Curated by Robert W. Jamison, CPA, PhD

Tax Essentials from Wolters Kluwer

 

The reduction of the corporate tax rate was one of the most significant provisions of the historic Tax Cuts and Jobs Act of 2017.

For tax years beginning after 2017, corporations pay federal tax at a 21-percent flat rate. For tax years beginning before 2018, corporations determine their income tax liability by applying a progressive rate of tax to their taxable income. Corporations with a fiscal year that includes January 1, 2018, calculate federal income tax using a blended tax rate. A corporation may also be subject to an alternative minimum tax (AMT) in tax years beginning before 2018, if the AMT exceeds the regular income tax. The corporate AMT is repealed for tax years beginning after 2017. A corporation with accumulated earnings and profits may also be subject to a 20-percent accumulated earnings tax. A personal holding company is subject to an additional 20-percent tax on its undistributed personal holding company income.

In computing its taxable income, a corporation may claim most of the deductions available to other taxpayers engaged in a business, including the net operating loss (NOL) deduction and charitable contribution deduction. However, certain deductions, such as the dividends received deduction and deduction for organizational expenses, are only available to corporations. A corporation can adopt a calendar tax year or a fiscal tax year, but certain corporations are limited in their tax year's selection. C corporations generally must use the accrual method. However, corporations that meet a gross receipts test and larger farming corporations can use the cash method.

A corporation must file its income tax return and pay its tax liability on or before the 15th day of the fourth month following the close of the corporation’s tax year. A corporation is generally entitled to an automatic extension of six months for filing its returns. A corporation that anticipates a tax liability of $500 or more must estimate its taxes and make quarterly estimated tax payments.

This overview of Corporate Taxation curated by Robert W. Jamison on Tax Essentials features compliance tips, tables, cautions, examples, and practice Notes for a comprehensive understanding of corporate taxation post TCJA.

Robert W. Jamison is professor emeritus of accounting at Indiana University, Purdue University, Indianapolis (IUPUI). His principal area of specialization is S Corporations. He consults on S corporation and other business entity problems and has secured letter rulings from the IRS.

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