(212) 641-0673 george@dimovtax.com

What is Corporation Tax?

Corporation tax is a tax imposed on the profits of a corporation. In the U.S., corporations are required to pay taxes on their earnings at the federal, state, and sometimes local levels. C corporations are taxed directly at a flat rate of 21%, while S corporations are pass-through entities, meaning the income passes to the shareholders’ individual tax returns.

 

What is Corporation Tax

 

C Corporation vs. S Corporation Taxation

 

Feature

C Corporation

S Corporation

Tax Rate

Flat 21% federal corporate tax rate

No federal corporate tax; pass-through to shareholders’ personal returns

Double Taxation

Yes (corporate and personal tax on dividends)

No (income taxed only at shareholder level)

Eligibility

No restrictions on the number of shareholders

Limited to 100 shareholders; only U.S. citizens or residents

Tax Forms

IRS Form 1120

IRS Form 1120S

Shareholder Structure

Can have multiple classes of stock

Limited to one class of stock

Steps to File Corporation Tax

  1. Gather Financial Documents: Collect income, expense, and deduction records.
  2. Determine Corporate Status: Choose between C corporation or S corporation taxation.
  3. Prepare Tax Forms: Complete IRS Form 1120 for C corporations or Form 1120S for S corporations.
  4. File Federal, State, and Local Returns: Submit the required tax forms by the applicable deadlines.

 

Frequently Asked Questions

 

1. What is the difference between C corporations and S corporations?

C corporations pay taxes on their profits directly, while S corporations’ profits pass through to shareholders’ tax returns, avoiding double taxation.

2. What is the corporate tax rate in the U.S.?

As of 2024, the federal corporate tax rate is 21%.

3. Do corporations have to file state taxes?

Yes, corporations may also need to file state taxes depending on the state they operate in.

4. What tax forms do corporations need to file?

C corporations file IRS Form 1120, while S corporations file IRS Form 1120S.

5. How do I file corporation taxes?

Gather financial documents, choose your corporate status (C or S corporation), and file IRS Form 1120 for C corporations or Form 1120S for S corporations. Submit federal and state returns on time.

6. Are there any deductions available for corporations?

Yes, corporations can deduct expenses like depreciation, salaries, advertising, and loan interest to reduce taxable income.

For personalized guidance on corporation tax, reach out to us today—our experts are ready to assist you!