Incorporating often increases the tax reporting and accounting required for a small business. But as long as you work from a complete “to-do” list, you should have only modest headaches in getting all the required tax returns prepared and turned in on time.
Accordingly, in the paragraphs that follow I provide short laundry lists of the tax returns that regular “C” corporations and “S” corporations need to complete annually.
Note: The federal income tax forms mentioned below (along with form instructions) are all available at the www.irs.gov web site. Equivalent state income tax forms are typically also available at the state tax agency’s website.
Another note: Annual corporate income tax returns are typically due by March 15. Quarterly payment tax returns are typically due by the end of the month following the end of the quarter. Estimated tax payments are due four times a year: 4/15, 6/15, 9/15 and 1/15. Finally, annual payroll tax returns are due typically by January 31.
Tax Returns and Forms Required for a Regular “C” Corporation
The standard corporation requires annual federal and state corporate tax returns, quarterly payment tax returns, quarterly estimated tax payments on the part of the corporation, and annual payroll tax returns. The specific forms along with descriptions appear in the list that follows:
• 1120 corporation income tax return – Reports on the income and deductions of the corporation, calculates the taxable income and resulting federal tax liability owed, and supplies additional information about the corporation such as balance sheets and ownership information.
• State corporation income tax return – Reports on the income and deductions of the corporation, calculates the taxable income and resulting state tax liability owed. (Note: Some municipalities also have their own corporate income tax return requirements.)
• 941 quarterly employers payroll tax return – Reports on the wages paid to employees, the federal income taxes withheld from employees, the Social Security and Medicare taxes owed by employees and employers, and the deposits of payroll taxes and withheld amounts made over the quarter. (Note: Even a one-employee corporation–a corporation where the only employee is the shareholder–needs to file these quarterly payroll tax returns.)
• State quarterly payroll tax return – Typically, the state (including Washington state) requires quarterly payroll tax returns from employers, including corporations. The state payroll tax returns let the employer calculate items such as unemployment insurance, workers compensation insurance (also known as industrial accident insurance), disability insurance (in some states), and state income tax withholdings.
• Quarterly deposits of corporate income taxes – Documents the quarterly estimated income tax payments made by a corporation. Note that if a corporation owes income taxes, the corporation is supposed to make quarterly payments of the estimated income taxes owed. These payments should be made electronically using the U.S. Treasury’s www.eftps.gov payment system or by completing an 8109 coupon and then bringing the coupon and a company check to the local bank.
• 940, W-2 and W-3 annual employers payroll tax returns – The 940 federal unemployment tax return reports on the total wages paid to employees and then calculates the amounts subject to the 6.2% federal employment tax. The W-2 annual wage statement reports on the total wages paid to an employee–and goes to employees, the Social Security Administration and (indirectly) to the Internal Revenue Service. The W-3 payroll tax return is just a summary of the W-2 information that employers prepare and distribute and goes to the Social Security Administration.
Tax Returns and Forms Required for an “S” Corporation
A “S” corporation also requires annual federal and state corporate tax returns, quarterly payment tax returns, quarterly estimated tax payments if the corporation earns income and therefore creates a tax liability, and also annual payroll tax returns as the list that follows explains:
• 1120S corporation income tax return – Reports on the income and deductions of the S corporation, calculates the taxable income of the S corporation, and then allocates that income (using K-1 forms that are part of the 1120S return) to the S corporation’s shareholders so they can pay the income taxes on their respective shares of income.
• State corporation income tax return – Reports on the income and deductions of the corporation, making adjustments for any differences in state income tax laws, calculates the taxable income, and then allocates the taxable to shareholders. Note that while Washington state doesn’t have an income tax if a Washington corporation operates in other states (like Oregon, Idaho or California), the Washington corporation does owe those other states corporation income tax returns.
• 941 quarterly employers payroll tax return – S corporations must report on the wages paid to employees, the federal income taxes withheld from employees, the Social Security and Medicare taxes owed by employees and employers, and the deposits of payroll taxes and withheld amounts made over the quarter. (Note: S corporations must pay their shareholder-employees reasonable compensation, which means that even a corporation where the only employee is the shareholder needs to file these quarterly payroll tax returns.)
• State quarterly payroll tax return – As with other employers, typically the state requires quarterly payroll tax returns from “S” corporation employers to to calculate items such as unemployment insurance, workers compensation insurance, and state income tax withholdings. Note that some states also have additional payroll taxes for items such as disability insurance and employee training.
• 1040ES quarterly deposits of individual income taxes – An “S” corporation typically doesn’t pay income taxes but that means that the S corporation shareholders (to whom the S corporation income is allocated) need to pay the taxes on their proportionate shares of the corporate income. To pay these taxes, individual shareholders need to complete a 1040ES payment voucher, write a check for the taxes that show as owing on the 1040ES voucher, and then mail the check and the voucher to the Internal Revenue Service.
• 940, W-2 and W-3 annual employers payroll tax returns – The 940 federal unemployment tax return reports on the total wages paid to employees and then calculates the amounts subject to the 6.2% federal employment tax. The W-2 annual wage statement reports on the total wages paid to an employee–and goes to employees, the Social Security Administration and (indirectly) to the Internal Revenue Service. The W-3 payroll tax return is just a summary of the W-2 information that employers prepare and distribute and goes to the Social Security Administration. Again, an S corporation needs to prepare these items even if the only employee is a single shareholder-employee.
