Get to Know about Corporate Taxes

 

The government levies some charges on the company’s profit and gains, known as corporate tax. This is the government’s national source of income. Many advantages of filing corporate tax returns include assistance in deducting retirement plans, medical insurances, losses, etc. Filing corporate tax returns requires good knowledge of the State’s corporate tax’s rules and regulations. Hence, it is always recommended to hire a CPA or a professional accountant from a good corporate tax accounting firm. According to the company’s requirements, some businesses hire complete corporate tax accounting firms as well.

Let’s learn a little more about filing corporate tax.

Filing of Corporate Tax :

To file corporate tax returns, all U.S. organizations are required to fill some IRS forms as form 1120 (for C corporations) and IRS form 1120S (for S corporations). Companies that have assets worth $10 million and above, must file corporate tax return online before the due date, which is March 15 every year. This due date can be extended for 6 months that is till September.

Deductions under Corporate Tax

There are some specific business expenses that are considered as deductions that reduce the taxable income. The deductions reducing the taxable income includes employee salaries, health benefits, interest payments, excise taxes, advertising costs, legal services, etc. All the current expenses that are necessary for the working of the business and also for generating income, are considered tax-deductible including financial and property investments.

 

Double Taxation

This is a primary issue in filing corporate tax returns. It happens when income tax is paid twice on the same source of income. This means income is taxed at the personal as well as corporate level. For instance, if a company’s shareholders distribute the income, then they would have to pay personal income taxes. To solve this issue, a business must register itself as an S corporation to pass all income to the owners. This registration enables the business, registered as an S corporation, to pay individual tax returns only.

Corporate Tax Rates in the U.S.

The federal corporate tax rate is 21%, at present. Usually, corporate taxes are 4.43% of state tax collections and 2.27% of state general income. State and federal corporate tax rates, when combined, in New York, is 26.1%. Amongst 50 other states, this is the 23rd highest tax rate.

Final Consideration

With the complex tax environment these days, filing tax returns should always be done by certified professionals under corporate tax accounting firms or even by the firms themselves. These firms and professionals are well versed in the state’s tax laws and regulations and are considered great in providing any suggestions or advice related to tax issues. These firms and professionals are registered under IRS and can assist greatly in the case of any tax audit. 

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