Your Complete Corporate Income Tax Guide - Including S Corp
Corporate Tax Forms, Tax Rates, Tax Filing Information
U.S. Corporations and Income Taxes
This guide will take you through the top pieces of information 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 estimating corporate taxes.U.S. corporations are complex entities and taxes for corporations are even more complex.
Coronavirus Relief Measures for Corporations
Corporations affected by COVID-19 in 2020 can take advantage of several new tax credits, including:
An Employee Retention Credit that encourages businesses to keep employees on their payroll, and
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 Coronavirus.
Both types of credits end on December 31, 2020, unless they are extended.
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 is taxed to shareholders 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 - and Other New Changes
The 2017 Tax Cuts and Jobs Act has made some changes that affect 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 doesn't affect S corporations, because the owners of an S corporation are taxed through their personal tax returns.
Other changes (both benefits and drawbacks) affecting corporations, detailed in this article about the Trump Tax Cuts, 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.
See this IRS article for a detailed list of all the changes from the new tax law.
Tax Return Due Dates
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 4th month after year-end.
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: 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. This article on Form 1120 includes a list of documents to give to your tax preparer to file your corporation's tax return. It also includes a list of schedules you may need to include. For more details on filing your corporate tax return, see the Instructions for Form 1120.
Estimated Taxes, Amended Tax Returns, and Extension Applications
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 December 31 corporation that would be April, June, September, and December.)
Filing an Amended Corporate Return. Corporations must file an amended corporate tax return 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 corporation taxes you should know.
IRS. "Forming a Corporation." Accessed July 4, 2020.
IRS. "Publication 542 Corporations." Page 6. Accessed July 4, 2020.
IRS. "Instructions for Form 1120-S U.S. Income Tax Return for an S Corporation." Page 3. Accessed July 4, 2020.
IRS. "S Corporations." Accessed July 4, 2020.
IRS. "Instructions for Form 1120 U.S. Corporation Income Tax Return." Page 4. Accessed July 4, 2020.
IRS. "Instructions for Form 1120-W." Page 1. Accessed July 4, 2020.
IRS. "Publication 542 Corporations." Page 16. Accessed July 4, 2020.