USA: Tax & Auditing Requirements
United States federal and state law codes are complicated and it is recommended that a business works with an accountant to file taxes.
Corporations subject to U.S. tax must file federal and state income tax returns. Different tax returns are required at the federal and some state levels for different types of corporations or corporations engaged in specialized businesses.
Your company will need a way to be identified by the Internal Revenue Service (IRS). This is typically done via an Employer Identification Number (EIN), which requires a social security number. For foreign businesses, an Individual Taxpayer Identification Number (ITIN) is often given to individuals who have to pay U.S. taxes but are not eligible for a social security number. You use form W-7 to apply for an ITIN. Note that as of January 2013, the IRS changed its policy regarding the documentation needed to obtain an ITIN; you can refer to the IRS instructions on the IRS Form W-7.
When beginning a business, you must decide what form of business entity to establish. Your form of business determines which income tax return form you have to file. The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation. A Limited Liability Company (LLC) is a business structure allowed by state statute. Legal and tax considerations enter into selecting a business structure.
For additional information, refer to Small Business Administration’s Choose Your Business Structure Web page.
Small Business and Self Employed: The IRS provides resources for taxpayers who file Form 1040, Schedules C, E, F or Form 2106, as well as small businesses with assets under $10 million on the Small Business and Self Employed Tax Center. The tax process includes:
- Electronic Filing Options for Business and Self-Employed Taxpayers: There are electronic filing options available for many of the taxes and forms that small businesses are required to file, such as excise and employment taxes, Forms 1120, 7004, 1041 and various information returns.
- Employer Identification Number: An Employer Identification Number (EIN), also known as a federal tax identification number, is used to identify tax reports to the IRS.
- Business Taxes: The form of business you operate determines what taxes you must pay and how you pay them. The following are the five general forms of business tax:
- Income Tax
- Estimated Taxes
- Self-Employment Tax
- Employment Taxes
- Excise Tax
- Estimated Taxes: Federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year. There are two ways to pay as you go: withholding and estimated taxes.
- Employment Taxes for Small Businesses: If you have employees, you are responsible for several federal, state, and local taxes. As an employer, you must withhold Federal income tax withholding, social security and Medicare taxes, and Federal Unemployment Tax Act (FUTA) taxes.
- Self-Employment Taxes: The self-employment tax is a social security and Medicare tax for individuals who work for themselves.
- Reporting Information Returns: Your business may be required to file information returns to report certain types of payments made during the year.
- E-file Forms 940, 941, 943, 944 or 945 for Small Businesses: Learn your options for e-filing form 940, 941 943, 944 or 945 for Small Businesses.
- Filing Past Due Tax Returns: Before you decide not to file your tax return on time or not pay all of your taxes when they are due, consider this.
- Reporting Payments to Independent Contractors: If you pay independent contractors, you may have to file Form 1099-MISC, Miscellaneous Income, to report payments for services performed for your trade or business.
- Deceased Taxpayers - Probate, Filing Estate and Individual Returns, Paying Taxes Due: Information to help you resolve the final tax issues of a deceased taxpayer and their estate.
Corporations: The IRS provides resources for taxpayers filing for corporations the Tax Information for Corporations Page.
E-File: Corporations can e-file by following these approved guidelines for Tax Year 2016. Corporations are required to turn in the following forms:
- Form 1120S Schedule B1 - Information on Certain Shareholders of an S Corporation
- Form 1128 – Application to Adopt, Change, or Retain a Tax Year
- Form 2439 – Notice to Shareholder of Undistributed Long-Term Capital Gains. If filed with the return, required as XML
- Form 2553 – Election by a Small Business Corporation. PDF file must be named and described as “Form 2553” (see Filing Requirements for Filing Status Change for additional information)
- Form 3115 – Application for Change in Accounting Method. If filed with return, required in XML, if previously filed, allowed as PDF.
- Form 4466 – Corporation Application for Quick Refund of Overpayment of Estimated Tax. If filed without signature, required in XML, if filed with signature, allowed as PDF.
- Form 8283 – Noncash Charitable Contributions. Required as XML unless Filing 10 or more forms OR 3rd party signature is required.
- Form 8716 – Election to Have a Tax Year Other Than a Required Tax Year. If filed without signature, required in XML, if filed with signature, allowed as PDF.
- Form 8832 – Entity Classification Election. If filed with return, required in XML, if previously filed, allowed as PDF.
- Form 8838 – Consent to Extend the Time to Assess Tax Under Sec. 367 - Gain Recognition Agreement. If filed without 3rd party signatures, required in XML, if filed with 3rd party signatures, allowed as PDF.
- Mixed Returns (Form 1120 Parent with one or more Form 1120-L or Form 1120-PC subsidiaries)
- Information Available on Request, including: Transactional data for the following forms may be submitted on a summary form in XML format as defined below. Corporations that use these optional procedures are agreeing that transactional data details will be made available on request: Form T – Forest Activities Schedule, Form 4562 – Depreciation and Amortization, Form 4797 – Sale of Business Property, Form 8824 – Like-Kind Exchanges, Form 8873 – Extraterritorial Income Exclusion, Schedule D (1120 and 1120S) – Capital Gains and Losses.
- International Forms
- Forms not required to be filed with income tax return
- Form 966 - Corporate Dissolution or Liquidation
- Form 7004 - Application for Automatic 6-Month Extension of Time To File Certain Business Income Tax, Information, and Other Returns
- Form 8023 - Elections Under Section 338 for Corporations Making Qualified Stock Purchases
- Form 8693 - Low-Income Housing Credit Disposition Bond
- Compensation of Officers, Form 1120, Schedule E