Recordkeeping

Keep the cooperative's records for as long as they may be needed for the administration of any provision of the Internal Revenue Code. Usually, records that support an item of income, deduction, or credit on the return must be kept for 3 years from the date the return is due or filed, whichever is later. Keep records that verify the cooperative's basis in property for as long as they are needed to figure the basis of the original or replacement property.

The cooperative should keep copies of all filed returns. They help in preparing future and amended returns and in the calculation of earnings and profits.

Other Forms and Statements That MayBe Required

Reportable transaction disclosure statement.   Disclose information for each reportable transaction in which the cooperative participated. Form 8886, Reportable Transaction Disclosure Statement, must be filed for each tax year that the federal income tax liability of the cooperative is affected by its participation in the transaction. The following are reportable transactions.
  1. Any listed transaction, which is a transaction that is the same as or substantially similar to one of the types of transactions that the IRS has determined to be a tax avoidance transaction and identified by notice, regulation, or other published guidance as a listed transaction.

  2. Any transaction offered under conditions of confidentiality for which the cooperative (or a related party) paid an advisor a fee of at least $250,000.

  3. Certain transactions for which the cooperative (or a related party) has contractual protection against disallowance of the tax benefits.

  4. Certain transactions resulting in a loss of at least $10 million in any single year or $20 million in any combination of years.

  5. Any transaction identified by the IRS by notice, regulation, or other published guidance as a “transaction of interest.

  For more information, see Regulations section 1.6011-4. Also see the Instructions for Form 8886.

Penalties.

The cooperative may have to pay a penalty if it is required to disclose a reportable transaction under section 6011 and fails to properly complete and file Form 8886. Penalties may also apply under section 6707A if the cooperative fails to file Form 8886 with its cooperative return, fails to provide a copy of Form 8886 to the Office of Tax Shelter Analysis (OTSA), or files a form that fails to include all the information required (or includes incorrect information). Other penalties, such as an accuracy-related penalty under section 6662A, may also apply. See the Instructions for Form 8886 for details on these and other penalties.

Reportable transactions by material advisors.   Material advisors to any reportable transaction must disclose certain information about the reportable transaction by filing Form 8918, Material Advisor Disclosure Statement, with the IRS. For details, see the Instructions for Form 8918.

Transfers to a cooperative controlled by the transferor.   Every significant transferor (as defined in Regulations section 1.351-3(d)) that receives stock of a cooperative in exchange for property in a nonrecognition event must include the statement required by Regulations section 1.351-3(a) on or with the transferor's tax return for the tax year of the exchange. The transferee cooperative must include the statement required by Regulations section 1.351-3(b) on or with its return for the tax year of the exchange, unless all the required information is included in any statement(s) provided by a significant transferor that is attached to the same return for the same section 351 exchange.

Dual consolidated losses.   If a cooperative incurs a dual consolidated loss (as defined in Regulations section 1.1503-2(c)(5)), the cooperative (or consolidated group) may need to attach an elective relief agreement and/or annual certification as provided in Regulations section 1.1503-2(g)(2).

Election to reduce basis under section 362(e)(2)(C).   If property is transferred to a cooperative in transfers subject to section 362(e)(2), the transferor and the acquiring cooperative may elect, under section 362(e)(2)(C), to reduce the transferor's basis in the stock received instead of reducing the acquiring corporation's basis in the property transferred. Once made, the election is irrevocable. If an election is made, a statement must be filed in accordance with Regulations section 1.362-4(d)(3). If an election was made before September 3, 2013, also see Notice 2005-70, 2005-41 I.R.B. 694, and Regulations section 1.362-4(j).

Annual information statement for elections under section 108(i).   If the cooperative made an election in 2009 or 2010 to defer income from cancellation of debt (COD) in connection with the reacquisition of an applicable debt instrument, the cooperative must attach a statement to its return beginning with the tax year following the tax year for which the cooperative made the election, and ending the first tax year all income deferred has been included in income. The statement must be labeled “Section 108(i) Information Statement” and must clearly identify, for each applicable debt instrument to which an election under section 108(i) applies, the following.
  1. Any deferred COD income that is included in income in the current tax year.

  2. Any deferred COD income that has been accelerated because of an event described in section 108(i)(5)(D) and must be included in income in the current tax year. Include a description and the date of the acceleration event.

  3. Any deferred COD income that has not been included in income in the current or prior tax years.

  4. Any deferred original issue discount (OID) deduction allowed as a deduction in the current tax year.

  5. Any deferred OID deduction that is allowed as a deduction in the current tax year because of an accelerated event described in section 108(i)(5)(D).

  6. Any deferred OID deduction that has not been deducted in the current or prior tax years.

  In addition, the cooperative must annually include a copy of the election statement it filed to make the election to defer the income. For more information on deferring the income, see the instructions for line 9.

  For more information regarding the annual information statement, see Rev. Proc. 2009-37, 2009-36 I.R.B. 309. For more information on deferring the income, see the instructions for line 9, later.

Other forms and statements.   See Pub. 542, Corporations, for a list of other forms and statements that a cooperative may need to file in addition to the forms and statements discussed throughout these instructions.


More Online Instructions