A C Corporation is a legal entity which is taxed separately from its shareholders. A common structure for many large Corporations, a C Corp has different advantages those of an S Corporation or LLC.
Benefits of C Corporations
In some cases, a small business can benefit from C Corp status. It is wise to review all business entity options with a trusted EA, CPA or Tax Attorney when setting up a business. Then on an annual basis, the EA or CPA can advise you if a change in entity might be to your advantage. At Torchlight Tax, this is part of our annual service.
A C Corporations is taxed on the net profit of the corporation. This can lead to double taxation for shareholders, as they are also subject to taxation on their distributions from the C corporation.
Of course, this means if you spend all the gross profit on tax-deductible expenses (including payroll), then the net profit is zero and the corporate tax is zero This avoids double taxation. Also, unlike LLCs and S Corporations, a C-Corporation can take a certain percentage (depending on the year) of its gross profits as charitable donations and thereby reduce its taxable income and resulting tax.
Then again, if a C-Corporation does not make any distribution to its shareholders (and instead leaves the money in the corporation) this also avoids double taxation, at least for a time, as there is no taxable income to the shareholders.
One could start a C Corporation on the side while living off the income of a job. Each year, one could take no distribution from the corporation. The corporation would be taxed at the corporate rate (21%) on its profits which might be lower than your personal tax rate. One could even zero out the corporate profit by buying (for example) business equipment and advertising and build the gross receipts and assets of the corporation while legally avoiding taxes. This only works if you do not need theprofit from the corporation to live on.
Then some years later, one could sell the corporation or shares of the corporation and get taxed at the lower long-term capital gain tax rate. For an industrious wage earner, he could set this up on the side and build a corporation pretty much tax-free on an annual basis that he would then sell shares of at the lower capital gain rate. This could be used for college for the kids, retirement, or as a safety net. If you get laid off on the job, how great would it be to have a functioning corporation with income and assets!
Also, one could donate corporation shares to a charity, have a buyer buy the shares from the charity, pay no income tax on the sale of those shares, and wind up with a charitable donation to offset OTHER income.
There are many interesting scenarios and strategies, of which the above are a few. I do not advise doing strategies like this on your own. I have given you here only the broad strokes, but a trusted CPA/EA/Tax Attorney should be involved to make sure all your bases are covered.
For some, C-corporations may be your best option. If you are starting out and trying to decide, you are welcome to call Torchlight Tax for a free consultation as to which business entity is best for your situation. As you move into the future, your business will change, and we will be happy to advise you if another business structure is best for your company.
When one is doing taxes for a C corporation, a higher quality of professionalism is expected by the IRS in the bookkeeping, accounting, and tax preparation. Attempting to do these hats yourself, if you are not properly trained, may be detrimental. One of the Torchlight Tax EAs or CPAs can assist you in tax preparation and planning for your C-Corporation and make sure your tax savings are maximized and your hassle is minimized.
When you do your C corporation taxes with Torchlight Tax, your C-Corporation tax return is reviewed by a second tax expert to make sure all is correct, and no tax savings are missed. You also benefit from the fact that Torchlight Tax is one team with a network of offices. Each team member has the purpose to save your tax dollars and make the whole tax experience as painless as possible. Different EAS and CPAs have expertise in different tax specialties. An EA holds the highest federal tax credential. A CPA holds the highest state tax credential. This does not mean they know everything. There are millions of words in the tax code, related regulations, court cases, and so on. No one knows it all. If one of our tax pros has a question or is looking for an additional tax saving strategy, he can simply pick up the phone and ask another CPA, EA, or Tax Attorney in the Torchlight Tax Network who may be more trained in a certain specialized field of taxes. Individual practitioners do not have this option.
Just as in sports, a team operating with a common purpose is superior to an individual or group of individuals, even if the individuals are as highly trained. And please note: few tax practitioners are as highly trained and experienced as the Torchlight Tax team. At Torchlight Tax, your tax return is completed by a licensed EA or CPA. Another advantage of Torchlight Tax is our team includes administrative support staff who wear their hats in supporting the tax pro. You do not need a highly trained CPA or EA to be filing papers or handling all the robot and sales phone calls. By having administrative support, the EA or CPA is available to handle your questions year-round, saving you money, time, hassle, and worry.
Also, our job is also, in addition to legally saving you money, is to make the tax process as pleasant and painless as possible. Advising on tax savings strategies is part of this. Advising you of how to handle a tax debt and handling your questions is part of this.
Unlike the big franchise tax mills, we are here to answer your questions year round. We look forward to hearing from you.
When it comes to tax preparation, accounting, and IRS representation in the Las Vegas Valley, Torchlight Tax is ready to save you tax dollars. Contact us today for assistance in C corporation tax returns. Free Consultations are available.
Call us at 1-877-758-7797 or 702-463-1818 or email us at info@TorchlightTax.com. We can transfer your call to a branch office near you or help you directly from our central office. .
Many people do not know how a professional tax and accounting firm differs from a bookkeeper or tax preparer. The main difference when working with a professional tax and accounting firm, such as Torchlight Tax, is that our firm utilizes the services of CPAs, EAs, and Attorneys who are distinguished from bookkeepers and other tax preparers by stringent qualification and licensing requirements. Our entire team has a purpose to legally save your tax dollars and to make taxes as painless as possible. This means we take your calls and respond to your concerns. If you receive a threatening IRS call or Notice or are worried about some tax question, we are here for year round taking your calls and responding to your emails.
Whether you are filing personal, small business, or corporate taxes, or negotiating IRS tax debt, if you are not already using a professional Tax, Accounting and IRS Representation firm, you most likely have missed out on major tax benefits. This is because a professional tax and accounting firm utilizes licensed professionals such as Certified Public Accountants (CPAs), EAs and Attorneys, who can not only advise individuals on personal financial matters but who can also advise businesses and corporations of all sizes and types. Tax laws are complicated, and no one knows everything. Torchlight Tax is a team and any one of our tax pros can call on other EAs, CPAs and Tax Attorneys in the team who may have specialist knowledge in a specific area of tax.
When doing current taxes, we often come across missed tax savings from prior years. When this happens, the Internal Revenue Service allows you to amend your taxes and lower your tax liability. Whether you or your prior tax preparer missed a W-2 or 1099, a revised 1099. large charitable donations, or made some other error, amending your tax return can help you recover the money you are rightfully owed. When we find this situation, we will advise you on potential savings and amend the previously filed tax return.</p”>
Sometimes, there may be a situation where a tax return could be amended, but it is too late to receive any benefit. Or maybe you made an error that was missed by the IRS that would have increased your tax liability. In some cases, it is prudent to file an amended return. But if it is not necessary and will not save you any money or decrease your risk, we will tell you not to bother. It is silly to amend a return to no advantage which is too old for the IRS to audit. Some firms might file a bunch of unnecessary tax returns and charge a fee. Sometimes a taxpayer himself might increase his tax liability by filing an unnecessary amendment that increases his tax liability. We will not do this.
Amending a tax return requires more professional acumen then doing it right in the first place. At Torchlight Tax, we do file the tax return correctly the first time. And we will happily amend your tax return, but only if it actually is to your benefit. If you think you might need to amend tax returns, contact Torchlight Tax for a free consultation.