Filing taxes properly is vital to the health of any business or corporation. When you are filing taxes, you will need to consider various factors, such as your status as an S corporation or C corporation. Don’t depend on chance. Use the help of an experienced tax accountant to provide you and your business with the help needed to prepare timely and accurate corporate state taxes.
The accountants that work with Cook CPA Group recognize the frustrations that can arise while paying corporate state taxes. Contact them at your earliest convenience to schedule a free consultation, during which you can discuss the ways that Cook CPA Group can help your business prepare its corporate state taxes.
Corporate Income Taxes in Sacramento, CA
Corporations in California are required to pay a corporate income tax. This tax is imposed on the gross taxable income of a corporation. Businesses are eligible to claim deductions for the costs of goods, wages, and other expenses.
California determines the amount of taxes that a business will pay by looking at the portion of their income that can be attributed to California-related activity. The income that can be attributed to business activity in the state (property, payroll, and sales) is added together and divided by four to determine the income that will be taxed.
Income taxes are imposed based on a corporation’s business structure. For example, small businesses that classify themselves as S corporations and LLCs have both business taxes and personal income taxes imposed upon them by the State of California. C corporations are subject to corporate income taxes at a rate of either 8.84% or 6.65%, depending on whether or not they have claimed net taxable income.
C corporations pay taxes based on the revenue of their businesses, but they also pay taxes on the personal income of shareholders and owners, which is known as double-taxation. Sole proprietorships are not subject to business taxes and rather are taxed on personal income.
Most corporate taxes in California are filed using IRS Form 1120, known as the U.S. Corporation Income Tax Return. Filing will require providing information about the assets that the corporation possesses.
Other Business Taxes in California
Corporate income tax is only one type of state tax that must be paid by corporations in Sacramento, though it is usually the heftiest. Other taxes that corporations in California must pay are franchise taxes, alternative minimum taxes, and employment taxes.
Franchise taxes are paid to the Franchise Tax Board. Each type of business is taxed differently: S corporations are taxed at a rate of 1.5% of their net income, while LLCs are taxed depending on whether they are considered a corporation, partnership, or disregarded entity.
Corporations in California must also pay alternative minimum taxes (AMT) to the Franchise Tax Board. This tax is only mandatory for C corporations and LLCs that choose to be treated like corporations.
A few different types of employment taxes must be paid by corporations in California. One of these employment taxes is the unemployment insurance tax. This tax is calculated based on the first $7,000 of each employee’s wages. The rate of unemployment insurance taxes paid by employers goes up over time: The rate is 3.4% in the first two to three years and then goes up each following year, capping at 6.3%.
Another employment tax that corporations must pay in Sacramento is the employee training tax. Employers in their first year of business are required to pay the employee training tax, which is taxed at a rate of 1% percent on the first $7,000 of taxable wages for each person employed by a corporation. Corporations must also pay a state disability insurance and paid family leave tax. This tax is paid by employees but is held by employers. It is 0.9% of income.
Tax Credits for Corporations in Sacramento
Corporations in California may be able to receive tax credits for meeting certain criteria. These credits are meant to incentivize businesses to engage in beneficial behaviors. One tax credit that businesses are eligible to receive is a Family Leave Tax Credit. This credit allows small businesses to provide paid leave to employees to deal with issues related to their families.
Corporations in Sacramento may also be able to benefit from the Environmental Tax Credit, which is issued to businesses that implement changes to become more energy-efficient and environmentally friendly. The Research and Development Tax Credit is another credit that businesses are eligible for if they perform research on product development and business performance.
Tax-Deductible Business Expenses
Many businesses are able to lower their tax liability by reducing the total amount of income that the IRS taxes. Businesses should keep close track of all the expenses they make that can be deducted when it comes time to pay their taxes. Businesses are able to make the following expense deductions: salaries paid to corporate officers, maintenance of corporate assets, contributions to charities, asset depreciation, pensions and profit-sharing plans, and advertising; there are other deductions as well.
Sacramento Accountants for Preparation of Corporate Taxes
You don’t have to navigate your corporate state taxes alone; the accountants at Cook CPA Group are here to help. They can put their expertise to use to help you prepare your corporate state taxes so that you are free to focus on other parts of your business.