Can a corporation get a tax refund?

Can a corporation get a tax refund? 

Corporations and tax refunds, do the two mix?

Do the two mix? Yes, but it depends on the business and situation. The tax circumstances are a large factor. C-corporations are the ones that usually get a tax refund.

The reason c-corps get the refund is due to the exemption status. C-corps are taxed separately from the ownership. The owners have a separate tax exemption under the Chapter C code for the IRS.

Say the C-corp pays more taxes during the year. Sometimes the company overpays when it comes to their payroll and sales taxes. That will qualify the company for a refund, depending on how much they overpaid.

How do I know if I get one or not?

The first thing you need to do is look at the type of corporation your company is listed under the tax code.

There are certain situations when the refund will pass through to the owner.

1) Are you the sole owner of the company? The listings will appear under the Schedule C. You will get a 1040 tax form in the mail and online. I suggest you double-check with your accountant to make sure you will get a refund.

2) Do you have a partnership with someone? The partnership must include at least two or more people. The partners get a K-1 form. You will get a 1065 form. You might be eligible for a refund based on what you report on the forms.

3) You might be eligible if you have an LLC partnership, for which you will also get a 1040 form.

4) The other eligibility requirement is with an S-Corporation. You will get an 1120S form, and the other people will get a K-1.

These are examples of company structures for which you could be eligible for a refund. I encourage you to go online and check out the tax code for additional information.

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Does Owning a Business Help with Taxes?

Does Owning a Business Help with Taxes?

Because of the internet and the digital age, starting a side business to help pay the bills has never been easier. This motivates people to start their own business to try and get ahead. However, make sure your motives are as clear and innocent as this. It is not a good idea to create a company or shell of a company only to get a tax deduction. If you truly have wanted to become an entrepreneur, then a side business may be the ticket, besides providing a tax advantage. For details, make sure that you speak with a tax advisor or a Certified Public Accountant.

There are rules about recording losses for a side business. First, the IRS requires you to start the business intending to make a profit. Further defined, you must make a profit for three of five years; this will show the IRS your goal is to turn a profit. There are legitimate businesses that suffer losses for many years. If you feel your business won’t make a profit for years to come, then you should consult a tax advisor going forward.

Second, show the significance of your side business. Examples of this include detailed financial records, a bank account only for your business, and a current business plan. You should also keep records to show your time and effort going towards the business.

Third, you need to show the legal structure of your business. Examples include a sole proprietorship, an LLC, an S Corporation, and/or partnership. You can use any entity and still take a loss on your personal taxes, including incorporating your business.

There are things to keep in mind with whichever structure you choose. You should maintain separate records for your business and personal finances. Lastly, have a solid understanding of how your decision will affect your taxes. If you want to pursue your dream, play by the rules and know your legal obligations.

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Who can sign a tax return for a corporation?

Who can sign a tax return for a corporation?

This question often comes up during tax season. Common sense dictates that the officers that initiated incorporation should be able to sign tax forms. In most medium-sized and large organizations, all financial activities are handled by the treasurer or chief financial officer. This task in small organizations is sometimes handled by the president, vice president or other designated person in the organization. It is important to note that the person must be authorized to sign important documents.

You can’t have someone who isn’t authorized sign important documents such as a tax return. The reasons are quite simple. The IRS holds your organization responsible for accurate accounting of your organizations’ assets and liabilities. An authorized individual should have that information readily available. An unauthorized person may cause difficulties when it comes to accountability. You want to make sure your organization is viable in the eyes of your customers and clients.

Corporations file Form 1120 or Form 1120S annually. Authorized signers include the president, vice president, treasurer, assistant treasurer, and other authorized officers. For this reason alone, all officers should have documentation designating their authorization. This authorization can come in the form of a contract that states what authority the person has.

There are certain circumstances where an officer of a corporation shouldn’t sign. It is understood that one of those circumstances is when the corporation merges with another corporation. In that case the new corporation files and signs the tax return. Bankruptcy is another circumstance where an officer shouldn’t sign. The receiver or trustee is obligated to file and sign those tax forms. When a corporation has a Paid Preparer file the tax return, then they are not obligated to sign it.

It is important to understand that your corporation is still liable for accurate reporting even when you hire outside tax help. Tax Preparers depend on the data you provide. If in doubt about how accurate your data is, authorized individuals should have that information.

 

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Will I Get a Tax Refund if My Business Loses Money?

Will I Get a Tax Refund if My Business Loses Money?

Deciding to be self-employed can be an exciting venture, but it involves a lot of forethought. There are some important differences between working for an employer and being self-employed. One of the biggest differences is how a person files taxes at the end of the year. This leaves many wondering if there will be a refund issued if the company takes some time to get its feet off the ground and operates at a loss. Important factors come into play when filing taxes while self-employed that can determine if the loss of a company will merit a refund.

Types of Business Ownership

There are four common types of businesses that a person chooses to operate under, but income from three of those types of businesses can be included in a personal tax return. A sole proprietorship, a limited liability company (LLC), and an S corporation may do so. A majority of small business owners elect to operate as a sole proprietorship or LLC.

Determining Net Operating Loss

If the operating expenses outweigh a business’s profits, then steps need to be taken to determine the net operating loss (NOL). It is important to be familiar with every type of qualified deduction a business can claim and keep detailed records of them, and this is because the total number that is calculated in the end will be subtracted from the total annual income. This income may include a spouse’s income, investment income, etc. The resulting number is called the adjusted gross income (AGI).

Once the AGI is determined, subtract either itemized deductions or standard deductions. If the number is negative, an additional step can be made to determine the NOL. The final step is to take the number determined by subtracting nonbusiness income from nonbusiness deductions and adding that number back to the current total. If the result is still a negative number, it reflects an NOL, and a tax refund may be issued.

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Are Business Tax Returns Public Records?

Are Business Tax Returns Public Records?

The short answer is no. Corporate tax returns are private, simply because they are deemed confidential and are protected under Section 6103 of the Internal Revenue Code, as enacted by the Tax Reform Act of 1976. Because of this, corporate returns are also not available to certain government agencies.

A Brief History

In the 19th century, up to certain parts of the 20th century, corporate tax returns were available to the public at varying degrees. Back then, tax information was posted on courthouse doors, and even published in newspapers. The goal was to promote public inspection. The tax returns were subject to the public’s eyes, and therefore, to surveillance and scrutiny. However, times have passed, and policymakers began the need to seek confidentiality.

Business Tax Returns: Why are they Confidential?

All tax returns contain very confidential information. They contain SSNs, addresses, EINs and other information that can compromise the owner’s privacy. In today’s world, the release of such information can render the owners vulnerable to identity theft and cybercrimes. Also, corporate tax returns include the company’s financial position and divulging it to the public might increase their vulnerability to certain crimes, threats, and fraudulent events brought by the public and other companies.

Confidentiality and Public Awareness

Some debates seek a balance between confidentiality and public awareness. The proponents of disclosures state that certain disclosure measures, when placed in effect, will encourage tax compliance and reduce corruption. If corporate tax returns were deemed as public information, more people will have the capacity to scrutinize these returns. They may include lawyers, economists, accountants, as well as the general public. They will be able to review corporate returns and raise awareness regarding possible instances of discrepancies, suspicious tax strategies, and even fraud. In effect, the public can potentially serve as watchdogs. In fact, corporate tax information is considered public records in some countries like Japan, Finland, Norway, and Sweden. Though they consider corporate tax returns as public records, they limit the amount of information that can be disclosed.

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