The Ultimate Guide for C Corporation Tax Return in 2024

Discover the ultimate guide to filing a C Corporation Tax Return with Business Globalizer! Get tips and advice on how to maximize deductions and save time when filing your taxes.

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Are you a business owner? Or are you thinking of becoming one? If yes, then you must be aware of business owners’ legal rules and obligations. Which, by the way, are required by the state and government. You will face penalties if you cannot follow or comply with those!

Today we will talk about taxes, specifically C-Corp tax returns. Once you decide which business structure is best for you, it affects how you pay taxes and what paperwork you have to file, such as obligations, liabilities, fundraising, and potential. And you must comply with all of them on time. Otherwise, as already mentioned, penalties!

This blog will help you learn about the C corporation tax return. So, let’s explore…

What Is a Corporation?

A corporation is a type of legal entity that people, stockholders, or shareholders create to run for profit. Businesses can enter into contracts, sue and be sued own assets, pay federal and state taxes, and borrow money from banks or financial organizations.

Corporations offer maximum liability to their owners. You can raise funds by issuing shares to an operating corporation. It’s subject to more regulations and formalities, and corporations and stockholders must pay taxes.

A single shareholder or numerous shareholders can create a corporation for a profit or non-profit organization. According to the percentage of ownership in the corporation, most of the corporations are formed to generate revenue and provide a return to their shareholders as profit entities.

But it’s totally different in terms of non-profit corporations. These are formed to operate as charitable organizations for religious, educational, scientific, or research purposes, which distribute revenues among shareholders or organizations to further their objectives.

Types of Corporations

There are three types of corporations, such as:

  • S Corporations.
  • C corporations.
  • Non-profit corporations.

Today, we will talk about C corporations and discuss the taxation of this specific corporation in detail.

Now, What Is a C Corporation?

A C corporation, or C-corp for short, is a type of legal structure for a corporation in which the owners or shareholders pay taxes separately from the entity. The “C” comes from C corp. income being taxed under subchapter C of the Internal Revenue Code, or IRC. When a business is formed in the United States, it is automatically set up as a C corporation.

Do you know that a corporation is considered a separate entity from its owners under the law?  

Though both S corporations and C corporations are forms of corporations, they are taxed differently as separate entities. C corporations must pay taxes on the entity’s income, and shareholders must pay taxes on their dividends from profit.

If you want to establish a C corporation for profit, you must file the “Articles of Incorporation” with the state.

One of the benefits of forming a corporation is that it offers maximum liability protection to the owners. Shareholders or owners are not individually responsible for the obligations and debts of the business.

A corporation can also issue shares to raise funds and continue to exist. One of the significant disadvantages of a corporation is that it is subject to more regulations and formalities than other types of commercial entities.

Does Every Corporation Need to File an Income Tax Return?

If you want to do business in the US, it’s essential to learn about the state’s tax rules and obligations where you plan to establish your business. Every business in the United States that generates net income or revenue during the tax year must file a corporate income tax return.

Imagine that if you form an LLC, you don’t have to file federal income tax returns in most states, because this is not a separate tax entity. But in terms of corporations, you must file a C corp tax return (for C-Corp) or a corporate tax return (for S corp). If your corporation is a C corporation, you need to file on the 15th day of the 4th month at the end of the fiscal year. But if you form an S corporation, you have to file the tax return on the 15th day of the 3rd month at the end of the fiscal year.

Tax Returns in C Corp LLC

Understanding the tax return for each entity is fundamental to any kind of business development process. Your business entity structure should be carefully considered when starting a business or changing the type of business structure, as that impacts tax obligations.

A C corp is a business structure owned by multiple shareholders. C corporations might go through the taxation rules in Subchapter C of the Internal Revenue Code (IRC). A C corporation has to pay corporate income tax. And again, they have to pay taxes on personal tax returns for individual earnings from corporations. This is known as “double taxation.” But it depends on how much easier filing taxes is based on a country’s personal income tax rate and corporate tax rate.

On the other hand, an LLC is a limited liability company that offers liability protection as a separate entity and can choose to have its business, whether taxes as a pass-through entity or not. This means that you’ll have to pay tax on business earnings as a personal tax return, or you can choose whether your business is taxed as a C corporation.

What Are the Tax Rates of C Corp?

C corporations are large businesses with multiple shareholders who choose the board of directors and pay taxes separately from the company itself. Compared to LLCs or S corporations, it uses the founder’s money or crowdfunding.

Business structures like partnerships, S corporations, sole proprietorships, and LLCs are all pass-through entities. This means that their profits and losses are passed through entities to the owners or shareholders, but they don’t distribute income tax to the owners or shareholders, like C Corp.

C corporation also pays taxes at the corporate level, like an S corporation or LLC. Eventually, it has to follow more federal and state requirements than an LLC, though a C corp isn’t a pass-through entity. However, they provide a flat federal tax rate of 21% on their operational profit. Along with this, it must pay state and local taxes by filing Form 1120. In the C corp, income taxes are paid twice: once by the C corp and again by shareholders.

You may be wondering what “Form 1120” is. If you are already doing business, you must file your income tax return. As we mentioned earlier, the C corporation files its tax return using IRS Form 1120. Other entities also use this for the same purpose.

For example, if you establish your business as an LLC or limited liability company but choose to have it as a C corporation, you must file Form 1120. But it’s slightly different for S corporations. Rather, you have to file Form 1120s.

Mainly, corporate income tax rates aren’t usually paid on personal income but on corporate income. There are variations in filing Form 1120, such as Form 1120-w is used to record estimated corporate taxes. When a corporation owes $500 or more in a tax year, it must file Form 1120-W.

By using Form 1120, you can determine your income tax liability. The farming corporation uses this form to report income and losses. If you are doing business as a foreigner or planning to expand your business as a non-resident in the U.S., you have to attach Form 5472 along with Form 1120.

How Can You File Form 1120?

You can file this form electronically or by mail. You can fill out the form by mail by following the IRS requirements. But in terms of corporations, you must file the form electronically using the IRS e-file to report $10 million or more in assets.

There are a few pieces of information needed to file a tax return. You have to follow the Form 1120 instructions, such as,

  • Employer Identification Number (EIN).
  • Gross receipts.
  • Capital gains.
  • Total income & assets of the corporation.
  • The date of incorporation.
  • Cost of goods sold (COGS).
  • Any dividends, interest, or royalties earned from the corporation or company.
  • Tax deductions.
  • Business tax credits (if required or applicable).

How Are C Corporations Taxed?

Operating a C corporation may offer greater tax benefits because of the expanded ability to deduct employee benefits. For this reason, growing businesses often use it. It is a very attractive tax planning fit for businesses that can use the C-corporation entity properly.

The system of double taxation can be scary, but it is preventable. C corporations don’t have to pay taxes on every single dime of profits. Rather, they reduce their taxable income by subtracting operating expenses from their revenues throughout the prior year.

Also, when a C corporation chooses to keep money in the entity instead of distributing dividends to shareholders, double taxation is not applicable. We suggest you get expert suggestions from your tax adviser for this purpose.

C Corp Tax Return Due Date

It doesn’t matter if your corporation was just created; your entity may be subject to legal filing and reporting requirements. As the founder of a corporation, you should ensure that your finances are solid and in good shape, and there should be no delay in transactions.

C corporations need to file on the 15th day of the 4th month at the end of the corporation’s fiscal year. If your corporation’s fiscal year ends on December 31, then tax returns are due by April 15th. But if your corporation’s fiscal year ends on June 30, then tax returns are due by September 13.

However, you can still request an extension of time to file the form for a tax return in case your corporation has been unable to file Form 1120. You have to file Form 7004 for an automatic extension of time by the actual due date of your tax return.

Penalties for Late Filing

Though there is an option to request an extension of time to file the tax return form, the IRS will still charge penalties for late filing or payment.

  • There is a 5% fine on the unpaid tax charged for each month.
  • But if your tax return is more than 60 days late, you have to pay one-half or one percent of the due tax for each partial or full month. That shouldn’t be up to a maximum of 25%.
  • But if the cause isn’t legit for late filings, like carelessness or underreporting of taxable transactions or payments, there are other penalties.

Bottom Line

At this point, we can say that as C corporations are not pass-through entities, they are required to pay corporate tax returns. But they can be ideal if you are a non-resident who is starting a small business or LLC or wants to expand your business globally. You can get various tax benefits and financial opportunities. Also, this protects your assets and liabilities against legal lawsuits.

That’s all we wanted to inform you of. If you have any more questions, don’t hesitate to contact us at [email protected]. Thank you.

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