IRS Instruction 1120-FSC – IRS Form, Instructions, Pubs 2026

IRS Instruction 1120-FSC  – Foreign Sales Corporations (FSCs) that still hold an active election must file an annual U.S. income tax return using Form 1120-FSC. The official IRS Instructions for Form 1120-FSC (Rev. December 2025) provide detailed, up-to-date guidance for tax years ending in 2025 and later.

This comprehensive, SEO-optimized guide summarizes the latest IRS instructions (available as a free PDF at the link below) to help FSC officers, tax professionals, and shareholders understand filing requirements, key schedules, deadlines, penalties, and transition rules after the FSC regime repeal. All details come directly from trusted IRS sources as of February 2026.

Sample of the official Form 1120-FSC (Rev. December 2025) – Source: IRS.gov

What Is Form 1120-FSC?

Corporations use Form 1120-FSC to report:

  • Income
  • Gains
  • Losses
  • Deductions
  • Credits
  • Income tax liability of a Foreign Sales Corporation (FSC) or small FSC

The form applies only to entities with a valid FSC election still in effect. FSCs that elect domestic corporation treatment under section 943(e)(1) file Form 1120 instead.

Who Must File Form 1120-FSC?

File Form 1120-FSC if your corporation:

  • Made a valid FSC or small FSC election under section 922 or 922(b), and the election remains effective.
  • Is an existing FSC (in existence on or before September 30, 2000) operating under transition rules.

Note: No new FSC elections have been allowed since September 30, 2000, following the FSC Repeal and Extraterritorial Income Exclusion Act of 2000.

FSC Repeal and Transition Rules (Critical Background)

The FSC provisions were largely repealed in 2000. However, existing FSCs can still apply FSC rules in limited cases:

  • Transactions before 2002.
  • Post-2001 transactions under binding contracts (rules repealed for tax years after May 17, 2006, in most cases).

FSCs may also:

  • Elect the extraterritorial income (ETI) exclusion using Form 8873.
  • Become inactive and cease FSC status after 5 consecutive years with no foreign trade income post-2001.

Always review the latest IRS guidance or consult a tax advisor, as transition rules are complex.

Filing Deadlines and Where to File

Due Date:

  • Calendar year → 15th day of the 4th month after year-end (April 15 for most 2025 returns).
  • Fiscal year ending June 30 or short year ending in June → 15th day of the 3rd month after year-end.

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

Extensions: Request using Form 7004.

Electronic Payments and Refunds

  • FSCs with a U.S. office must generally pay taxes electronically via EFTPS.
  • Direct deposit of refunds is encouraged (new fields added on the 2025 form).
  • Check or money order is acceptable if no U.S. bank account exists.

How to Complete Form 1120-FSC: Key Steps? (Summary from IRS Instructions)

  1. Entity Information (Page 1)
    • Name, address, EIN, incorporation details, foreign country/territory of incorporation.
    • Check FSC or Small FSC election type and effective date.
  2. FSC Information
    • Principal shareholder details (if two or more equal shareholders, use the one with the same tax year).
  3. Schedule A – Cost of Goods Sold
    Related to foreign trading gross receipts.
  4. Schedule B – Taxable Income or (Loss)
    • Part I: Net income from nonexempt foreign trade income.
    • Part II: Taxable income or loss.
  5. Schedule E – Exemption Percentages
    Calculate exempt foreign trade income (not taxed).
  6. Schedule F – Net Income from Nonexempt and Taxable Nonforeign Trade Income
    • Part I: Nonexempt foreign trade income.
    • Part II: Taxable nonforeign trade income (investment income, etc.).
  7. Schedule G – Deductions Allocated or Apportioned to Foreign Trade Income
    Includes foreign direct costs, salaries, officer compensation, and other deductions.
    Follow uniform capitalization rules (section 263A) and business interest limitation (section 163(j)).
  8. Schedule J – Tax Computation
    • 21% corporate tax rate.
    • Base erosion minimum tax (if applicable).
    • Corporate Alternative Minimum Tax (CAMT) for applicable large corporations (post-2022 rules).
    • Foreign tax credit (limited to certain cases).
  9. Schedule L – Balance Sheets
    Beginning and end of year.
  10. Schedule M-1 – Reconciliation of Income (Loss) per Books With Income per Return

Other Required Forms and Attachments

Common attachments include:

  • Form 5471 or 5472 (information returns for foreign corporations).
  • Form 5713 (international boycott reporting).
  • Form 8990 (business interest expense limitation).
  • Form 2220 (estimated tax penalty, even if waived for CAMT in 2025).
  • Principal business activity code.

Assemble the return in the order specified in the instructions.

Penalties for Non-Compliance

  • Late filing: 5% per month (up to 25%) of unpaid tax; minimum $525 (for 2026 filings) if over 60 days late.
  • Late payment: 0.5% per month (up to 25%).
  • Estimated tax underpayment: Applies if liability ≥ $500.
  • Section 6686: Up to $100 per failure to provide required information (or $1,000 for non-filing).

Important Changes in December 2025 Revision

  • Updated minimum late-filing penalty to $525.
  • Enhanced direct deposit fields for refunds.
  • CAMT guidance and 2025 estimated tax penalty waiver for CAMT amounts (still file Form 2220).
  • Clarified electronic payment options.

FAQs About Form 1120-FSC

Q: Is Form 1120-FSC still required in 2026?
A: Yes, for any corporation with an active FSC election under transition rules.

Q: Can I e-file Form 1120-FSC?
A: The form supports modern filing, but check IRS e-file rules for corporations. Payments are generally electronic.

Q: Where do I find the latest form and instructions?
A: Always download from IRS.gov (links below).

Q: What if my FSC has no activity?
A: Inactive FSCs may lose status after 5 years without foreign trade income.

Download Official IRS Form 1120-FSC & Instructions (2025/2026)

Final Advice

Tax rules for legacy FSCs involve complex transition provisions, CAMT calculations, and international compliance. This article summarizes the official IRS Instructions for Form 1120-FSC (Rev. December 2025) for informational purposes only and is not a substitute for professional tax advice.

Consult a qualified tax advisor or the IRS directly (call 800-829-4933 for business) for your specific situation. Always use the latest revision from IRS.gov.

Keywords: IRS 1120-FSC instructions, Form 1120-FSC 2025, Foreign Sales Corporation tax return, how to file 1120-FSC, FSC tax filing deadlines, 1120-FSC schedules, FSC repeal rules.

Last updated: February 2026 – Based exclusively on current IRS publications.