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Publication 542



Future Developments(p2)

For the latest information about developments related to Pub. 542, such as legislation enacted after it was published, go to For changes that may affect the current tax year, see the Instructions for Form 1120 or the applicable instructions for the corporation’s tax return.

What’s New(p2)

Changes in due date for filing corporate returns.(p2)
For tax years beginning after 2015, the due date for filing corporate returns generally is the 15th day of the 4th month after the end of the corporation's tax year. Special rules apply to corporations with tax years ending in June. See When to file, later.
Increase in penalty for failure to file.(p2)
For returns required to be filed after December 31, 2015, the minimum penalty for failure to file a return that is over 60 days late has increased to the smaller of the tax due or $205. See Late filing of return, later.

Photographs of Missing Children(p2)

The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children selected by the Center may appear in instructions on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.


This publication discusses the general tax laws that apply to ordinary domestic corporations. It explains the tax law in plain language so it will be easier to understand. However, the information given does not cover every situation and is not intended to replace the law or change its meaning.

Comments and suggestions.(p2)

We welcome your comments about this publication and your suggestions for future editions.
You can send us comments from Click on "More Information" and then on "Give us feedback."
Or you can write to:

Internal Revenue Service
Tax Forms and Publications
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224

We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.
Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products.
Ordering forms and publications.(p2)
Visit to download forms and publications. Otherwise, you can go to to order current and prior-year forms and instructions. Your order should arrive within 10 business days.
Tax questions.(p2)
If you have a tax question not answered by this publication, check and How To Get Tax Help at the end of this publication.

Additional forms.(p2)

A list of other forms and statements that a corporation may need to file is included at the end of this publication. Also see the Instructions for Form 1120 or the applicable instructions for the corporation’s tax return.


Useful items

You may want to see:

 510 Excise Taxes (Including Fuel Tax Credits and Refunds)
 535 Business Expenses
 538 Accounting Periods and Methods
 544 Sales and Other Dispositions of Assets
 550 Investment Income and Expenses
 925 Passive Activity and At-Risk Rules
 946 How to Depreciate Property

Businesses Taxed as Corporations(p2)

The rules you must use to determine whether a business is taxed as a corporation changed for businesses formed after 1996.

Business formed before 1997.(p2)

A business formed before 1997 and taxed as a corporation under the old rules will generally continue to be taxed as a corporation.

Business formed after 1996.(p2)

The following businesses formed after 1996 are taxed as corporations.

Limited liability company (LLC).(p3)

An LLC can elect to be treated as an association taxable as a corporation by filing Form 8832, Entity Classification Election. For more information about LLCs, see Pub. 3402, Taxation of Limited Liability Companies.

S corporations.(p3)

Some corporations may meet the qualifications for electing to be S corporations. For information on S corporations, see the Instructions for Form 1120S.

Personal service corporations.(p3)

A corporation is a personal service corporation if it meets all of the following requirements.
  1. Its principal activity during the "testing period" is performing personal services (defined later). Generally, the testing period for any tax year is the prior tax year. If the corporation has just been formed, the testing period begins on the first day of its tax year and ends on the earlier of:
    1. The last day of its tax year, or
    2. The last day of the calendar year in which its tax year begins.
  2. Its employee-owners substantially perform the services in (1) above. This requirement is met if more than 20% of the corporation's compensation cost for its activities of performing personal services during the testing period is for personal services performed by employee-owners.
  3. Its employee-owners own more than 10% of the fair market value of its outstanding stock on the last day of the testing period.
Personal services.(p3)
Personal services include any activity performed in the fields of accounting, actuarial science, architecture, consulting, engineering, health (including veterinary services), law, and the performing arts.
A person is an employee-owner of a personal service corporation if both of the following apply.
  1. He or she is an employee of the corporation or performs personal services for, or on behalf of, the corporation (even if he or she is an independent contractor for other purposes) on any day of the testing period.
  2. He or she owns any stock in the corporation at any time during the testing period.
Other rules.(p3)
For other rules that apply to personal service corporations, see Accounting Periods, later.

Closely held corporations.(p3)

A corporation is closely held if all of the following apply.
  1. It is not a personal service corporation.
  2. At any time during the last half of the tax year, more than 50% of the value of its outstanding stock is, directly or indirectly, owned by or for five or fewer individuals. "Individual" includes certain trusts and private foundations.
For rules for determining stock ownership, see section 544 of the Internal Revenue Code.
Other rules.(p3)
For the at-risk rules that apply to closely held corporations, see At-Risk Limits, later.