C-Corporation Tax Strategies

C-Corporation Tax Strategies

Tax Tips for Small Business Owners

Be Prepared – Stay Ahead of an IRS Audit 

C-Corporation Tax Strategies

IRS Scrutiny

 C-Corporation Structure

A C-Corporation is considered a separate legal and taxable entity from the owners (shareholders) of the corporation.

 Taxation of a C-Corporation

The C-Corporation’s earnings are taxable under Subchapter C of the IRS Code and files Form 1120 and pays taxes at the prevailing corporate tax rate on its earnings. Then the individual shareholders pay taxes individually on the corporate dividends received. This is what is often referred to as “double taxation” of C-corporations.

 “Double Taxation” of C-Corporation

For this reason many smaller C-corporations never pay out dividends, but retain profits within the company to fund further growth. If the long-term intent is to create sufficient value so that it can be sold or taken public, this provides a tax-efficient exit strategy. Often, with this strategy, the owner of the small business takes a salary.

 Check Out The S-Corporation Advantage

However, depending on the needs and objectives of the small business owner(s); the S-corporation may be a more suitable business entity

C-Corporation Tax Strategies

See S-Corporation

Investment Credits

Investment credits are currently provided to stimulate certain types of favored economic activity as follows:

  • Low-Income Housing Credit –
  • Disabled Access Credit (Form 8826) –
  • Credit for Small Employer Pension Plan Startup Costs (Form 8881) –
  • Empowerment Zone and Renewal Community Credit (Form 8844)

C-Corporation Tax Strategies