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Federal Tax Return Requirements for Corporations

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Typically corporations must file an annual income tax return with the IRS. At the federal level, C corporations are taxed at rates ranging from 15 percent to 38 percent, based on taxable income. Dividends that meet certain conditions are now taxed at a 15 percent rate. Shareholders of an S corporation pay income tax based on their individual tax rate by making regular estimated tax payments during the year.

In additional to income taxes, corporations will also likely have to pay some — if not all — of the following additional federal taxes:

Self-employment tax: This tax is a combination of Social Security and Medicare tax for individuals who work for themselves. You generally must pay self-employment tax if your annual net earnings from self-employment are $400 or more.

Employment taxes:

  • Federal withholding tax. Businesses must withhold federal income taxes from employees' wages.
  • Social Security and Medicare withholding tax. These taxes pay for benefits that workers and their families receive under the Federal insurance Contributions Act (FICA). Social Security tax pays for benefits under the old-age, survivors, and disability insurance part of FICA. Medicare tax pays for benefits under the hospital insurance part of FICA. Part of these taxes are withheld from employees' wages; the other part is paid by your corporation.
  • Federal Unemployment tax. This tax pays unemployment compensation to workers who lose their jobs. Employees do not pay this tax or have it withheld from their pay.
  • Excise taxes. Taxes imposed on the manufacture or sale of certain products, on the operation of certain types of businesses, or on the use of various types of equipment.

Tax matters, both state and federal, can be very complicated. The IRS and other government agencies offer assistance to small businesses. If after reviewing all available assistance, you are still confused or unclear about tax issues, it is a good idea to seek professional assistance. In fact, tax issues are one area in which you are allowed to go straight to professional assistance, without attempting to master the area yourself. To find the right tax professional for you and your corporation, ask your colleagues, your attorney, and your banker for a recommendation for a tax attorney, accountant, financial advisor, and bookkeeper.

In addition, read Small Business Tax Basics, and Top 10 Tax Tips for Small and Growing Businesses.

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