On April 15, local time, the tax season in the United States ended except for two states. Everyone should know that this is the time period for individual tax filing, as for the tax filing time for American companies, different types of businesses have different tax filing times, this article talks about the difference between individual tax filing and corporate tax filing in terms of time and method. Here are the main differences between them:
1
Time differences
1. Individual tax return
- The deadline for filing a personal income tax return is usually April 15 of each year. If April 15 falls on a weekend or holiday, the deadline may be postponed to the next business day.
- Individuals can choose to file an extension of time, but will need to apply for an extension before the deadline.
2. Company tax declaration
The deadline for filing a corporate tax return depends on the type of company and the tax year chosen.
(1) C-type corporation
A C corporation is generally required to file a federal income tax return (Form 1120) by the 15th day of the third month following the end of the tax year.
Characteristics of a C-type company:
- A C corporation is a separate legal entity with its own tax obligations.
- The profits of a C-corporation company are taxed by the company, which is known as "double taxation", that is, the company's profits are first subject to corporate income tax, and then dividends are distributed to shareholders, and shareholders are also required to pay personal income tax.
- A C corporation can have an unlimited number of shareholders and can be an individual, another corporation, or a foreign entity.
- The shareholders of a C corporation have limits on the company's debts and liabilities for litigation, and generally only bear the amount of their investment.
- A C corporation has relatively transparent financial information and is suitable for companies seeking venture capital or public listing.
(2) S corporations
S corporations are generally required to file a federal income tax return (Form 1120S) by the 15th day of the third month following the end of the tax year.
Characteristics of S type company:
- An S corporation is a special form of corporation that allows the profits of the corporation to flow directly through the corporation as the income of individual shareholders and avoids "double taxation".
- An S corporation can only have a maximum of 100 shareholders, and the shareholders must be U.S. citizens or permanent residents.
- Profits and losses from an S corporation are reflected on individual tax returns, rather than paying corporate income tax at the corporate level.
- The shareholders of an S corporation also have limits on the company's debts and liabilities for litigation, similar to a C corporation.
- S corporations are typically suitable for small businesses and family businesses that want to avoid the "double taxation" of a C corporation and meet the eligibility requirements for an S corporation.
2
Differences in tax filing methods
1. Individual tax return
- Individuals can choose to fill out a paper form themselves and mail it in the mail, or file it online using e-file software.
- Commonly used online tax preparation software includes TurboTax, H&R Block, TaxAct, etc.
Depending on the individual's circumstances and preferences, individuals can choose to file their own tax returns or hire a professional to file their taxes. In general, the following are some situations where it is advisable to hire a professional to file your taxes:
- Complex financial situation: If you have a complex financial situation, such as having multiple sources of income, investments, real estate, overseas assets, etc., hiring a professional can ensure that you declare all your income correctly and minimize taxes.
- Unfamiliar with tax laws: If you are not familiar with U.S. tax laws, especially in the face of new tax law changes or special circumstances, professionals can provide accurate advice and guidance to avoid mistakes.
- Time is of the essence: If you don't have enough time to research tax laws, prepare documents, and fill out forms, hiring a professional can help you complete your tax return in a timely manner.
- Avoiding mistakes: Professionals are often more familiar with the details of tax laws, which can help you avoid common tax filing mistakes and reduce the risk of being scrutinized by the IRS.
Conversely, self-filing may be appropriate if:
- Simple Finances: If your financial situation is relatively simple, with only one job income and no other complicated financial arrangements, it may be simpler and more economical to file your taxes on your own.
- Familiarity with tax law: If you have some knowledge of tax law and are able to understand and fill out tax forms independently, then self-filing is also a viable option.
- Cost savings: Hiring a professional to file your taxes often incurs an expense, and self-filing may be more appropriate if you want to save costs and have the confidence that you're doing your tax return correctly.
Whether you choose to file your own taxes or hire a professional, you should make sure that your tax return is accurate to avoid unnecessary hassles and penalties.
2. Company tax declaration
- Corporate tax filing is usually more complex and requires different tax forms and forms to be filled out.
- Whether it is a C corporation or an S corporation, in the face of the complex tax system in the United States, companies often need to hire an accountant or tax professional to handle tax matters to ensure compliance with tax laws and maximize tax planning.
Overall, while both individual and corporate tax filings need to comply with U.S. tax laws, corporate tax filing often requires more expertise and complex procedures, and as a result, many companies choose to appoint professionals to handle tax matters.
The author of this article is Mr. Mark, Chief Economist of Easy Tax Link