Federal Business Income Taxes
Business Income Taxes
Business Income (For Income Tax Purposes)
Business Deductions (For Income Tax Purposes)
Business Tax Credits (For Income Tax Purposes)
Estimated Tax Payments (C-Corporations)
Where to File Returns
Federal Corporate Income Tax Rates
Business Income Taxes
C-Corporations (as opposed to S-Corporations) are required to compute and remit income taxes on their taxable income.
S-Corporations and partnerships generally do not pay income taxes at the entry level, rather, they pass income or loss through to the shareholders and partners, respectively. The shareholders and partners include the income and deductions on their respective income tax returns (i.e. form 1040's).
Federal Income Tax Return form numbers are as follows;
- C-Corporations file Form 1120
- S-Corporations file Form 1120-S
- Partnerships file Form 1065
- Proprietorships report income and expenses on Schedule C of Form 1040
North Carolina Income Tax Return form numbers are as follows;
- C-Corporations file Form CD-405
- S-Corporations file Form CD-401S
- Partnerships file Form D-403
There is no North Carolina Equivalent of Federal Schedule C. A Proprietorship's income or loss is, however, included in Federal Form 1040, Line 37 which carries over to the North Carolina individual income tax return (Form D-400).
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Business Income (For Income Tax Purposes)
The Internal Revenue Code defines gross income of a business as its net sales and receipts, less cost of goods or services sold, plus other investment income earned, and plus the gain from the sale of property that is not inventory. Only where specific exemptions are provided in the Code will an income item not be included in gross income.
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Business Deductions (For Income Tax Purposes)
The general rule for deductibility of business expenditures is found in Internal Revenue Code section 162. Expenses are deductible if they are both ordinary and necessary. Ordinary has been defined as that which arises with some degree of constancy in the industry. Necessary has been defined as that which is appropriate and helpful to the conduct of business.
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Business Tax Credits (For Income Tax Purposes)
A tax credit is a direct offset to a taxpayer's otherwise computed tax income liability and reduces such tax by 100% of the allowable credit. For example, if a business' computed income tax liability is $10,000 and the taxpayer has an allowable tax credit of $2,000, the taxpayer's net income tax liability is reduced to $8,000.
Year-end tax checklists and conferences with a CPA will help identify and quantify amounts eligible for tax credits.
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Estimated Tax Payments (C-Corporations)
C-Corporations are required to make estimated tax payments on their net income. The periods and their due dates for estimated tax payments for calendar year-end businesses are as follows:
| Period | | Due Date |
| |
| Jan 1st - Mar 31st | | Apr 15 |
| Apr 1st - May 31st | | Jun 15 |
| Jun 1st - Aug 31st | | Sep 15 |
| Sep 1st - Dec 31st | | Dec 15 |
Partnerships and S-Corporations generally do not make estimated tax payments. Partners and shareholders, at the individual level, make estimated tax payments that include their portion of the profit or loss flowing from the partnership and S-Corporation.
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Where to File Returns
Federal income tax returns are filed with the IRS in Memphis, TN 37501. North Carolina income tax returns are filed with the North Carolina Department of Revenue at PO Box 25000, Raleigh, NC 27640.
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Federal Corporate Income Tax Rates
Federal income taxes are applied to taxable income and determined from the following partially presented schedule:
| Taxable Income Over- | but not over- | Tax is: | of the amount over- |
| 0 | 50,000 | 15% | 0 |
| 50,000 | 75,000 | 7,500 + 25% | 50,000 |
| 75,000 | 100,000 | 13,750 + 34% | 75,000 |
| 100,000 | 335,000 | 22,250 + 39% | 100,000 |
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