Establishing a C corporation, or C-corp, has many benefits. It lets you limit your personal liability for corporate debts, for one thing. And it offers a highly flexible ownership structure you won’t find, for example, in S corps. However, one significant downside to C-corps is just how complex the tax filing requirements can be.
While it’s best to seek legal advice from experienced tax lawyers, here’s a rundown of how C-corp taxes work and how you can file C corporation taxes with confidence.
How Are C-corps Taxed By the IRS?
The IRS taxes C-corps at two different levels: the corporate and individual level.
- Corporate Taxes: The company, as a legal entity separate from its individual shareholders, pays corporate taxes. Corporate income is taxed at around 21%.
- Individual Taxes: Shareholders receive profits, such as dividends and other distributions. The shareholders pay tax on this income at a personal level, even though the capital has already been taxed at the corporate level.
This concept is known as “double taxation.”
When Are C Corporation Taxes Due?
The filing deadline for C corporations depends on whether the company uses the fiscal tax year or the calendar year for tax purposes.
- Fiscal Tax Year: Taxes should be paid by the 15th day of the fourth month after a fiscal year ends.
- Calendar Year: Taxes should be paid by April 15th.
Corporations may also be required to make estimated tax payments each quarter. For calendar year corporations, the deadlines are:
- April 15th (Q1)
- June 15th (Q2)
- September 15th (Q3)
- December 15th (Q4)
Can a C-corp Be Taxed as an S-corp?
Yes, there’s a legal process available for C-corps seeking to pay S-corp taxes. Why does this matter? Well, S-corps benefit from tax deductions on income “passing through” to individual shareholders.
However, a word of warning: the process involves reclassifying your business as an S-corp. You can do this by filing an IRS Form 8832, “Entity Classification Election.” However, this could have significant implications for your business moving forward, since there are pros and cons to each structure. Consult our business formation lawyers to discuss which option could be right for your company.
Steps to C Corporation Tax Filing
Now we’re clear on how C-corps are taxed and when taxes are due for C-corps, let’s break down the main steps to C corporation tax filing in the US.
1. Identify Deductions
Corporations can deduct allowable expenses which they won’t pay tax on. These expenses include:
- Employee salaries
- Insurance payments
- Operating expenses
If it’s an ordinary and necessary expense, it could be deductible. Your attorney can help ensure you claim all relevant deductions to reduce your tax bill.
2. Pay Estimated Taxes
C-corps should pay estimated taxes four times a year to cover income as it’s earned. This includes federal-level taxes and, potentially, taxes to at least one or more US states. Estimated taxes are based on your net amount for each quarter.
3. File Federal, State, and Local Tax Returns
Next, it’s time to file the relevant IRS, state, and local tax return forms for your C-corp.
- Federal Level: Use IRS Form 1120 to file your IRS tax return by the relevant deadline. You must e-file your corporate federal tax return if you’re a C-corp.
- State Level: You’ll typically file state and federal taxes together; however, some states have different deadlines. You should check state rules to see how much of your company’s income is taxed in each state before filing your returns.
- Local Level: Depending on where you do business, you may also be liable for regional or city taxes. Check local rules or consult a tax professional for more information.
4. File International Tax Returns
Does your C-corp do business internationally? Then you may be required to file international tax returns. The rules here are highly variable and complex, and you should seek legal advice to ensure you comply with your obligations. Your lawyer can also explain if you may be able to claim credits to reduce tax on foreign income, and how you can avoid double taxation.
What if a C Corporation Cannot Pay Its Taxes?
There are options for moving forward if a C-corp needs more time to file IRS taxes, or if it simply cannot pay its corporate taxes.
- If the business needs more time to file, it can request a six-month extension to file business taxes. The relevant form is IRS Form 7004. This doesn’t mean you have more time to pay; rather, there’s just more time to submit the tax return.
- Seek a payment plan, such as an installment plan, to give your company more time to pay its taxes. Interest may be incurred.
It’s not advisable to seek filing extensions, or IRS installment or payment plans, without seeking legal advice first. This is because negotiating with the IRS can have serious legal consequences and you may incur significant penalties.
Our tax attorneys have the experience to help you explore your best options for handling overdue taxes or corporate tax debt, so don’t hesitate to call for help.
Got Questions About Tax Filing? Contact Gordon Law!
A key objective of C-corp tax filing is finding ways to reduce tax liability while ensuring that you meet all corporate tax obligations. This is no easy task, but that’s where Gordon Law can assist.
For more than 10 years, our team has successfully helped numerous corporations reduce their tax liability, avoid tax debt, and file corporate taxes with ease. For more information on how our team can support your tax filing goals, contact Gordon Law online or by phone to schedule your free, no-obligation first consultation.
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