Basic Guide to Corporate Tax Preparation
There’re 3 types of business categories: small business, medium business, and large business. As its name suggests, small business has small resources, with the stock worth of under $1 million.
There’re multiple reasons why a businessman would choose to ‘’Incorporate’’. Protecting assets from lawsuits filed against the company are one of the key reasons to save on taxes.
Getting more contracts from different companies that prefer doing business with corporations is another reason to save on taxes. It’s all legal for anyone to run several corporations. But he/she would need to confirm it’s running through legal transactions and these transactions are perfectly reflected in their records.
The corporation’s deductions and income are reported using the annual accounting process and period usually used by the company or corporation to keep its books (IRS section 446). There’re two common accounting methods, the Accrual Basis and the Cash Basis. First off, we’ll discuss Cash Basis technique.
If your corporation or company employs Cash Basis accounting method, it should deduct business expenses in the Tax Year it was paid off and report revenue in the Tax Year it was received. On the other hand, if your corporation prefers using Accrual Basis accounting method, it should subtract business expenses.
What is Calendar Year Taxpayer?
It’s a period that a business owner chooses to file its Tax Return. There’re two types of years, Calendar year and fiscal year. A calendar year is a 12-month period that usually starts from January 1 and ends on December 31. Moreover, a fiscal year is a 12-month period that can begin anytime.
It could end on any day expect the last day of the last month December. S corporations or companies are Calendar year taxpayers. C corporations and firms can either select a fiscal or calendar year to file the tax return.
Information necessary for corporate tax preparation
- A duplicate copy of the previous corporation Tax Return filed with the state, IRS, and city.
- A Filling Receipt you received from the state
- Papers filed & accepted by the Internal Revenue Service (US Government) and the state if the company or corporation has selected to file as a ‘’Subchapter S Corporation’’.
- The company’s Federal Employer ID number (EIN) usually obtained from the internal revenue service and the state identification number.
- Furthermore, a duplicate copy of your State Sales Tax certificate.
Business Income for corporate tax preparation
- Interest received on your business investment, savings, and checking accounts during the Tax Year.
- Revenue from other sources earned during the Tax Year.
- Gross revenue earned from all sources such as forms 1099 obtained from other firms for subcontractor’s commission work that your company has completed for them during the Tax Year.
Expenses & Capital Expenditure
You can deliver and prepare a copy of year-end worksheet including the adjusting entries, trial balance, balance sheet and income statement.