6 Steps to Filing Corporation Taxes

Before you start making decisions and preparing your taxes, you should familiarize yourself with the basics of filing corporate income taxes. here are six steps to getting your taxes filed :

1. Decide Whether to Be Taxed as an S Corp. or a C Corp.

When you form a pot, your business is automatically treated as a C corporation for federal income tax purposes .
A C corporation is a traditional corporation that pays corporate income tax on its profits, with its shareholders paying tax on the wage and dividends they receive .
This tax income of dividends at both the corporate and individual levels is sometimes referred to as “ double taxation. ”

Some small businesses are able to avoid bivalent tax by choosing to be taxed as S corporations. S corporations don ’ t give any bodied tax .

The pot ’ randomness profits and losses pass through to its shareholders ’ personal tax returns, and the shareholders pay taxes on those profits at their personal income tax rates .
To be eligible for S corporation status, a corporation must meet certain requirements, including :

  • Having 100 or fewer shareholders
  • Having only one class of stock
  • Not having corporations, partnerships, or nonresident aliens as shareholders
  • Being a domestic corporation

2. File an S Corporation Election

If you want your business to be taxed as an S pot, you must fill out Internal Revenue Service Form 2553, have all shareholders sign it, and file it with the IRS .
The deadline for filing the form is 2 months and 15 days after the begin of the tax year. If you are a newly formed corporation, your tax class begins when your pot is formed .
The IRS instructions for form 2553 include a full explanation of these deadlines. The IRS must approve your S pot election. Once you ’ ve elected S pot condition and it ’ s been approved, the election stays in effect until it is terminated or revoked .

3. Learn About Tax Deductions for Corporations

In addition to the ordinary business expenses that all small businesses can deduct, corporations can deduct employee salaries and bonuses and the cost of employee health indemnity and retirement plans .
Understanding these deductions will help you make choices that will maximize your tax savings.

4. Pay Estimated Taxes

C corporations must pay estimated corporate income tax, and S corporations must make estimate tax payments for certain S corporation taxes. Estimated tax payments must be made quarterly throughout the class .
Corporations that do not pay their estimated tax payments on clock time can be topic to sake and penalties for underpayment .

5. File Your Federal Tax Return

The type of tax rejoinder you file for your pot will depend on whether you ’ re an S corporation or a hundred pot .
If your business is an mho pot, you ’ ll file Form 1120S, a tax return key that shows your corporation ’ sulfur income, expenses, and losses .
You ’ ll besides file a Form K-1 for each of your pot ’ mho shareholders, showing their contribution of the pot ’ sulfur income, deductions and credits. You must provide your shareholders with copies of their K-1 forms so they can report their plowshare of the corporate income or loss on their personal income tax returns .
C corporations file a corporate tax return on phase 1120. Shareholders then report any dividends they received from the pot on their personal tax returns .

6. File Your State Tax Returns

Depending on your tax condition and the state where your corporation was formed, you may besides have to file a state income tax revert for your corporation.

The corporate tax pace is normally a directly percentage that varies from state to state. If you are registered to do occupation in extra states, those states may besides require submit tax returns for your corporation and/or its shareholders .
corporate taxes can be confuse, so it pays to get advice from a tax professional before choosing your pot ‘s tax condition or preparing your taxes .
An accountant can explain the consequences of C pot or S corporation tax, advise you on maximizing your business tax deductions, and prepare your recurrence .

source : https://www.peterswar.net
Category : Finance

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