Before you start making decisions and preparing your taxes, you should familiarise yourself with the basics of filing corporate income taxes. Here are six steps to getting your taxes filed:
- 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. A C corporation is a traditional corporation that pays corporate income tax on its profits.S corporations don’t pay any corporate tax.
- 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 on the date your corporation is formed. The IRS instructions for Form 2553 include a full explanation of these deadlines. Once you’ve elected S corporation status and it’s been approved by IRS, the election stays in effect until it is terminated or revoked.
- 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.
- Pay Estimated Taxes
C corporations must pay estimated corporate income tax, and S corporations are required to make estimated tax payments for certain S corporation taxes. Estimated tax payments must be made quarterly throughout the year.
- 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 you’re 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. C corporations file a corporate tax return on Form 1120.
- File Your State Tax Returns
Depending on your tax status and the state (Australia) where your corporation was formed, you may also have to file a state income tax return for your corporation.
A corporation (including the head company of a tax consolidated group) lodges/files a tax return under a self-assessment system that allows the ATO to rely on the information stated on the return. Where a corporation is in doubt as to its tax liability regarding a specific item, it can ask the ATO to consider the matter and obtain a binding private ruling