when to pay federal taxes for small business

Out of the $900,000 profit, then, the C corporation structure means that at least roughly $400,000 of the $900,000 profit will be siphoned off for taxes. If the leftover amount (roughly $600,000) is distributed to shareholders as a dividend, that $600,000 is subject to another tax that'll run at least $90,000 and may, if the shareholders earn more than $400,000 (or more than $450,000 if married and filing joint returns) be about $235,000. That means an initial $306,000 of corporate income taxes. If the C corporation sells this building, the $900,000 of profit will be taxed at the C corporation tax rates (roughly 34%). Further suppose that building was purchased many years ago for $100,000 but is now worth $1,000,000. Suppose you have a C corporation that owns a building. Probably the best way to explain how the BIG tax works is by an example. When an S corporation realizes built-in gains stemming from the period the corporation operated as a C corporation, a built-in gains, or BIG, tax may be levied. Accordingly, smart S corp owners and managers need to know about, and work to avoid, these stealth S corporation taxes.

However, three situations exist when an S corporation may end up paying tax on its income. The essential feature of an S corporation is that shareholders pay the taxes on income, not the corporation. Most of the time, an S corporation does not pay federal income taxes. When Does an S Corporation Pay Income Tax?

When to pay federal taxes for small business