Corporations must submit Form 1120 to the Internal Revenue Service (IRS) in order to report their revenue, profits, losses, deductions, and credits. Do C Corporations alone use Form 1120, though? Yes, it is the answer. The only kind of corporation that files its taxes using Form 1120 is a C Corporation. S Corporations, on the other hand, file their taxes using Form 1120S.
Pass-through organizations, such as S Corporations, do not have to pay corporate taxes on their profits. Instead, the stockholders’ personal tax returns receive the earnings and losses. Based on their portion of the profits or losses, the shareholders subsequently make tax payments on their individual tax returns. The individual tax brackets of each shareholder are used to determine the S Corp tax rate for 2021. For 2021, the top individual tax rate is 37%.
The 15th day of the third month following the end of the tax year is the deadline for S Corporations to file their tax returns. Your tax return is due on March 15, 2022, for instance, if the tax year for your S Corporation ends on December 31, 2021. The penalty for filing your tax return late is $195 per shareholder, per month, for a maximum of 12 months. It’s crucial to file your tax return on time because this fine can build up quickly.
Can I file S Corporation taxes on my own? Even while it is conceivable, it is not advised unless you have experience and a thorough understanding of tax law. S Corp taxes are more intricate than personal taxes and call for a solid grasp of both tax law and accounting fundamentals. It’s best to work with a certified tax expert to file your S Corp taxes so you can be sure you’re utilizing all possible deductions and credits. Should I Form a C-Corporation or a S Corporation? The number of shareholders, tax consequences, and legal liabilities all play a role in determining whether to incorporate a C Corporation or S Corporation. While S Corporations are pass-through businesses that do not pay corporation taxes, C Corporations are vulnerable to double taxation. Non-U.S. citizens or non-resident immigrants are not permitted to be shareholders in S Corporations, which are limited to 100 stockholders. To choose the right corporation type for your company, you must speak with an experienced attorney or accountant.
In conclusion, S Corporations file their taxes using Form 1120S, whereas Form 1120 is solely for C Corporations. Each shareholder’s individual tax bracket will determine the S Corp tax rate for 2021, and the penalty for filing S Corp taxes late is $195 per shareholder, each month, for a maximum of 12 months. While it is feasible to file your S Corp taxes independently, it is preferable to work with a certified tax advisor. Before making a choice regarding whether to incorporate a C Corporation or S Corporation, it is imperative to speak with an experienced attorney or accountant.