Understanding Corporate Taxes
The size of your profit and type of your business dictates the amount of corporate taxes you will have to pay. These corporate taxes are usually levied by the law based on your corporate earnings, and for this reason, many had been seeking loopholes in paying what they owe in state and federal taxes. Corporate taxes measure the taxable earnings according to a set of specific tax law, which can be exploited for personal gain. For this reason, issues arise on the loopholes of corporate taxes, where companies receive tax breaks or tax exemptions. Although it is not illegal, if the cost of this tax loophole becomes too obvious, lawmakers can rewrite the law to close the loop. Sometimes, these loopholes exist for years until the IRS ( Internal Revenue Service ) discovers its existence.
Corporate taxes are mandated to businesses created inside the United States, and to those which operate their trades inside the country. Corporations, except for an S-Corporation, is subject to corporate taxes. Partnerships or Limited Liability Companies ( LLC ) may be liable to corporate taxes as well, depending on certain conditions. To make the process of corporate taxation simpler, the IRS have created their Check-the-Box regulation to classify local and foreign business entities. Foreign corporations conducting business inside the U.S. are also taxed based on their branch profits. There can also be a 30% withholding tax on royalties and dividends. Corporate taxes on foreign corporations and patents operating within the U.S. can be a complicated process and it is important to seek professional legal and tax advice to get a tax treaty for reduced taxes and to avoid double taxation as well. Also know that income from operating business abroad is taxable under the law.
Ten Basic Information on Corporate Taxes for Business Entities:
Take note that only those businesses approved by the IRS are eligible to participate in e-Services or filing of tax online, which is available 24 by 7.
1. All registered businesses can make an online registration, make an application for a PTIN ( Preparer Tax Identification Number ), and make an e-file application.
2. Attorneys, enrolled agents, or CPAs will have unlimited access to e-Services for their clients and
get incentives like filing and modifying a disclosure authorization form, making quick electronic account resolutions, and securely request and receive account transcripts for their business clients.
3. Corporations can file IRS Forms 1120, 1120S, or 1120-F online. Partnerships can also file IRS Forms 1065 and 1065-B online. Charities and Non-Profits can make an e-file on their IRS Form 990.
4. Tax returns ending before December 2006, prompt assessments, returns with late or failure of payment, returns with multiple tax periods, and the Bank Holding Company Tax Act are those that cannot be filed electronically.
5. Corporations with $10 million or more worth of assets, or those that file 250 or more returns annually are required to file their corporate taxes electronically.
6. Waivers can be applied for non-compliance of filing their corporate taxes electronically, provided that this is due to technical issues or that filing online will create a financial burden for the taxpayer.
7. If a corporation will file using a tax professional, they must check with the IRS if their chosen professional is an authorized e-file provider.
8. Failure to file corporate taxes electronically can result in monetary penalties.
9. Those corporations who had changed names under a certificate of incorporation can update these changes online. If you are only changing the company’s name, you do not need a new EIN ( Employer Identification Number ).
10. If a corporation chooses to develop their very own software in preparing taxes, this must be approved first by the IRS.
These are just among a few of the policies implemented by the IRS when it comes to corporate taxes. The government is still seeking ways to close tax loopholes to make tax collection more efficient. Only a savvy tax professional knows their way around the ambiguity of the taxation world, so you can maximize the tax deductions you can get. You may contact the IRS e-Help Desk at toll free number 1-888-255-0654 on making an e-file of your corporate taxes. For partnerships, you may contact this toll-free number: 1-866-255-0654. Charities, Non-Profits, and other tax-exempt organizations may call 1-877-829-5500. Tax professionals or practitioners of tax laws can ask for help and call 1-800-829-8374. For software vendors and/or developer, reach the e-Help Desk at 1-866-255-0654. Pay Your Taxes on Time!
RESOURCES:
IRS.gov. “ E-File for Large and Mid-Size Corporations – FAQ. “ June 2009.
http://www.irs.gov/businesses/article/0,,id=177619,00.html
IRS.gov. “ E-Services: Online Tools for Tax Professionals. “ December 2008.
http://www.irs.gov/taxpros/article/0,,id=109646,00.html
Robinson, Peter. “ Cut the Corporate Tax Rate! “ September 2009. Forbes.com.
http://www.forbes.com/2009/09/17/taxes-corporations-business-globalization-opinions-peter-robinson.html
Wikipedia. “ Corporate Tax in the United States. “ October 2009.
http://en.wikipedia.org/wiki/Corporate_tax_in_the_United_States
Pollick, Michael. “ What is a Tax Loophole? “ 2003 – 2009. WiseGeek.com.
http://www.wisegeek.com/what-is-a-tax-loophole.htm
