A corporate tax return is a form filed by a corporation which reports earnings or losses of income by a business throughout a fiscal year. In the US, corporations typically file tax returns to the state in which the business operates as well as to the federal government’s Internal Revenue Service (IRS). While rules and jurisdictions for states and other countries vary, the IRS requires a corporation to complete Form 1120 (or 1120S for an S corporation) along with supporting schedules.
Tax returns filed by corporations include all income and deductions, similar to a simple tax return filed by a citizen. The first section lists all income and the second section lists all expenses, losses and deductions. Other parts of the form, such as Schedule A or Schedule C, must be completed along with the main form.
The deadline for filing a corporate tax return is established by state or federal governments. The IRS deadline is 15 March unless a form to extend the deadline is filed by this date. An extension is granted up to six months, but interest on any amounts owed may accrue during this time.
Taxes paid by corporations to state and federal authorities provide a large revenue source within the budgets of the governments. If these taxes are not paid properly and on time, severe penalties may be imposed. This means that a corporation does not only have to pay the proper amount, but also any fees or interest allowed by the governments. For this reason, corporations may choose to self-audit their company’s books to prevent any IRS or other auditor from finding any instances of improper bookkeeping.
In some cases, state or federal governments require quarterly payments of estimated taxes due. At the end of a year, if there is an overpayment, the extra amount paid is refunded or carried over to the next quarter. If there is an underpayment, the corporation must pay the amount plus any fees or interest.
Information used to complete a corporate tax return can be found on a company’s Balance Sheet and Profit & Loss Report. These accounting reports are basic, and can be generated easily by virtually every accounting software program on the market. These two reports reveal a great deal about a corporation’s stability and revenue.
The 12-month period that a corporation reports upon in a corporate tax return is called a fiscal year. For most companies, the fiscal year is identical to the calendar year, and runs from January to December. In other cases, a corporation’s fiscal year may run from July to June or some other 12-month cycle.