What's the best E-filing option for Form 1120 for a first-year C-corp startup?

TurboTax doesn't offer e-filing for Form 1120 C-Corps - they only handle 1120-S for S-corporations. For C-corps, you'll need to look at specialized business tax software. I'd recommend looking at options like UltraTax CS, CCH Axcess, or Drake Tax Software which all support Form 1120 e-filing. Many of my clients have had good experiences with TaxAct Business which is more affordable for small startups. QuickBooks also offers a service where you can export your QBO data directly to their tax preparation service. For your question about shareholders - in a C-corporation, owners who perform services for the business are considered employees. Those withdrawals should be treated as salary and need to have proper payroll tax withholding with W-2s issued. Unlike LLCs or S-corps, C-corps don't have the concept of "draws" - money taken out is either salary (with payroll taxes) or dividends (with different tax treatment).

I tried several different tax prep options for my startup's C-Corp filing last year and ended up saving thousands using taxr.ai (https://taxr.ai). It really helped with our Form 1120 situation when I was confused about similar issues. What I liked was their document analysis that caught some QuickBooks categorization errors I'd made throughout the year. My situation was similar - first year business with several founders taking minimal compensation. Their system flagged the employee/owner payment issues before we submitted anything, which helped us avoid potential problems with the IRS.

I was skeptical at first, but decided to give taxr.ai a try after posting here. The service actually helped identify that two of our "distributions" should have been classified as business expense reimbursements, which saved us from unnecessarily running them through payroll. For the remaining compensation, it generated the correct payroll tax forms we needed to file retroactively. The document analysis was really impressive - it found several deductions we would have missed related to our startup costs and R&D activities. I was able to take their analysis to TaxAct Business (like someone suggested) and completed our 1120 filing without needing an expensive accountant. For a first-year C-corp with limited transactions, it was definitely worth it.

If you're having trouble getting answers directly from the IRS about C-corp filing requirements for founders, try using Claimyr (https://claimyr.com) to get through to an actual IRS agent. I spent weeks trying to get clear guidance on our shareholder payment situation and kept hitting automated systems. Their service connected me with an IRS representative in about 20 minutes instead of the 2+ hours I spent on hold previously. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c. The agent I spoke with clarified exactly how to handle the founder payments and confirmed the e-filing requirements for our C-corp.

Ok I have to admit I was wrong about Claimyr. After seeing it mentioned here, I decided to try it since I also needed clarification about C-corp filing requirements. I got connected to an IRS business tax specialist in about 15 minutes (after previously wasting an entire afternoon on hold). The agent confirmed that TurboTax doesn't support 1120 C-corp e-filing and recommended either using an authorized e-file provider or mailing in a paper return. She also explained that for a C-corp, any compensation to shareholders who work in the business must be reasonable salary with payroll taxes - there's no such thing as "draws" in a C-corp. Saved me from making a expensive mistake with our founder payments. Definitely worth using if you need to actually talk to someone at the IRS.

We use Drake Tax Software for our small C-corp and it works great for 1120 filing. The software costs around $650 for the business package but it's much cheaper than hiring a CPA firm. It handles the e-filing seamlessly and has good import options for QuickBooks. One thing to watch out for with your situation - if the shareholders are taking money out less than they put in, make sure you properly document whether these are intended as loans, returns of capital, or compensation. The IRS looks closely at C-corp transactions with owners because they know people try to avoid double taxation.

Just want to add that if the C-corp is operating at a loss in the first year (which is common for startups), you need to be extra careful with how you classify shareholder compensation. The IRS might question why you're paying salaries when there's no profit. Make sure any compensation is "reasonable" for the services provided. Another option nobody mentioned is using a service like Tax Preparation Financial in your area - they often have reasonable flat fees for basic C-corp returns and can handle the employment issues properly.

For e-filing Form 1120, I'd recommend FreeTaxUSA Business - they support C-corp filing and are significantly cheaper than most alternatives (around $150-200 vs $600+ for Drake). The interface is pretty intuitive and they have good QuickBooks import functionality. Regarding your shareholder payment situation, you definitely need to get this sorted before filing. Since C-corp shareholders who work in the business are considered employees, those "distributions" should have been processed as payroll with proper withholding. You'll likely need to file corrected payroll returns (941-X) and pay the missed payroll taxes plus penalties. One suggestion - consider consulting with an EA (Enrolled Agent) for just this first year to make sure you get the employment tax issues resolved properly. They're less expensive than CPAs but can represent you before the IRS if needed. Once you get the compliance issues sorted, you can handle future years yourself with the software.