What is Corporate Tax Preparation?
Every year, millions of companies worldwide file corporate taxes which can really be a cause of concern due to the complexities involved. But in order to know what corporate tax preparation really is, one must realize that businesses are classified into three main categories: small, medium, and large. Understanding how a business is classified is beneficial since the each category has its own requirements. First, a business corporation is referred to as small if its annual gross income does not exceed $2 million. Thus, a lot of professional financial advisers often recommend to a small business to incorporate to reduce tax costs and prevent personal lawsuits.
Critical Information Of Corporate Tax Preparation
A critical information you should learn about corporate tax preparation are various income and deductions of a corporation which must be reported according to the annual accounting method used by the business. Normally, two known methods are being applied – the Cash Basis and the Accrual Basis. Learning the difference between the two is helpful since the reports submitted to the authorities must be correct and complete. In case where your business utilize the Cash Basis method, then corporate tax preparation should include income tax on the year it was received and minus the business-related expenses in the tax year it was paid.
Different Deduction Of Corporate Tax Preparation
On the contrary, when the Accrual Basis method is applied, there’s a different way to do corporate tax preparation. In its place of deducting business related expenses in the tax year it was paid, the deduction must be made on the year those expenses accrued. At this time, you are enlightened why corporate tax preparation is a complicated process since it depends on some factors starting with the accounting method. The following list gives you a rundown of things you need to have in corporate tax preparation :-
1) A copy of last years corporation tax return filed with the IRS, state, & city.
2) A copy of the filing receipt you received from the state where the business was incorporated.
3) The corporation’s federal Employer Identification Number (EIN) obtained from the IRS and the State Identification Number from the state where it was incorporated.
4) Documents filed and accepted by the IRS and the state if the corporation has elected to file as a subchapter S corporation.
5) A copy of your state sales tax certificate.
There are still other forms that can be additionally required so better consult a corporate tax preparation specialists who can give you the best advice.