Corporate Tax Help

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 All businesses have one common concern, their corporate tax code. Before 1908, no American businesses were taxed at the federal level. Now, they’re hit with a rate of over 39 percent, as the United States corporate tax rate is the highest behind Japan. Government leaders want to simplify and eliminate the tax loopholes, so they can treat each corporation fairly.

Here are some tips for corporate tax:

Deducting Business Expenses

The true definition of a business expense is the cost of handling the everyday practice of a business. These expenses are eligible for corporate tax deductions, especially if the business is expected to make a profit. To be considered deductible, your expense must be commonly recognized in your industry. Some call this a necessary expense that is very helpful to the business. Some expenses don’t have to be indispensable to be considered necessary. It’s very important they you separate your business expenses from your own personal expenses.

Updating Your Paperwork

It’s very important that you continually update your paperwork, as failure to do so could hurt your corporate standing and your eligibility for legal tax shelters. If your paperwork is in order, then those rental real estate losses are suddenly eligible to be suspended and you can pay the taxes at a later date. You can prove this by showing your income is too high and your profits are classified as income.

Partnership

There is a wide assortment of business partnerships, and they all have different corporate tax codes. General partnership has no limited liability, as all income is eligible for Social Security tax. Each partner reports their share of the profits on their own tax returns. To be considered a limited partnership, you must have one or more general partners and one other limited partner in the corporate agreement. Each partner must report their share profits separately on a tax return. General partners must pay Social Security tax, while limited partners aren’t required to pay.

Lowering Your Tax Rate

Leaders of a corporation can decide to be taxed as one and become a tax shelter for their owners. Most cases, the first $50,000 of taxable income are taxed at 15 percent, and then the next $250,000 can be withheld as accumulated earnings. The corporation should be part of a group partnership, as lower tax brackets and retained earning exemption can be shared equally among the group.