Your Complete Corporate Income Tax Guide - Including S Corp
Corporate Tax Forms, Tax Rates, Tax Filing Information
This guide will take you through the top pieces of information you need to help you prepare for corporate taxes, including types of corporations and how they are taxed, when and where to file, which form to use, and how to estimate corporate taxes. U.S. corporations are complex entities and taxes for corporations are even more complex.
Relief Measures for Corporations
Corporations affected by the economic downturn in 2020 and 2021 can take advantage of several new tax credits, including:
- An Employee Retention Credit (ERC) that encourages businesses to keep employees on their payroll
- Emergency Paid Sick Leave and Family Medical Leave tax credits for businesses that must pay sick leave and family leave benefits to employees affected by the ongoing public health crisis
Both of these credits were originally scheduled to end on December 31, 2020, but they were extended by subsequent legislation. The ERC was slightly modified and extended through June 30, 2021. The sick and family medical leave credits were extended as-is through March 31, 2021, though businesses are no longer required to provide this type of leave (but they can claim tax credits if they do).
U.S. Corporations and Income Taxes
Corporations are a special kind of business because, unlike other businesses, corporations are a separately taxpaying entity. Corporations are owned by their shareholders. The corporation pays taxes on earned income and then shareholders are taxed on dividends they receive.
In the U.S., there are two basic types of corporations—C corporations (usually just called "corporations") and S corporations (for the section of the Internal Revenue Code that applies to this business type). Both types have the same basic structure, using Articles of Incorporation to incorporate within a specific state or states. Both types of corporations have corporate by-laws and a board of directors. An S corporation is created first as a corporation and then files to elect S corporation status.
Corporate Tax Rate Reduction and Other New Changes
The 2017 Tax Cuts and Jobs Act made some changes that affected corporations and S corporations. The biggest change was the elimination of the tax schedule and a new flat corporate income tax rate of 21% of corporate net income. The change in the corporate tax rate didn't affect S corporations, because the owners of an S corporation are taxed through their personal tax returns.
Other tax law changes (both benefits and drawbacks) affecting corporations are:
- Increased depreciation expense deductions
- More businesses can use cash accounting
- Lower interest rate deduction for larger businesses
- Meal expense deductions limited and entertainment expenses eliminated
- Most commuting expense deductions for employers eliminated
The Internal Revenue Service (IRS) extended the 2021 tax filing deadline to June 15, 2021, in Texas and surrounding states declared winter-storm disaster areas. This includes Oklahoma and Louisiana, and extends to businesses.
Tax Return Due Dates
Outside the winter-storm disaster extensions, here are some important due dates to keep in mind. If any of these dates fall on a weekend or holiday, they are pushed back to the next day that is not a weekend or holiday.
Corporate Tax Returns
For corporations with a December 31 year-end, the tax return is due on April 15. For corporations with a fiscal year-end other than December 31, the tax return is due on the 15th day of the fourth month after year-end. The only exception is when a corporation's fiscal year ends June 30—in that case, the corporation must file tax returns by the 15th day of the third month after year-end (Sept. 15).
S Corporation Tax Returns
S corporations must usually take a calendar year-end date (December 31) to agree with the personal tax year-end unless the corporation 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.
Corporations and S Corporation Tax Forms
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.
How to File
You can file your corporate or S corporation tax return by mail or you can have your tax preparer e-file the return. Certain corporations with assets of $10 million or more that file at least 250 returns a year must e-file. You can find the correct addresses to use when filing your Form 1120 on the IRS website.
Before You Prepare Your Tax Return
To file your corporate or S corporation income taxes, you will need to provide some financial reports and other documents to your tax preparer. These documents include information about the cost of goods sold, dividends, and many other aspects of operating a corporation. For more details on filing your corporate tax return, see the Instructions for Form 1120.
Estimated Taxes, Amended Tax Returns, and Extension Applications
Here are a few final notes on filing federal taxes for a corporation.
Paying Corporation Estimated Taxes
Corporations must pay estimated taxes if their expected tax bill is $500 or more. Corporations calculate and file estimated taxes on IRS Form 1120-W. The installments generally are due by the 15th day of the 4th, 6th, 9th, and 12th months of the tax year. For a corporation that uses the calendar year, this would be April 15, June 15, Sept. 15, and Dec. 15.
Filing an Amended Corporate Return
If a corporation needs to amend a previous corporate tax return, it must do so on Form 1120x.
Applying for a Corporate Tax Return Extension
Corporations receive automatic approval on extension applications, but you must still file the application using Form 7004. The form must be filed by the due date of your corporate tax return and you must pay taxes by this date.
State Corporate Taxes
You must also pay income taxes in the state or states where your business is incorporated if those states have corporate taxes. To find out more about your state's corporate tax rates and filing instructions, go to the website of your state department of revenue or similar agency.
Getting Help with Corporate Income Taxes
Income taxes for corporations and S corporations are complicated. It's usually best to get the help of a CPA or tax professional who is familiar with corporate taxes, rather than attempting to prepare this return on your own. Before you enlist the help of a CPA, enrolled agent, or another qualified tax preparer to prepare your corporation's taxes, make sure you review basic information about business taxes that you should know.