Learn About Corporate Tax
Corporate Tax is a tax levied on company’s revenue, in order to boost the taxation. Thus every corporation is supposed to pay tax on their net earnings.
How much a business owes to the government, depends on the Operating Earning.
Operating Earning is generally levied on the company’s revenue after deduction of cost of goods sold (COGS) & depreciation and inclusion of tax rates; which a company is bound to pay to the government. Rules regarding corporate tax vary as per the jurisdiction of different States of the United States.
Due date for submitting your corporate tax return is 15 March in U.S. In some cases where corporation seeks extension then it will be shifted till September. Besides this, mid April, June, September and December are the months when you are required to pay the installments. In U.S, Form 1120 is created to report Corporate Tax. A corporation is required to register online for assets exceeding $10 million.
Corporate Tax Deduction benefits a corporation by allowing them to deduct certain much needed and general expenses conducted while exercising the business.
Now, what one seeks is which expense is tax deductible?
Corporation’s operating expenses and the ones that are distinctively conducted to raise business are fully deductible i.e., investments and purchasing real estate. Other than this, personnel deductions allows a deduction of employee salaries, training and benefits catered like healthcare, bonuses and retirement. Advertising one’s business, legal services and fee used to plan the taxes are also not counted while calculating a corporation’s net earnings. Besides this, travel expenses, interest payments and taxes related to excise, fuel and sales are also deductible thereby lowering the corporation tax that a company is expected to pay.
Corporate Tax though is beneficial, but it has an issue along with it i.e. double taxation. So, it’s mandatory to acknowledge what Double Taxation stands for.
What is Double Taxation?
There exist some corporations where taxes are levied on the company’s taxable income. When in between the shareholders, this net income gets shared; the shareholders are bound to pay the taxes individually based on their part of share. Due to this, the situation of Double Taxation prevails. To resolve the issue, S Corporations comes into effect where a corporation registers self as Self Corporation. Through this it ensure that whole income remains with the owner solely. In the cases where company is registered as S Corporation, the tax returns are paid individually by the shareholders and are the owner is not required to pay any of the corporate tax.
What are the advantages of corporate tax?
While comparing individual income tax and corporate tax, corporate tax stands much more advantageous. While paying corporate tax an owner has liberty to deduct some expenses like medical insurance and retirement plans. Corporate owner can even deduct the losses incurred. Sole Proprietor on the contrary, is bound to submit evidences where before deduction he is required to incur profit. This, profit gained remains in the corporation which is thereon used for planning the tax and the tax benefits later on.