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Incorporation

18. How Corporations are Taxed

As a separate legal entity, a corporation must submit a tax return each year with the IRS. For corporations with a fiscal year ending December 31, tax returns are due on March 15. A corporation must file a tax return even if it does not have income or no tax is due. C corporations file tax returns on Form 1120 or 1120A.

Although S corporations do not pay federal taxes at the corporate level, they still must prepare a separate tax return (Form 1120S).

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For 2011, the federal income tax rate for a C corporation is as follows:


Income


Tax Rate


Up to $50,000


15%


From $50,001 to $75,000


25%


From $75,001 to $100,000


34%


From $100,001 to $335,000


39%


From $335,001 to $10,000,000


34%


From $10,000,001 to $15,000,000


35%


From $15,000,001 to $18,333,333


38%


Over $18,333,333


35%

Some states, including California, also have a state corporate income tax. Corporations that anticipate a tax liability of $500 or more must estimate their taxes and make quarterly estimated tax payments. Corporations with employees are required to pay federal (and sometimes state) payroll and unemployment taxes.

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