Keeping a few main considerations in mind will help you prepare for corporate taxes, including types of corporations and how they’re taxed, when and where to file, which form to use, and how to estimate your corporate taxes.
U.S. Corporations and Income Taxes
There are two basic types of corporations in the U.S.: C corporations and S corporations. C corps are typically just called “corporations.” S corporations are named for the section of the Internal Revenue Code that applies to this business type. Both have the same basic structure,
Corporate Tax Rate Reduction and Other Changes
The Tax Cuts and Jobs Act made some changes that affected corporations and S corporations when it went into effect in 2018. The biggest change was the elimination of the tax schedule and a flat corporate income tax rate of 21% of corporate net income. Other tax law changes affecting corporations include both benefits and drawbacks:
Increased depreciation expense deductions More businesses can use cash accounting Lower interest rate deduction for larger businesses Limited meal expense deductions Entertainment expenses eliminated Most commuting expense deductions for employers eliminated
Tax Return Due Dates
Corporations with a Dec. 31 year-end have a tax return filing deadline of April 15. The tax return is due on the 15th day of the fourth month after year-end for corporations with a fiscal year-end other than Dec. 31. The only exception is when a corporation’s fiscal year ends on June 30. The corporation must file tax returns by the 15th day of the third month after year-end (Sept. 15) in this case. S corporations must usually take a calendar year-end date (Dec. 31) to agree with the personal tax year-end unless it can establish a reasonable business purpose for a different date. The filing date and tax return due date are the 15th day of the third month after the tax year-end. In other words, taxes are due March 15 for almost all S corporations.
Tax Forms for Corporations and S Corporations
Corporations file their taxes on Form 1120. S corporations file their federal income taxes using Form 1120-S. S corporation shareholders report their share of corporate income or loss on a Schedule K-1, Shareholder’s Share of Income, Deductions, Credits, with their personal returns. You can file your corporate or S corporation tax return by mail, or you can have your tax preparer e-file it. Certain corporations with assets of $10 million or more that file at least 250 returns per year must e-file. You can find the correct addresses to use when filing your Form 1120 on the IRS website. You’ll have to provide some financial reports and other documents to your tax preparer to file your corporate or S corporation income tax return. These documents include information about the cost of goods sold, dividends, and many other aspects of operating a corporation.
Estimated Taxes, Amended Tax Returns, and Extension Applications
Corporations must pay estimated taxes if their expected tax bill is $500 or more. They calculate and file estimated taxes on IRS Form 1120-W. The installments are generally due by the 15th day of the fourth, sixth, ninth, and twelfth months of the tax year. This would be April 15, June 15, September 15, and December 15 for a corporation that uses the calendar year. Corporations receive automatic approval on extension applications, but they must still file the application using Form 7004. The form must be filed by the due date of the corporate tax return, and they must pay any taxes due by this date. A corporation must use Form 1120x if it needs to amend a previous year’s tax return.
Getting Help with Corporate Income Taxes
Income taxes for corporations and S corporations are complicated. It’s usually best to get help from a CPA or tax professional who is familiar with corporate taxes rather than attempt to prepare this return on your own. Review basic information about business taxes that you should know before you enlist the help of a CPA, enrolled agent, or another qualified tax preparer to prepare your corporation’s taxes.
