C-Corporation Tax Filing

A C-Corporation is a separate legal and taxable entity under federal law. Unlike pass-through entities, a C-Corp files its own tax return, pays its own taxes, and is subject to what's known as "double taxation." This structure is common for venture-backed companies, publicly traded corporations, and businesses planning to reinvest profits or offer various equity incentives.

Form 1120: The Core Corporate Tax Return
Form 1120, U.S. Corporation Income Tax Return, is the annual federal tax form filed by C-Corporations. It is a complex document that requires a detailed accounting of the corporation's financial activity for the year.

Key Components We Handle:

• Income: Reporting gross receipts, sales, and other income.
• Deductions: Claiming all allowable business expenses (see Deductions section).
• Depreciation/Amortization: Calculating and reporting using methods like MACRS.
• Tax Computation: Applying the flat federal corporate tax rate of 21% (per the TCJA) to taxable income.
• Credits & Payments: Applying tax credits (R&D, energy, etc.) and accounting for estimated tax payments made during the year.
• Schedules: Preparing necessary attachments like Schedule L (Balance Sheet), Schedule M-1 (Reconciliation of Income), and Schedule M-2 (Analysis of Unappropriated Retained Earnings).

We ensure accurate preparation, strategize for tax minimization, and guarantee timely filing (by the 15th day of the 4th month after the fiscal year-end).

Double Taxation: The Defining Characteristic

This is the most significant tax consideration for a C-Corp.

First Layer (Corporate Level): The corporation itself pays income tax on its net profit (at the 21% federal rate) using Form 1120.

Second Layer (Shareholder Level): When the remaining profit is distributed to shareholders as dividends, the shareholders pay personal income tax on those dividends on their individual Form 1040.

Example: A C-Corp has $1,000,000 in taxable profit.

• It pays $210,000 in corporate income tax (21%).
• It distributes the remaining $790,000 as dividends.
• A shareholder in the 20% qualified dividend tax bracket pays $158,000 in personal tax on their portion.
• The combined effective tax rate on the original profit can exceed 35%.

Mitigation Strategies We Implement:

• Reinvesting Profits: Using profits for business expansion to avoid dividend distributions.
• Reasonable Salaries: Paying shareholder-employees deductible salaries/bonuses (subject to payroll tax).
• Fringe Benefits: Providing tax-deductible benefits (health plans, etc.) to owner-employees.

Payroll Rules: Compliance is Critical

Even with a single employee-owner, a C-Corp must adhere to strict payroll regulations. Salaries paid to shareholder-employees are tax-deductible for the corporation.

Our Comprehensive Payroll Service Includes:

• Withholding & Remittance: Calculating and filing federal/state income tax, Social Security, and Medicare (FICA) withholding.
• Employer Taxes: Paying the matching FICA portion (7.65%) and Federal Unemployment Tax (FUTA).

Quarterly Filings:

• Form 941 for federal payroll taxes.
• Required state unemployment and withholding returns.
• Annual Filings:
• Form W-2 for each employee.
• Form 940 for FUTA.

Owner-Employee Scrutiny: We ensure salaries are "reasonable" (commensurate with services provided) to withstand IRS scrutiny and avoid reclassification of dividends.

Deductions: Reducing Taxable Income

A key advantage of the C-Corp structure is the ability to deduct a wide range of ordinary and necessary business expenses, directly lowering the 21% corporate tax burden.

Common & Strategic Deductions We Maximize:

• Employee Salaries, Bonuses, and Benefits
• Employee Benefit Plans: Health, dental, and life insurance premiums; contributions to retirement plans (401(k), SEP).
• Rent, Utilities, and Office Supplies
• Marketing and Advertising Costs
• Business Travel and Meals (subject to the 50% limit for meals)
• Interest on Business Loans
• Depreciation of Assets (using bonus depreciation or Section 179 expensing)
• Research & Development (R&D) Expenses (may qualify for the R&D Tax Credit)
• Charitable Contributions (limited to 10% of taxable income)
• Insurance Premiums (liability, professional, etc.)
• Startup and Organizational Costs (amortizable)

Startups & Delaware C-Corps: Special Considerations

For Startups (Often Delaware C-Corps):
Venture capital firms and angel investors almost universally require a portfolio company to be a Delaware C-Corporation. This is due to Delaware's well-established corporate law, legal precedent, and investor-friendly framework.

Our Guidance for Startup C-Corps:

• Entity Formation: Ensuring proper setup in Delaware and qualification to operate in your home state.
• Equity & Cap Table Management: Tax implications of issuing founder stock, employee stock options (NSOs/ISOs), and preferred stock to investors.
• Net Operating Losses (NOLs): Strategically carrying forward early-year losses to offset future profits. (Note: NOL rules are complex post-TCJA).
• R&D Tax Credit: Identifying qualifying activities to generate a valuable dollar-for-dollar credit against payroll tax (for startups) or income tax.
• Section 1202 (QSBS): Advising on Qualified Small Business Stock to potentially enable shareholders to exclude 100% of capital gains upon sale.
• 83(b) Elections: Crucial filing for founders and early employees receiving restricted stock to lock in low valuations for future tax purposes.
• We specialize in navigating the complex tax landscape for high-growth startups, ensuring compliance from inception through funding rounds and eventual exit.

Let Us Handle Your Corporate Tax Complexity

From routine Form 1120 preparation to strategic tax planning for startups, we provide the expertise to ensure your C-Corporation remains compliant, minimizes its tax liability, and supports its long-term financial goals.