HOW TO PREPARE AND FILE YOUR CORPORATE TAX RETURN WITH EASE AND ACCURACY
As a business tax professional, you know the intricacies of complying with business tax requirements. Your business may be required to file corporate income tax returns in many states and local jurisdictions. As well as with federal – and possibly international – tax authorities.
The complexity of corporate income tax filing requirements and frequent changes in tax laws. Make it time-consuming and complicated to report corporate taxes accurately.
DO ALL COMPANIES FILE TAXES?
Every business in the United States that generates net income during the tax year must file a corporate income tax return. Whether these companies have to pay income tax is another question. For example, unlike any corporation, a limited liability company (LLC) is not known as a separate tax entity, so it does not pay any federal income tax (although some states require an LLC).
THE TWO VERY MAIN TYPES OF CORPORATIONS THAT MUST FILE A FEDERAL INCOME TAX RETURN ARE:
- GROUP C:
The legal structure for a corporation in which the owners or shareholders are taxed separately from the entity, C corporation being the most common type of corporation. These corporations are subject to federal corporate income tax. Taxing of business profits occurs at both the corporate and individual levels, potentially creating double taxation.
- S CORPORATION:
One type of corporation that can pass the income (along with credits, deductions, and losses) directly to the shareholders is an S corporation that pays no federal corporate taxes. Usually associated with small businesses (100 shareholders or less), this designation offers the usual benefits of incorporation and the tax-exemption privileges of a partnership.
C corporations and S corporations must file tax returns with local, state, federal, and possibly international governments once per fiscal year through corporate tax filings.
7 STEPS TO PREPARE CORPORATE TAX RETURN
DETERMINE IF YOUR COMPANY IS A C CORPORATION OR A WILL COMPANY
By default, a non-LLC corporation in the United States is a C corporation. However, once you have formed your corporation as a C corporation, you can file the option to be taxed under as an S corporation, which means that the tax obligations are transferred to the owner’s tax return.
If you need to know what type of corporation it is, call the IRS Business Tax Line at 800-829-4933. The IRS can tell you whether to file your taxes as a C or S corporation.
DETERMINE YOUR TAX DEDUCTIONS TO WRITE OFF
The next step in preparing your corporate income tax return is to determine the tax deductions you can deduct. For c corporations, the IRS allows you to deduct all expenses needed to operate your business, certain investments and real estate purchases, and employee salaries and benefits. , some taxes, insurance payments, etc.
PAY ESTIMATED TAXES TO THE IRS
Next, estimate how much tax you must pay on the overall net amount. Then, if your business is a certain C corporation, you have to submit estimated tax payments four times a year to state and federal governments. S corporations generally don’t pay income taxes because they pass on tax obligations to their shareholders, which means they don’t pay estimated taxes.
However, S corporations must pay estimated tax when the associated capital gains tax, excess net passive income tax, and investment credit recovery tax total $500 or more. C corporations typically pay estimated taxes to one or more states.
FILE YOUR FEDERAL TAX RETURN BY THE DUE DATE
C corporations use Form 1120 to file federal income taxes, while any S corporations use Form 1120-S. In addition, shareholders of an S corporation must report their share of income in the corporation on Schedule K-1 attached to their tax return.
When do I have to file a corporate tax return?
C corporations must file their tax returns by the 15th of the fourth month after the end of the fiscal year. This means that for C corporations with a year-end date of December 31, tax returns are due on April 15. The only rare exception to this rule is for a corporation. Whose year-end date is June 30; tax returns must be filed by September 30. 15.
S corporations are required to file by the 15th of the third month, which usually means that the tax returns for these companies are due March 15. Tax calendar software helps you in keeping track of the times. This term.
How do you apply to renew your corporate tax return?
The IRS offers Form 7004 to businesses requesting an automatic 6-month extension to file taxes and other returns. However, like tax extensions for individuals, filing a form does not extend the payment due date.
What is the penalty for late filing of tax returns?
The late penalty for C and S corporations (if you owe the IRS) is 5% of unpaid taxes for up to five months, increased to another percentage after that, depending on the amount owed.
Are you required to file your federal business return electronically?
Most companies do not need to file their taxes electronically. Still, C corporations and S corporations must file their federal income tax returns through approved software or any tax professional who is an authorized electronic records provider. Tax professionals who wish to file their clients electronically must be IRS Authorized Electronic Filing Providers or Electronic Filers.
FILE YOUR STATE TAX RETURN BY THE DUE DATE
You must also file a tax return for any state where you do business if that state requires it.
When must corporate income tax be paid?
Although most states require a certain corporation to file a tax return on the same day as federal taxes are filed, this is starting to change. Some states now have a due date of one month or more to give taxpayers more time to complete their federal tax returns, on which state tax returns are usually based.
What are state filing requirements for corporations?
Not all states have the same type of corporate tax filing requirements. While 44 states and the District of Columbia have a corporate income tax, some states (Ohio, Nevada, Texas, and Washington) tax a company’s total sales instead. Two states – such as South Dakota and Wyoming – currently have no corporate or gross sales taxes.
How is state tax calculated?
States use a variety of formulas to determine how much of a business’s sales income will be taxed in that state — a process known as. It would be best to stay up-to-date with the breakdown details for each state where you do business and other state-specific details such as business tax rates, withholding rules, and due dates. Estimated tax payments and annual interest.
FILE YOUR LOCAL TAX RETURN BY THE DUE DATE
Companies may also be subject to taxes for city, country, or regional jurisdictions. Local tax authorities are less likely to ask for estimated tax payments, but checking the local rules that apply to your business is important. Mostly local tax returns are due on the same calendar as state taxes, but this is also a detail to check before filing.
PAY INTERNATIONAL TAXES ON ANY BUSINESS IN OTHER COUNTRIES
U.S.-based international business organizations must also consider specialized rules and guidelines for paying and reporting corporate taxes globally. Businesses should remember that the IRS allows businesses that claim foreign tax credits to meet U.S. tax obligations to account for taxes paid to other countries on income earned from operations. Operating in that country.
COMMON BUSINESS CHALLENGES AND PROBLEMS
Tax teams may have to face many challenges in preparing and filing tax returns correctly. It is essential to keep abreast of tax rules and regulations changes, which occur frequently at all levels. This can be especially difficult if your business has connections in multiple states and you need to file in multiple jurisdictions. A good tax return and a good accounting research tool can be kind of invaluable in these cases.
Tax technology can help your team file your company’s business tax return faster, more efficiently, and more accurately. Thomson Reuters Income Tax ONESOURCE streamlines tax management, freeing your accountant and tax staff to do more strategic work. To learn more about managing business tax claims, see “Tips and tricks for a successful production season.”