This Schedule H Form 1120 guide explains the IRS Section 280H Limitations for a Personal Service Corporation (PSC). Schedule H for Form 1120 addresses the section 280H limitations for personal service corporations covered by its instructions. It is not the household employment tax schedule on an individual return. The corporation tax year and applicable deduction rules determine the specialized calculation.
Reviewed October 31, 2026. This is an independent guide. The version and availability information below identifies the IRS documents used for this page.
What Schedule H Form 1120 does and who prepares it
A covered personal service corporation uses the schedule for the section 280H limitation calculation.
For the connected reporting route, see Form 1120. Keep the role of that document separate from the task explained on this page.
| Official form | Form 1120 (Schedule H) |
|---|---|
| IRS title | Section 280H Limitations for a Personal Service Corporation (PSC) |
| Guide period | the applicable reporting period |
| Target version | Dec 2011 |
| Availability | Current IRS catalog PDF |
| Last checked | October 31, 2026 |
Get the Schedule H Form 1120 PDF and check its status
Use the IRS source to confirm the document before completing a real filing. The download link is a reference to the official file; it is not a statement that every copy inside the PDF may be printed and submitted. Follow any instructions about electronic filing, scannable copies, recipient copies or attachments.
Which version of Schedule H Form 1120 should you use?
This form follows a revision or continuing-use format rather than a new title for every calendar year. Check the revision printed on the document and the period requested inside it. A revision date, transaction date and tax year are different pieces of information. The current document should be read with the instructions that apply to the actual transaction or return.
Records to gather for Schedule H Form 1120
- Personal service corporation status records.
- Fiscal-year information.
- Compensation and deduction records.
- Applicable limitation workpapers.
- Corporate return.
Keep a working reconciliation with these records. It should show the source of each reported item, any correction made before filing and the reason a different amount appears on a connected form. This is especially useful when a statement is corrected or a prior-year balance continues into the current calculation.
How to work through Schedule H Form 1120
- Confirm applicability. Start with the purpose, filer category and version of the form. Complete any eligibility or applicability question before spending time on the numerical calculation.
- Prepare the source workpapers. Gather the records listed below and reconcile their totals. Keep prior-year balances, current-year transactions and estimated payments separate where they serve different purposes.
- Complete dependent calculations first. When a line refers to another form, schedule or worksheet, finish that supporting calculation first. Preserve any classification, limitation and carryforward information.
- Follow the line sequence. Use the actual line labels and arithmetic in the applicable form. A line number from an older version may refer to something different after a revision.
- Reconcile the filing package. Check names, identifying numbers, tax periods, totals and required attachments. Then use the filing method, signature process and deadline that apply to this filer and form.
Form-specific IRS instructions and reporting details
The following points retain the operative wording of the IRS documents linked above. Read each point with its stated conditions and the applicable form version. References to another form or section describe a connected requirement; they do not mean that every reader must file every referenced document.
Unless exempt under section 501, all domestic corporations (including corporations in bankruptcy) must file an income tax return whether or not they have taxable income. Domestic corporations must file Form 1120, unless they are required, or elect to file a special return. See Special Returns for Certain Organizations, later.
Corporations can generally electronically file (e-file) Form 1120, related forms, schedules, and attachments; Form 7004 (automatic extension of time to file); and Forms 940, 941, and 944 (employment tax returns). If there is a balance due, the corporation can authorize an electronic funds withdrawal while e-filing. Form 1099 and other information returns can also be electronically filed. The option to e-file does not, however, apply to certain returns.
For returns filed on or after January 1, 2024, corporations are required to e-file Form 1120 if the corporation files 10 or more returns of any type during the calendar year (including income tax, employment tax, excise tax, and information returns). See Regulations section 301.6011-5. However, these corporations can request a waiver of the electronic filing requirements. For more information on e-filing, see E-file for Business and Self-employed Taxpayers on IRS.gov.
A group of corporations with members located in more than one service center area will often keep all the books and records at the principal office of the managing corporation. In this case, the tax returns of the corporations may be filed with the service center for the area in which the principal office of the managing corporation is located.
Additional reporting conditions
A corporation must figure its taxable income on the basis of a tax year. A tax year is the annual accounting period a corporation uses to keep its records and report its income and expenses. Generally, corporations can use a calendar year or a fiscal year. Personal service corporations, however, must use a calendar year unless they meet one of the exceptions discussed later under Personal Service Corporation. Change of tax year.
Generally, a corporation, including a personal service corporation, 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, exceptions may apply. See the Instructions for Form 1128 and Pub. 538 for more information.
Enter the gross amount received for the rental of property. Deduct expenses such as repairs, interest, taxes, and depreciation on the proper lines for deductions. A rental activity held by a closely held corporation or a personal service corporation may be subject to the passive activity loss rules. See Passive activity limitations, later.
Calculations and supporting information
Consolidated returns. Corporations filing a consolidated return should see Regulations sections 1.1502-13, 1.1502-26, and 1.1502-27 before completing Schedule C. Corporations filing a consolidated return must not report as dividends on Schedule C any amounts received from corporations within the consolidated group. Such dividends are eliminated in consolidation rather than offset by the dividends-received deduction. Enter dividends (except those received on certain debt-financed stock acquired after July 18, 1984—see section 246A) that are: • Received from less-than-20%-owned domestic corporations subject to income tax, and • Qualified for the 50% deduction under section 243(a)(1).
Also, include on line 1 the following.
• Dividends received on certain debt-financed stock acquired after July 18, 1984, from domestic and foreign corporations subject to income tax that would otherwise be subject to the dividends-received deduction under section 243(a)(1), 243(c), or 245(a). Generally, debt-financed stock is stock that the corporation acquired by incurring a debt (for example, it borrowed money to buy the stock). • Dividends received from a RIC on debt-financed stock. The amount of dividends eligible for the dividends-received deduction is limited by section 854(b).
The corporation should receive a notice from the RIC specifying the amount of dividends that qualify for the deduction.
Enter the foreign-source portion of dividends that: • Are received from specified 10%-owned foreign corporations (as defined in section 245A(b)), including, for example, gain from the sale of stock of a foreign corporation that is treated as a dividend under sections 1248(a) and (j); and • Qualify for the section 245A deduction.
Exceptions and related reporting
Line 8. Personal Holding Company Tax A corporation is taxed as a personal holding company under section 542 if: • At least 60% of its adjusted ordinary gross income for the tax year is personal holding company income, and • At any time during the last half of the tax year more than 50% in value of its outstanding stock is directly or indirectly owned by five or fewer individuals. See Schedule PH (Form 1120) for definitions and details on how to figure the tax.
Enter on line 8 the tax from Schedule PH (Form 1120), Part III, line 26.
Note: A newly organized PSC is considered to have met the section 280H distribution requirements for the first year of its existence and does not have to complete Schedule H. If, during the tax year, an existing corporation becomes a PSC and makes a section 444 election, the corporation is treated as if it were a PSC for the 3 preceding tax years. See Temporary Regulations section 1.280H-1T(e).
Further form details
Purpose of Schedule A personal service corporation (PSC) (as defined in section 441(i)(2)) may elect under section 444 to have a tax year other than a calendar year. A PSC that makes the election is subject to the minimum distribution requirement of section 280H for the year the election is made and for each tax year the election remains in effect. If the PSC does not meet the requirement, its deduction for amounts paid or incurred to employeeowners (see Applicable amount below) is limited.
Use Part I of Schedule H to determine if the PSC meets the minimum distribution requirement of section 280H(c) for the tax year. Use Part II to figure the limits on deductions under section 280H(d) if the requirement is not met.
Who Must File A PSC that has elected under section 444 to have a tax year other than a calendar year must complete Schedule H. If the PSC does not meet the minimum distribution requirement of section 280H for the tax year, it must file Schedule H with its Form 1120. If it does meet the requirement, it does not need to attach the completed Schedule H to its tax return, but it should keep it with its tax records.
Reading the lines and boxes
These selected labels come from the linked target PDF. They are a reading aid, not a replacement for the full line instructions or a completed calculation. Match the label and document version before transferring any amount.
| Line or box | Label in the source form | What to check |
|---|---|---|
| 1 | Enter applicable amounts from preceding tax year | Use the date or tax period requested by this particular field. A payment date, acquisition date and return year can describe different facts. |
| 2 | Divide number of months in deferral period of preceding tax year by number of months in | Follow the stated arithmetic and line references in sequence. Complete the referenced inputs first and retain the worksheet supporting the result. |
| 3 | Amount figured under preceding year test. Multiply line 1 by the percentage on line 2 | Follow the stated arithmetic and line references in sequence. Complete the referenced inputs first and retain the worksheet supporting the result. |
| 4 | Enter applicable amounts from the deferral period of the applicable election year | Use the date or tax period requested by this particular field. A payment date, acquisition date and return year can describe different facts. |
| 5 | Enter applicable amounts from the: | Check the applicable line instructions and keep the source workpaper with the return records. Transfer only the information that matches the field and reporting period. |
Further selected fields
| Line or box | Label in the source form | What to check |
|---|---|---|
| 6 | Total. Add lines 5a through 5c | Follow the stated arithmetic and line references in sequence. Complete the referenced inputs first and retain the worksheet supporting the result. |
| 7 | Enter adjusted taxable income for the: | Identify the income or transaction category before entering a total. Preserve the distinction between gross amounts, adjustments and the resulting taxable or reportable figure. |
| 8 | Total. Add lines 7a through 7c | Follow the stated arithmetic and line references in sequence. Complete the referenced inputs first and retain the worksheet supporting the result. |
| 9 | Divide line 6 by line 8 | Follow the stated arithmetic and line references in sequence. Complete the referenced inputs first and retain the worksheet supporting the result. |
| 10 | Enter the percentage from line 9 or 95%, whichever is smaller | Follow the stated arithmetic and line references in sequence. Complete the referenced inputs first and retain the worksheet supporting the result. |
A practical example
A personal service corporation reviews whether section 280H applies to its tax year and deductions. The preparer gathers the required compensation information and completes the specialized corporate schedule when required.
This example illustrates the order of the review. It does not assume an unverified deduction, exemption, treaty rate or final tax amount. The applicable form instructions and the actual records determine the result.
Common mistakes to avoid with Schedule H Form 1120
- Confirm the specialized corporation and tax-year applicability.
- Do not substitute the individual household schedule.
- Trace the limitation calculation to the supported corporate deduction.
Questions about Schedule H Form 1120
Does receiving or downloading this form mean I must file it?
A covered personal service corporation uses the schedule for the section 280H limitation calculation. The form purpose and the applicable filing or furnishing conditions determine the action. Downloading a blank PDF does not itself create a filing obligation or establish eligibility for a tax benefit.
Is the revision date always the same as the tax year?
No. Some forms show a tax year, while continuing-use forms show a revision date and ask separately for the reporting period. Check the actual document and instructions. Do not relabel a payment or transaction solely because it was reported in a later calendar year.
What should I do if the underlying information is wrong?
Confirm the specialized corporation and tax-year applicability. Keep the original record and the correction trail. The issuer correction process, an amended return and an updated certificate can be different procedures. Choose the process that matches the document and the actual error.
Which records should I keep with the completed form?
Retain the source documents, applicable worksheets, submitted version and filing or furnishing confirmations. For this form, the working file should include personal service corporation status records, fiscal-year information, compensation and deduction records. Keep continuing balances and prior-year support for as long as they remain relevant under the applicable recordkeeping rules.
Related forms and next steps
Use these guides when the connected issue applies to your records. Each page has its own purpose, reporting year and availability status.