Corporate taxes are imposed in the US at the local, state and federal levels, on the income of people and entities that are treated as corporations. The tax rate on corporate income can vary from 15-35%, and taxes and rules are different in every jurisdiction. A corporation’s taxable income may be different from its book income, and corporations are also assessed a federal AMT or alternative minimum tax. Just as is the case with individuals, American corporations must file tax returns every year. There are some corporate transactions that are not taxable, such as acquisitions, mergers and liquidations. Shareholder dividends are taxed, and some corporations are subject to a foreign income tax, but may be allowed a credit for them.
Most shareholders aren’t directly taxed for corporate income, but they must pay taxes on all dividends. However, shareholders in an “S” corporation or a mutual fund are taxed on corporate money but do not pay dividend taxes. Corporate income taxes are based on the federal or state definition of taxable income (usually business receipts, minus the cost of goods and services sold). A federal corporate tax is imposed at different levels, and all taxable income above $335,000 is subject to a 34% or 35% tax rate. Local and state taxes are deductible in the calculation of federal corporate taxable income.
At the federal level, consolidated returns are permissible, and some states even require them. Members of a group are permitted to file just one return that reports their combined income, and to calculate a combined tax. When related entities don’t file a consolidated return, they fall under transfer pricing stipulations, and in these situations, the tax board may adjust the prices charged in between these entities. Corporate shareholders are taxed upon the distribution of earnings, and dividends. The tax rate on dividends is now lower than the rate for regular income for shareholders. To make sure that shareholders pay dividend taxes, there are two provisions: backup withholding on domestic shareholders, and withholding tax on shareholders who are foreign. Foreign corporations that operate in the US may fall under the branch profit tax, at the same rate as the dividend withholding. A corporation must file a tax return in any US jurisdiction that has an income tax, and it is payable through estimated payments at both the state and federal levels. More explained here.
Like any other entity, a corporation might be subject to withholding taxes upon making a payment to another entity, such as dividends or wages. These are generally not considered as part of the corporate tax, but the tax system might assess a penalty upon the corporation for not paying the tax. American corporations are subject to many other taxes, such as those on stock or capital, excise taxes, sales/use taxes, and property taxes.
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