Unit 12: C Corporations In General Flashcards
Double Taxation:
Earnings of a C corporation may be taxed twice: first at the corporate level and again at the shareholder level if they are distributed as dividends.
Shareholder Meetings:
A corporation must maintain a list of all its shareholders and generally must conduct at least one shareholder meeting per year
1120
U.S. Corporation Income Tax Return
1120-F
Foreign corporation income tax return
990
Tax-exempt corporation income tax return
For tax year 2022, electronic filing is mandatory for C corporations with:
$10 million or more in assets and/or at least 250 or more returns of any type.
When must a corporation file a tax return?
15th day of the 4th month after the end of it tax year.
7004
Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns
Penalty for late filing:
5% of any unpaid tax for each month the return is late, up to a maximum of 25%
If a corporation files its form 1120 more than 60 days late, the penalty is:
$450 in 2022 or the amount of tax owed, whichever is smaller.
Penalty for late payment of corporate income tax:
.5% of the unpaid tax each month that the tax is not paid, up to a maximum of 25% of the unpaid tax
Corporations are required to make estimated tax payments if:
They expect their tax due to be $500 or more during the taxable year.
EFTPS
Electronic Federal Tax Payment System
Calendar year estimated payment dates:
- April 15
- June 15
- September 15
- December 15
In general, each quarterly federal tax payment is 25% of the corporation’s “required annual payment” which is the lesser of two amounts:
- Current-year tax liability: 100% of the federal income tax reported on the return for the current taxable year of the payment
- Prior-year safe harbor: 100% of a corporation’s federal income tax reported on the return for the preceding year.
What forms can a corporation use to apply for a refund of overpaid tax?
Either 1139 “Corporate Application for Tentative Refund” or 1120X “Amended U.S. Corporation Income Tax Return
Generally, the corporation must file Form 1139:
Within 12 months of the end of the tax year an NOL, net capital loss, unused credit, or claim or right adjustment arose
Generally, a corporation must file Form 1120X:
Within three years of the due date, including extensions, for filing the return for a year in which is sustains a loss.
4446
Corporation Application for Quick Refund of Overpayment of Estimated Tax
- Used to obtain a quick refund of its estimated tax payments
NOTE: May be used if a corporation’s overpayment is at least 10% of its anticipated tax liability and at least $500
Corporation flat tax
21%
CAMT
Corporate Alternative Minimum Tax
Imposes a 15% minimum tax on the adjusted financial statement income of very large corporations for the taxable years beginning after 2022.
Does a corporation receive a tax deduction for the distribution of dividends to its shareholders?
No
Accumulated Earnings Tax
Levied at a rate of 20% of the excess amount accumulated.
It is not automatically applied; it is assessed only after an audit.
Accumulated Earnings Tax Limits
- Most businesses $250,000
- Personal service corporations - $150,000
“Reasonable needs” of a business include the following:
- Specific, definite, and feasible plans for the use of the earnings accumulation in the business such as:
- The expansion of the company to a new area or new facility
- Acquiring another business through the purchase of stock or
assets - Providing for reasonable estimates of product liability losses
- The amount necessary to redeem the corporation’s stock is included in a deceased shareholder’s gross estate if the amount does not exceed the reasonably anticipated total estate and inheritance taxes and funeral and administration expenses incurred by the shareholder’s estate.
A corporation may generally use the cash method of accounting if it has average annual gross receipts less than:
$27 million. After that, they must use the accrual; method
Schedule M-1 & M-3
Used to reconcile bot-to-tax differences.
Schedule L
Is the balance sheet, based on the corporation’s books and records
Who is not required to file Schedule M-1, or Schedule L?
Very small corporations with less than $250,000 of gross receipts or total assets
Schedule M-1
Only required when the corporation’s gross receipts or its total assets at the end of the year are greater than $250,000
Schedule M-3
Used for corporations with assets (based on financial accounting-based book value) that exceed $10 million
Section 351
If a taxpayer transfers property to a corporation in exchange for stock, and immediately afterward, the taxpayer controls the corporation, the exchange may not be taxable.
351 does not apply in the following situations:
- The corporation is an investment company
- The taxpayer transfers the property in a bankruptcy proceeding in exchange for stock that is used to pay creditors
- The stock is received in exchange for the corporation’s debt (other than a security, such as a bond) or for interest on the corporation’s debt (including a security) that accrued while the taxpayer held the debt
351: To be considered “In control”
The transferors must own at least 80% of the total voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock immediately after the transfer.
