C-Corporation taxes

You might be familiar with the comparison of a corporation to a person, and this is particularly true for C-Corporations, which are subject to similar taxation as individuals. C-Corporations are taxed based on their profits, and they are required to report any earnings they make after deducting business expenses or distributing funds to shareholders to the IRS.

One advantage of being a C-Corporation is the ability to claim tax deductions on the company's tax return. This includes deductions for all expenses related to running the business, such as employee salaries, benefits, supplies, services, advertising, and other operating costs. By deducting these expenses from their income, C-Corporations can reduce their tax liability. To comply with tax regulations, C-Corporations must file a tax return every quarter to estimate their profits and pay estimated taxes accordingly.
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Double taxation

A major criticism of the tax laws pertaining to C-Corporations is the double taxation of profits. This occurs when the corporation pays taxes on its net earnings and subsequently distributes dividends to shareholders, who are then required to report the dividends as income and pay taxes on them through their personal tax returns.

Despite this issue, smaller C-Corporations frequently do not pay dividends, and their shareholders are frequently corporate employees who earn salaries and bonuses. These compensation packages are deductible by the corporation, reducing its taxable income and mitigating the impact of double taxation.
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C-Corp tax rates

The federal corporate tax rate can climb as high as 35 percent, and local and state taxes can push the marginal corporate tax rate up to 39 percent. However, there are various tax brackets and strategies available to minimize a corporation's tax burden, as you may already know. Typically, the tax rate for C-Corporations falls somewhere between 12 and 28 percent.

It's worth noting that the United States has some of the highest corporate tax rates globally. Furthermore, corporations are required to pay taxes not only on their domestic earnings but also on their global income, regardless of where it was generated.
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S-Corporation taxes

The tax return requirements for S-Corporations diverge from those of C-Corporations, primarily because S-Corporations are not subject to income tax. Instead, any profits generated by the S-Corporation are distributed to its shareholders and taxed at their individual tax rates on their personal tax returns.

In the same vein, any losses incurred by the S-Corporation are also passed on to shareholders, who can deduct them from their personal tax returns. Put simply, an S-Corporation's profits are taxed in a similar fashion to that of a partnership or many LLCs, whereby individual owners are responsible for paying taxes on their share of the profits, rather than the entity itself being taxed.
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Choosing your corporation type

Both types of corporate tax filings have their advantages and disadvantages. On one hand, while C-Corporations are subject to double taxation (at the corporate and individual levels), they are not required to distribute profits to shareholders on an annual basis. This means that profits can be retained by the corporation (usually up to $250,000), delaying the tax liability for shareholders.

On the other hand, with S-Corporations, taxes are only paid once, by the shareholders on their individual tax returns. Additionally, S-Corporations provide greater liability protection for owners compared to partnerships and do not require the double taxation that C-Corporations do.
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Limited Liability Company taxes

An LLC is a pass-through entity for federal taxes. LLC itself doesn't pay taxes; members pay taxes on their share of profits. Additional taxes may be levied by state/local governments. Members can choose to be taxed as a corporation. LLC taxes include income tax, self-employment tax, payroll tax, and sales tax. LLC can opt for different tax treatment. This guide explains LLC taxes, responsibilities, and ways to reduce tax burden for smarter financial decisions.

Individual Tax:

1. Determining whether or not you need to file a tax return this year depends on several factors, such as your income, tax filing status, age, and whether you are claimed as a tax dependent by someone else.

Even if you are not required to file taxes, there are still reasons why you might want to consider doing so. For instance, you may be eligible for a tax break that could result in a refund. Individuals with lower incomes, for instance, may be eligible for a refundable credit known as the earned income tax credit, while parents of children under the age of 17 may be able to claim the partially refundable child tax credit. Therefore, if any of these scenarios apply to you, it's worth giving serious consideration to filing your taxes.

You had income tax withheld from your pay checks. You made estimated tax payments or had last year’s refund applied to this year’s estimated tax.

You qualify for certain tax credits.

When can I start filing taxes?
‍The 2023 tax-filing season started on Jan. 23, 2023. This is the date the IRS began accepting income tax returns.

Do you file 2022 taxes in 2023?
‍Yes. The purpose of the 2023 tax-filing season is to file taxes for the 2022 tax year.

When are taxes due in 2023?
‍The tax-filing deadline is April 18, 2023. If you request an extension, the IRS says that the date is Oct. 16, 2023.
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2. Choose how to file taxes

There are three main ways to file taxes: fill out IRS Form 1040 or Form 1040-SR by hand and mail it (not recommended), file taxes online using tax software, or hire a human tax preparer to do the work of tax filing.

a. File taxes online with tax software
‍If you have previous experience using tax software, you're already familiar with how to prepare and file your taxes online. Several major tax software providers also offer access to human preparers as an added feature. 

In addition to paid options, the IRS Free File program provides access to free online tax preparation software from several well-known tax preparation companies. To qualify for Free File software, your adjusted gross income must have been $73,000 or less in 2022. Additionally, the IRS provides all taxpayers, regardless of income, with access to fillable tax forms that can be submitted electronically at no cost.

b. Hire and work with a tax preparer
‍As your financial situation becomes more complicated, you may start to question whether you should seek assistance in preparing and filing your taxes instead of relying solely on tax software. This is especially true if you own a business or have a significant side job, or if you want help navigating complex tax forms. If you prefer not to meet with a tax preparer in person, there's an option to file your taxes from the comfort of your own home. By using a secure portal, you can electronically share tax documents with a preparer. The preparer will typically send you a link to the portal via email, and you can then upload pictures or PDFs of your documents after setting up a password.

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3. Understand how your taxes are determined

Your tax liability is determined by the government through a process of dividing your taxable income into different tax brackets. Each bracket is subject to a corresponding tax rate, allowing you to pay taxes on different portions of your income at different rates. This system is progressive, meaning that individuals with higher taxable incomes are subject to higher federal income tax rates while individuals with lower taxable incomes are subject to lower federal income tax rates.

4. Gather tax filing information

Whether you are preparing your own taxes or hiring a tax preparer, you will need to gather proof of income, tax-deductible expenses, and evidence of taxes paid throughout the year. Our tax preparation checklist provides more detailed guidance, but in summary, here are the items you should gather: Social Security numbers for yourself, as well as for your spouse and dependents, if any.

• W-2 form, which tells how much you earned in the past year and how much you already paid in taxes. (If you had more than one job, you might have more than one W-2.)‍
• 1099 forms, which are a record that some entity or person — not your employer — gave or paid you money.
• ‍Retirement account contributions‍
• ‍Property taxes and mortgage interest‍
• ‍Charitable donations.‍
• ‍State and local taxes you paid‍
• ‍Educational expenses‍
• ‍Unreimbursed medical bills‍
• ‍Last year’s federal and state tax returns.
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5. Settle up with the IRS

If you owe

There are various methods available for sending money to the IRS, such as electronic payments, wire transfers, debit and credit cards, checks, and even cash. (Here's a list of 10 ways to make an IRS payment.) If you're unable to pay your taxes all at once, you might consider an IRS payment plan, which is an agreement directly with the agency to pay your federal tax bill over a certain period of time. 

There are two types of IRS payment plans: short-term and long-term. 

Typically, you'll make monthly payments to settle your tax debt. If you're expecting a refund, there are a few things you can do to ensure that your money arrives in your bank account as quickly as possible:

It's best to avoid filing your tax return on paper since it can take the IRS six to eight weeks to process, and with their ongoing backlog, it could take even longer. Opting to file taxes online, on the other hand, typically results in your return being processed in about three weeks. Most state tax filing authorities also accept electronic tax returns, which may allow you to receive your state tax refund faster. Additionally, to further reduce wait times, you can have your refund sent by direct deposit directly into your bank account instead of waiting for a paper check to arrive in the mail.

Foreign Assets Reporting:

Taxpayers in the United States who hold specified foreign financial assets with a total value greater than $50,000 are required to report information about those assets using Form 8938. This form must be attached to the taxpayer's annual income tax return. Higher asset thresholds apply to taxpayers who file a joint tax return or reside abroad.

Form 8938 reporting applies to taxable years beginning after March 18, 2010, for specified foreign financial assets in which the taxpayer has an interest. For most individuals, this means they will start filing Form 8938 with their 2011 income tax return.

Starting from tax years beginning after December 31, 2015, specified domestic entities, including certain domestic corporations, partnerships, and trusts, must file Form 8938 if they are formed or availed of to hold specified foreign financial assets, either directly or indirectly. Taxpayers who do not have to file an income tax return for the tax year are not required to file Form 8938, even if the total value of their specified foreign assets exceeds the appropriate reporting threshold.

If you are required to file Form 8938, you do not have to report financial accounts maintained by: a U.S. payer (such as a U.S. domestic financial institution), the foreign branch of a U.S. financial institution, or the U.S. branch of a foreign financial institution.

Refer to Form 8938 instructions for more information on assets that do not have to be reported.

You must file Form 8938 if:

1. You are a specified person (either a specified individual or a specified domestic entity).

A specified individual is:

• A U.S. citizen
• A resident alien of the United States for any part of the tax year (see Publication 519 for more information)
• A nonresident alien who makes an election to be treated as a resident alien for purposes of filing a joint income tax return
• A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico (See Publication 570 for the definition of a bona fide resident)

A specified domestic entity is: This passage describes certain types of domestic entities that are subject to reporting requirements on Form 8938. Specifically, the following entities must report information about specified foreign financial assets on Form 8938 if they meet certain criteria:

• A closely held domestic corporation where at least 50% of the gross income or assets are passive.
• A closely held domestic partnership where at least 50% of the gross income or assets are passive.
• A domestic trust described in section 7701(a)(30)(E) has a current beneficiary who is a specified person.

Note that "specified persons" refer to individuals or domestic entities who are required to report specified foreign financial assets on Form 8938.

AND

2. You have an interest in specified foreign financial assets required to be reported.

A specified foreign financial asset is:
‍Except as mentioned previously, any foreign financial account is maintained by a foreign financial institution. Additionally, any foreign financial assets held for investment that are not in an account maintained by a US or foreign financial institution, including stock or securities issued by someone other than a U.S. person, any interest in a foreign entity, and any financial instrument or contract having an issuer or counterparty that is other than a U.S. person. Please refer to the instructions of Form 8938 for further clarification on the definition of specified foreign financial assets and when you have an interest in such an asset.

AND 3. The aggregate value of your specified foreign financial assets is more than the reporting thresholds that apply to you:

For unmarried taxpayers living in the US, if the total value of their specified foreign financial assets is greater than $50,000 on the last day of the tax year, or greater than $75,000 at any point during the tax year, they are required to report this information. If married taxpayers file a joint income tax return and live in the US, they are required to report their specified foreign financial assets if the total value is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.

Married taxpayers filing separate income tax returns and living in the US must report their specified foreign financial assets if the total value is greater than $50,000 on the last day of the tax year, or greater than $75,000 at any point during the tax year.

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Taxpayers living abroad. You are a taxpayer living abroad if:

If you are a U.S. citizen with a tax home in a foreign country and meet either of the following conditions, you are required to file Form 8938:

1. You are a bona fide resident of a foreign country for an uninterrupted period that includes the entire tax year, or

2. you are physically present in one or more foreign countries for at least 330 full days during a period of 12 consecutive months ending in the tax year.

If you are a U.S. taxpayer living abroad, you must file Form 8938 if: 

• You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or
• You are filing a joint return and the total value of your specified foreign assets is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year.

For specified domestic entities, the reporting threshold is the total value of specified foreign financial assets of more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.

If you have a specified foreign financial asset reported on Form 3520, Form 3520-A, Form 5471, Form 8621, Form 8865, or Form 8891, you do not need to report it again on Form 8938. However, you must identify on Part IV of Form 8938 which and how many of these forms report the specified foreign financial assets.

Even if a specified foreign financial asset is reported on another form, if you are a specified individual, you must still include the value of the asset in determining whether the aggregate value of your specified foreign financial assets is more than the reporting threshold that applies to you. If you are a specified domestic entity, you should exclude the value of any specified foreign financial asset reported on another form listed in Part IV, to determine if you satisfy the applicable reporting threshold. For more information on the definition of specified foreign financial assets and when you have an interest in such assets, refer to the Form 8938 instructions.