Do I Have to File a State Tax Return in Delaware?

Many firms prefer to incorporate in Delaware because of the state’s well-known reputation for having business-friendly tax policies. However, this does not imply that people who reside in Delaware and earn a living there are excused from submitting state tax forms. In fact, you might need to submit a state tax return in Delaware if you meet specific requirements.

First and foremost, you have to file a state tax return if you live in Delaware and your income is higher than a specific amount. As of the 2020 tax year, married couples filing jointly with an income of $4,400 or more and single filers with an income of $2,200 or more will both need to file a state tax return. You can also be obliged to file a state tax return if you are a nonresident of Delaware but made money there.

A Delaware corporation is what?

A company that is incorporated in the state of Delaware is known as a Delaware corporation. Delaware’s business-friendly tax policies and established legal system make it a popular place to incorporate. Delaware is the state where many significant organizations, including more than half of the Fortune 500, are incorporated.

You can still be obligated to file a corporate tax return in Delaware even if your firm didn’t make any money during the tax year. This is due to Delaware’s requirement that all corporations that are incorporated there submit annual reports and pay franchise taxes on a yearly basis. The minimum franchise tax is $175, and the amount is determined by the corporation’s authorized shares. Do I Need to File a 1120S If There Is No Activity?

It’s possible that you be exempt from filing a federal tax return (Form 1120S) if your S business had no activity during the tax year. You might yet be obliged to submit state tax returns and pay state franchise taxes, as was already explained.

The federal tax return for businesses, including S companies, is Form 1120. Except for some excluded entities like nonprofit companies, all corporations must submit Form 1120. S corporations are still obliged to submit a federal tax return, but they must do so by using Form 1120S rather than Form 1120.

In conclusion, you could be required to file a state tax return in Delaware if you live there and earn money there. Furthermore, even if your Delaware corporation didn’t make any money during the tax year, you still need to file an annual report and pay an annual franchise tax. Finally, unless they are exempt, all corporations, including S corporations, must submit a federal tax return (Form 1120 or 1120S).