TAX FILING FOR CORPORATIONS
Congratulations on setting up your corporation. Now you will have to file a Corporation Tax Return for your entity each year and remain in compliance with State and Federal Taxing Agencies. Regardless to if you are profit or non-profit you will have filing requirements. BIZ CORP NATION has been filing Corporation Taxes for the past ten years. We are certified with State Taxing Authorities and the Internal Revenue Service. We have knowledge preparing Individual and Corporation Tax Returns.
HERE ARE THE BASIC STEPS TAX FILING FOR CORPORATIONS
1. NON-PROFIT TAX FILING
An organization can be automatically revoked again if it fails to file required returns for three consecutive years beginning with the year in which the IRS approves the application for reinstatement. Organizations must file a 990N Postcard for revenue under $50,000 dollars, 990EZ for Revenue $50,000 to $100,000 and form 990 for organization that have revenue from $100,000 and above. Each organization must file tax returns by May 15, of each year. We file Taxes for Religious Organizations, Churches, Pastors, Public Benefit Organization, Private Foundations and Mutual Benefit organizations.
2. SIX STEPS TO FILING CORPORATION TAXES
Not only do corporations have their own tax forms and special deductions, but many small corporations can choose how they are going to be taxed. 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 corporation, your business is automatically treated as a C corporation for federal income tax purposes. The “C” Corporation is a traditional corporation that pays corporate income tax on its profits, with its shareholders paying tax on the salary and dividends they receive. This taxation of dividends at both the corporate and individual levels is sometimes referred to as “double taxation.” Some small businesses are able to avoid double taxation by choosing to be taxed as S corporations. S corporations don’t pay any corporate tax. The corporation’s 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 corporation, 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 beginning of the tax year. If you are a newly formed corporation, your tax year begins when your corporation is formed. The IRS instructions for Form 2553 include a full explanation of these deadlines. The IRS must approve your S corporation election. Once you’ve elected S corporation status 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 insurance 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 estimated tax payments for certain S corporation taxes. Estimated tax payments must be made quarterly throughout the year.
Corporations that do not pay their estimated tax payments on time can be subject to interest and penalties for underpayment.
5. File Your Federal Tax Return
The type of tax return you file for your corporation will depend on whether you’re an S corporation or a C corporation. If your business is an S corporation, you’ll file Form 1120S, a tax return that shows your corporation’s income, expenses, and losses. You’ll also file a Form K-1 for each of your corporation’s shareholders, showing their share of the corporation’s income, deductions and credits. You must provide your shareholders with copies of their K-1 forms so they can report their share of the corporate income or loss on their personal income tax returns. C corporations file a corporate tax return on Form 1120. Shareholders then report any dividends they received from the corporation on their personal tax returns.
6. File Your State Tax Returns
Depending on your tax status and the state where your corporation was formed, you may also have to file a state income tax return for your corporation. The corporate tax rate is usually a flat percentage that varies from state to state. If you are registered to do business in additional states, those states may also require state tax returns for your corporation and/or its shareholders.
Corporate taxes can be confusing, so it pays to get advice from a tax professional before choosing your corporation's tax status or preparing your taxes. An accountant can explain the consequences of C corporation or S corporation taxation, advise you on maximizing your business tax deductions, and prepare your return.
Filing Taxes for Limited Liability Companies
If your business is organized as an LLC, it may be taxed as like a sole proprietorship, a partnership or a corporation, and you may be responsible for self-employment taxes in addition to federal and state income tax. Here’s a guide to the way LLCs are taxed and the steps you’ll need to take to file your returns. From a tax standpoint, limited liability companies are like hermit crabs. With no tax classification of their own, they inhabit the tax homes of other types of businesses, and they can choose and change the way they are taxed. This tax flexibility is one of the things that make LLCs so appealing for small business owners. But if you’re just starting out, the LLC tax filing process can seem confusing. LLCs can choose to be taxed like sole proprietorships, partnerships or corporations. It’s important to understand the differences between them, because the way your business is taxed can affect both your total tax bill and your obligation to pay self-employment tax.
How Are LLCs Taxed?
Because LLCs are a relatively new type of business entity, the Internal Revenue Service has not established a tax classification for them. Therefore, while there are forms and procedures for corporate tax returns, there is no such thing as an LLC tax return form. That doesn’t mean that limited liability company income isn’t taxed. It just means that LLCs are taxed as though they were a different kind of entity. If your LLC has only one owner (known as a “member”), the IRS will automatically treat your LLC like a sole proprietorship. If your LLC has more than one member, the IRS automatically treats it like a general partnership. However, if you’d prefer to have your LLC taxed like a corporation , you can change its tax status by filing a form with the IRS.
The Single-Member LLC Tax Return
A single member LLC that is taxed like a sole proprietorship reports its income and expenses on Schedule C of the member’s personal income tax return. The member then lists the net profit or loss on the income section of his or her Form 1040, U.S. Individual Income Tax Return.
Because the LLC is ignored for tax purposes, an LLC that is taxed like a sole proprietorship is referred to as a “disregarded entity.” The entity is only disregarded for tax purposes—these LLCs still retain all of their limited liability protection.
Multi-Member LLCs Taxed Like Partnerships
If your LLC has more than one member and is taxed like a partnership, the LLCs income will flow through to the members themselves and will be reported on their personal tax returns.
Specifically, an LLC that’s taxed like a partnership files Form 1065, an informational tax return that reports all of the partnership’s income and expenses. The LLC also issues a Schedule K-1 to each LLC member, showing the member’s share of the LLC’s profit. Your LLC’s operating agreement should list each member’s percentage share of the LLC’s profits and losses.
LLC members then report their share of profit (or loss) on Schedule E of their personal tax returns. Members must report and pay tax on their entire share of the profit, even if they leave some of those profits in the business rather than taking them home.
Self-Employment Taxes and Estimated Taxes
The members of LLCs taxed as sole proprietorships or partnerships are considered to be self-employed for federal tax purposes. When you work for an employer, your employer pays half of your Social Security and Medicare taxes, and you pay the other half. But when you’re self-employed, you must pay the full amount yourself. On your annual tax return, you are allowed to deduct half of this tax from your income, which slightly offsets the impact of the self-employment tax.You must file Schedule SE, Self-Employment Tax, with your tax return to report and calculate your self-employment taxes. In addition, self-employed individuals are expected to make estimated payments of these taxes and their personal income tax quarterly throughout the year. Failure to do this can lead to penalties and interest.
LLC Taxed as S Corp. or C Corp.
As an alternative, an LLC can choose to be taxed as a corporation by filing Form 8832, Entity Classification Election, with the IRS. An LLC can also file a further election to be taxed as an S corporation. Corporate taxation can be more complicated and it’s a good idea to consult an accountant before choosing to be taxed as a corporation. Some of the reasons an LLC might choose corporate taxation include:
You plan to leave a substantial amount of money in the business each year to finance expansion or for other reasons.
Your profits are far greater than the amount the owner/employees should reasonably make in salary and you want to minimize self-employment taxes.
An LLC taxed as a C corporation files a corporate income tax return each year. The shareholders also report any salary and dividends they receive on their personal tax returns.
An LLC taxed as an S corporation follows a procedure similar to a partnership, filing an informational return and providing members with a Schedule K-1 form showing their share of the profits (or losses). The members then report that income on Schedule E of their personal tax returns.
Knowing how and when to file estimated and annual tax forms for your LLC is an important step in keeping your business’s finances on track. If you’re just starting out, you’ll probably prefer to be taxed as a sole proprietorship or partnership, but as your business grows, you may want to consult with an accountant to see if your LLC might benefit from taxation as a corporation.
Have questions about Non-Profit, Corporation or LLC taxes? Call us at BIZ Corp Nation.
Although the majority of nonprofits are set up without the help of a consultant, it's easy to make mistakes that become costly to correct later (such as unwisely creating voting membership structures, adding unlawful provisions to template bylaws, violating the commerciality doctrine, etc.). We recommend having experienced professionals involved. Biz Corp Nation consultants consist of board members with nonprofit incorporation experience and experienced consultants.