Federal Tax Returns Required for Corporations
As a business entity, you have obligations towards the federal government concerning income and employment taxes. What are these obligations that you must fulfill to be compliant with the law?
Our guide tell you the basics of these obligations and the tax forms that you must accomplish in order to file your tax returns.
Business tax obligations will depend on whether a business was incorporated as a sole proprietorship, a partnership, a limited liability company, or a corporation. Businesses have tax obligations to both state and federal governments.
Federal Income and Estimated Taxes
If you incorporated your business as a regular C corporation, you use federal tax Forms 1120 or 1120-A to pay income tax and Form 1120-W to pay estimated tax. Estimated taxes are required for a business that expects to pay $1,000 or more, including self-employment tax, when it files its return. If not, it should pay tax due through income tax return. Self-employment tax is tax for social security and Medicare, and comes at a rate of 15.3%, which is the total of 12.4% for social security and 2.9% for Medicare. Payment of self-employment tax is required for those whose net earning from self-employment is at least $400.
Subchapter S Corporations use Form 1120S to file income tax return to the federal government. For other useful forms, visit www.sba.gov.
Employment Tax Obligations
Other forms that C corporations may use are Form 8109-B Deposit Coupon, Form 4625 Depreciation, and forms for employment tax; that is, if you have employees.
Employment taxes cover:
Social Security and Medicare. Social security and Medicare taxes withheld by the employer contribute to an employee's social security coverage for retirement and certain medical insurance benefits.
Federal Income Tax. Employers withhold part of employees’ salary to cover taxes that the employee must pay to the government at the end of the year.
Federal Unemployment (FUTA) tax. The FUTA Act together with state unemployment systems takes care that people who have lost jobs will be paid unemployment compensation. This tax is paid by employer and not by the employee. To see more information about this tax, visit the IRS Web site.
Excise Tax/Excise Duty
Certain businesses that manufacture or sell particular products or use certain equipment or facilities are required to pay excise tax, also called as excise duty. This is also applicable to businesses that operate certain kinds of businesses or receive payment for certain services. Forms used to pay excise tax are Form 720, 2290, 730, and 11-C. See the Web site of the IRS for detailed description of these forms.
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