Entities (aka corporations) must pay taxes much the same as individuals do. The business structure affects how you pay corporate taxes, whether you are a C-corporation, S-corporation, partnership, tax-exempt organization, or self-employed. Here’s a high-level overview of U.S. corporate tax basics, like tax due dates, corporate tax rates, and the difference between various corporate tax forms.
When are taxes due for the 2018 tax year?
While April 15 is tax day this year, there are different due dates depending on whether you are filing as an individual or entity. Below are estimated tax dates you should make note of if they apply to you.
Tax Day is Monday, April 15, 2019.
- Employers file W-2 (mail or e-file) –January 31, 2019
- Form 1065 – Partnerships – March 15, 2019
- Form 1120S – S Corporations – March 15, 2019
- Form 1040 – Individuals – April 15, 2019
- Form 1041 – Trusts and Estates – April 15, 2019
- Form 1120 - C Corporations –April 15, 2019
- Form 990 Series – Tax Exempt Org –May 15, 2019
Which corporate tax form should I file?
Not all businesses are the same. Depending on the type of business you own, you might pay taxes differently. These are the types of corporate tax forms you may need to complete in order to file taxes.
C-corporation: Form 1120
Shareholders are taxed separately from the business in a C-corporation. The business itself must pay corporate income tax. Owners pay personal income taxes on the profits. If dividends are distributed, then income taxes are paid by the individuals who received the dividends, as well.
Federal Tax Rates for Corporations
This chart is subject to change for the 2018 tax year after tax reform legislation was passed in December 2017.
||But not over
||$0 plus 15% on amount over $0
||$7,500 plus 25% on amount over $50,000
||$13,750 plus 34% on amount over $75,000
||$22,250 plus 39% on amount over $100,000
||$113,900 plus 34% of amount over $335,000
||$3,400,000 plus 35% of amount over $10,000,000
||$5,150,000 plus 38% of amount over $15,000,000
||35% of amount over $18,333,333
State corporate income tax rates and brackets vary by state. See more here.
S-corporation: Form 1120S
An S-corporation is a sole proprietorship where shareholders are taxed for profits. Owners pay personal income tax on profits but the business itself does not have to pay corporate income tax. This is what is referred to as a “pass-through entity.” All of the business income, losses, deductions, and credits are “passed through” to the owners each year, and they report those on their individual income tax returns. Generally, S-corporations are domestic business, have no more than 100 shareholders, and shareholders must be U.S. citizens or resident aliens.
Partnership: Form 1065
This is for businesses with more than one owner. Owners report income, deductions, gains, losses, etc. on an informational return, but owners/partners include income from the business on their individual tax returns. This is also a “pass-through entity.”
Form 1065 – U.S. Return of Partnership Income
Self-employed: Forms 1040, 1040A, 1040EZ
Generally, when you see “self-employment tax” it is referring to Social Security and Medicare taxes. If you work freelance jobs, started your own business, or work as an independent contractor, you might have to pay self-employment tax.
When you work for yourself, Social Security and Medicare taxes are not automatically deducted from your paycheck like regular employees (see the chart below). Most pay those tax installments quarterly, as opposed to annually (Think Form 941, Form 943, and Form 940). But, you might be able to claim 50% of your self-employment tax as an income tax deduction.
You most likely will have to file a Form Schedule SE (Self-Employment Tax) to calculate the self-employment tax you owe. A Schedule SE applies to any sole proprietorship that earned $400 or more of net profit during the year.
You should also file a Schedule C form (Profit or Loss From Business (Sole Proprietorship)) to report your business’s profits and losses. You should include your Schedule C with your 1040.
% of Income Taxed
Cap on Wages Taxed?
% of Income Taxed
Cap on Wages Taxed?
Only the first $127,200 of earnings are subject to tax (for 2017 tax year).
No limit. All earnings are subject to tax.
Tax-Exempt Organization: Form 990 Series
(990, 990-N, 990-EZ, 990-PF)
Tax-exempt organizations may not have to pay taxes, but most need to file an informational return each year. Form 990 collects financial information (like revenues and expenses) and details about your mission, leadership, and activities. Tax-exempt organizations, nonexempt charitable trusts, and section 527 political organizations should file this information annually. However, certain religious and political organizations may be exempt from filling a Form 990.
Tax-exempt organizations that have gross receipts of at least $200,000 or assets worth at least $500,000 must file Form 990 annually with the IRS. According to the IRS, gross receipts are the “total amounts an organization received from all sources during its annual accounting period, without subtracting any costs or expenses.”
Form 990 Series
||Form to file
|Gross receipts normally
less than or equal to $50,000
|Gross receipts less than $200,000,
and total assets less than $500,000
|990-EZ or 990
|Gross receipts greater than or equal to $200,000
or total assets greater than or equal to $500,000
|Private foundation –
regardless of financial status
Via the IRS
What are FICA taxes?
FICA taxes, which stands for Federal Insurance Contributions Act, are Social Security and Medicare taxes that employers and employees both pay. Many refer to these as “payroll taxes.” Social Security and Medicare programs provide people with retirement, disability and health benefits.
For Social Security taxes, employers and employees each pay 6.2% of the first $127,200 of an employee’s wages (for 2017). For Medicare, the employer and employee each pay 1.45% on all income, there is no cap on wages subject to the tax. If you are self-employed, you must also pay these taxes.
With the passage of comprehensive tax reform legislation in December 2017, new laws and regulations are set to take effect in 2018. You can learn more about the impact of tax reform legislation here.
We know this sounds complicated, and that’s because it is. So, this is not intended as legal advice, but only as insight into tax regulations. If you have tax questions, consult a tax professional. Speaking of which, did you know XcelHR helps businesses comply with tax laws and regulations? You don’t say? It’s true, and you can learn more here.