U.S. Corporate Income Tax

All domestic Corporate taxpayers in the United States must file an annual income tax return (Form 1120) by the 15^th day of the fourth month following its tax year-end. A foreign corporation which is not incorporated in the United States however doing business in the United States or deriving income from the United States must also file an annual income tax return (Form 1120F) by the 5^th day of the fourth month following its tax year-end. Most of the states in the United States are also require a domestic or a foreign corporation doing business in the states must also file an annual tax return.

Anywhere in the world, Corporate income tax is complex. It is further complex when the corporation is involved in a cross-border transactions. On top of that the emergence of digital economy and online sellers have put further put challenges for which tax authorities are yet to provide a clear interpretation of any tax rules or tax treaties. Another challenges are faced by the tax regulators when the taxpayer is dealing with a decentralized currency, like cryptos. As a tax professional standing between the tax regulators and as an advocate of our client, we always put our best efforts in favor of our clients.

At RKB with our comprehensive cross-border taxation knowledge and experience allows, us to review your taxation issues from all perspectives. We design, Implement, and guide you with the most tax-advantageous strategies for both sides of the borders. If you are incorporated in the United States or in Canada, or in another country of the world and doing business in the US as a foreign corporation, you may have to deal with the many taxation issues which includes double taxation, tax treaty benefits, withholding tax, foreign tax credits, and other reporting obligations like FACTA, in which we are specialized. With our specialized US tax services, you can rest worry-free and leave all the burden on us.

You need to pay attention to:

A Corporation may require paying several taxes and complying with filings requirements at the state level.
There are different types of corporate structures in the USA are treated differently for the taxation purposes.
This can be further complicated when the business is cross-border. Still, with our experience, you can become worry-free and put all your focus on establishing and growing your business.
A tax treaty between the countries can treat your income or residency status completely different what it looks like apparently.
Each state has their own taxation system, minimum tax, and filing requirements.
IRS imposes penalties on unreasonable transfer pricing and management fees. These need to be carefully reviewed and documented.
U.S. Internal Revenue Code § 6662 – imposes an accuracy-related penalty on underpayments

Corporate tax planning

There are a few common areas that we always pay attention, before preparing your tax return and before filing a return with IRS:

Determination of income that is effectively connected with carrying a business in the United States
Business expenses and deductions that you may be entitled to
Double taxation, foreign tax credit, and treaty benefits
Salary, bonus, management fees, and dividends
Transfer pricing
Preparation of income statements and a balance sheet for the accurate reporting

Taxation of Domestic Corporation in the USA

All US corporation is taxed on an annual basis. The corporation may choose a tax year that is different from the calendar year. The new corporation may use a short tax year for its first tax period.

Corporate tax return

Corporations pay corporate income tax on their income for the year.
The federal tax rate on the profits of US resident corporations is 21 percent.
Corporations may also have to pay state income tax.
After taxed, profit is distributed to shareholders as dividends.
Shareholders pay tax on dividend income.

Note: You may have a small business tax fining under the sole-proprietorship or a corporation. However, the tax filing requirement is completely different. Under the sole proprietorship, you do not need to file a balance sheet of your business, while under the corporate income tax, a balance sheet of the corporation is compulsory.

Taxation of Foreign Corporations in the USA

A Canadian corporation may have to file (1120-F) and pay taxes in the US if they have income from a trade or business in the US. Similarly, Canada’s domestic tax laws require a non-resident to file and pay tax on any income they earn from carrying on a business in Canada.

This requires a detailed review of all your business connections, and you may be able to avail yourself of the treaty benefits.

Taxation of LLC in the USA

A Limited Liability Company (LLC) in the USA is an entity created by law. A standard LLC must have one member. LLCs that choose to be taxed as S Corporation has a limit of 100 members. Some states do not allow a minor to be a member of an LLC. Individuals, corporations, and other LLCs are permitted to be LLC members, and there are no citizenship or residency requirements.

An LLC with foreign members can decide and elect that the LLC be taxed for income tax purposes as a partnership, C corporation, or to be disregarded as an entity for federal tax purposes.
If a single-member LLC elects to be a disregarded entity, the LLC’s profits and losses are reported on the member’s personal income tax return.
A single-member LLC reports its income on Schedule C of its own returns filed with IRS. Foreign member LLC will need to apply for ITIN.
A partnership reports its profits on Form 1065, and partners are taxed on their share of profits.
If an LLC chooses to be taxed as a C corporation, the corporation reports the income on Form 1120 and pays tax on it at the high corporate rate. The shareholder will again be taxed on any distributions received from that corporation.

US tax and business advisory

You may also be under the filing and compliance requirements for:

Social Security and Medicare Taxes
Additional Medicare Tax
941 for Employers Quarterly Federal Tax Return
940 for Employer’s Annual Federal Unemployment (FUTA) Tax Return
Form 5472 for Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business
Form 926 for Return by a U.S. Transfer of Property to a Foreign Corporation
1120-W for Estimated Tax for Corporations

We are an authorized IRS e-file service provider who can file your corporate tax returns electronically for faster processing. We file corporate income taxes for our clients in all of the states of the U.S. Our virtual and cloud-based U.S. tax filing services are available where ever you are.