State federal tax returns

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state federal tax returns

In the U.S., all individuals who received income are taxed for their earnings. Every year, those who received income must report their earnings to the International Revenue Service (IRS) by filing a Federal Tax Return, and to the California Franchise Tax Board (FTB) by filing a State Tax Return.

Deadline to File Taxes Without an Extension - April 15th

The following information and links are specific to "aliens", the term used by the IRS for tax purposes to identify individuals who are not a U.S. citizen or permanent resident (i.e. - F-1, J-1, and H1-B Visa holders). For more information on how "aliens" are taxed at UCLA, please Click Here. For complete details on taxation of income for non-resident students, scholars, and exchange visitors, please Click Here.

  • Federal Tax Return: The IRS classifies aliens as either non-resident aliens or resident aliens for tax purposes. Non-resident aliens are taxed only on their income from sources within the U.S. and on certain income connected with the conduct of a trade or business in the U.S. Resident aliens are generally taxed on their worldwide income, and taxed the same way as a U.S. citizen. Determining your tax residency will determine the type of Federal Tax Forms you must file for your tax return.

  • Form 1040NR/1040NR-EZ: If you have received any income that appears on a W-2, 1042-S, or other supplemental income forms, you must file form 1040NR or 1040NR-EZ.

  • Form 8843:All non-resident students and scholars must fileForm 8843even if they did not receive any U.S. income from employment, fellowship, scholarship, or any other U.S. sources.

  • Form 540NR (Long)/540NR (Short): Non-residents must file a return if they have any California-sourced income and their income from all sources is more than the filing requirement amount for residents. Click Here for more details. In general, you should file a 540NR (Long) or 540NR (Short) if you have a tax return refund due.

GLACIER: Nonresident Alien Tax Compliance System

  • GLACIER is a secured, web-based Nonresident Alien (NRA) tax compliance system that foreign individuals can use to provide their immigration and tax data to UCLA via the internet 24 hours a day. GLACIER maintains the following information:
    • Tax Residency & Tax Withholding Rates
    • Income Tax Treaty Eligibility
    • Distributes Form 1042-S
    • Interfaces with GLACIER Tax Prep (GTP)

    All non-residents at UCLA must have a GLACIER record on file prior to receiving any of the following forms of payments:
    • Wages from employment
    • Taxable fellowship, scholarship, or grants
    • Other forms of payment not exempted by IRS Code

  • Prepare and File Using GLACIER Tax Prep (GTP)

GLACIER Tax Prep (GTP) is a web-based tax preparation system designed for non-residents and can be used to prepare and file Form 1040NR or 1040NR-EZ. All non-resident individuals who have a GLACIER Record can use GLACIER Tax Prep for free.

  • VITA at UCLA is an IRS-sponsored tax assistance program that provides free basic tax assistance and preparation to the UCLA community. VITA provides free tax assistance for filing both Federal and State returns, and all volunteers are IRS-certified.

For further questions and consultations on non-resident tax matters please contact UCLA Payroll Services: Nonresident Alien Compliance Office, 310-267-5774, Monday-Friday, 7:30AM - 5PM.

Wave of Fake Federal and State Tax Returns Filed, Experts Say

State federal tax returns

ID thieves are using stolen credentials to file a wave of fraudulent tax returns -- both state and federal -- experts say. Paul Sakuma / AP

The recent flood of fraudulent tax returns –- both state and federal -– is the work of “a criminal gang, possibly working outside the country,” a leading cyber security expert told NBC News.

Haywood Talcove, CEO for government solutions at LexisNexis, believes the gang is using stolen user names and passwords to gain access to the accounts of people who use online tax preparation software.

“This is potentially the most serious breach of personally identifiable information in the history of our country,” Talcove said. “The tax form is the mother lode of personal information.”

Armed with this stolen information -– Social Security number, date of birth, dependents, employer and adjusted gross income –- the thieves can file bogus state and federal income tax returns. If they can file before you do and their fake return makes it through the system, they can steal a sizeable refund.

The IRS says that it is working with the software industry and with state tax officials to battle fraud. "Preventing and detecting identity theft and refund fraud remains a top priority for the IRS," the agency said in a statement on Friday. It added that taxpayers should continue to file their tax returns as they normally would.

“This is potentially the most serious breach of personally identifiable information in the history of our country."

The vulnerability of online tax preparation services became apparent last week when the Utah Tax Commission and the Minnesota Department of Revenue found thousands of potentially fraudulent returns. Those returns were filed using TurboTax, the popular program made by Intuit.

State federal tax returns

Intuit temporarily stopped the transmission of e-filed state income tax returns on Friday while it investigated. It resumed processing state returns after announcing that it implemented additional verification measures, such as multi-factor authentication, a technology that has proven effective at preventing identity theft.

In a blog post on Friday, the company wrote that filing of federal returns was not affected. But on its Answer Exchange page (how did my TurboTax account get hacked into), a half-dozen customers reported fraud problems with their federal return. The company agrees that is the case.

“We’re absolutely aware that tax fraud is happening at the federal level as well, using compromised credentials,” Julie Miller, Intuit’s vice president of communications told NBC News. “This is a multi-front battle and we are going to fight it at both the state and federal level.”

Intuit insists its systems were not breached. The company suggests that victims had their TurboTax login information stolen from “other sources outside the tax preparation process,” possibly through a phishing scam or some other online attack.

Lisa Letchworth, who lives in Washington State, doesn’t know how it happened, but crooks got into her TurboTax account. Last Tuesday, when she logged on to start her federal return, she got a nasty surprise. A message on the screen said her return had already been filed and the IRS was issuing a refund of $5,013 to someone else on a prepaid card.

“It freaked me out,” she said.

Letchworth was able to see the bogus return the criminals had filed. They had all the information from last year’s return -– including the names and Social Security numbers of everyone in her family, employer names, even a special education credit she claimed.

“It’s really frightening,” she said. “It’s painfully clear they got into my account.”

Because the crooks filed first, Letchworth and her husband will have to prove to the IRS that they were the victims of identity theft. Letchworth said the IRS told them it could take six months to straighten out all the paperwork and get them their refund.

Corporate tax in the United States

Corporate tax is imposed in the United States at the federal, most state, and some local levels on the income of entities treated for tax purposes as corporations. Federal tax rates on corporate taxable income vary from 15% to 35%. State and local taxes and rules vary by jurisdiction, though many are based on federal concepts and definitions. Taxable income may differ from book income both as to timing of income and tax deductions and as to what is taxable. Corporations are also subject to a federal Alternative Minimum Tax and alternative state taxes. Like individuals, corporations must file tax returns every year. They must make quarterly estimated tax payments. Controlled groups of corporations may file a consolidated return.

Some corporate transactions are not taxable. These include most formations and some types of mergers, acquisitions, and liquidations. Shareholders of a corporation are taxed on dividends distributed by the corporation. Corporations may be subject to foreign income taxes, and may be granted a foreign tax credit for such taxes.

Shareholders of most corporations are not taxed directly on corporate income, but must pay tax on dividends paid by the corporation. However, shareholders of S corporations and mutual funds are taxed currently on corporate income, and do not pay tax on dividends.

In 2014 the United States had the third highest general top marginal corporate income tax rate in the world at 39.1 percent (consisting of the 35% federal rate plus a combined state rate), exceeded only by Chad and the United Arab Emirates. [1] However, the average corporate tax rate in 2011 dipped to 12.1%, its lowest level since before World War I, largely due to the great recession and a bonus depreciation tax break. [2]

Corporate income tax is imposed at the federal level [3] on all entities treated as corporations (see Entity classification below), and by 47 states and the District of Columbia. Certain localities also impose corporate income tax. Corporate income tax is imposed on all domestic corporations and on foreign corporations having income or activities within the jurisdiction. For federal purposes, an entity treated as a corporation and organized under the laws of any state is a domestic corporation. [4] For state purposes, entities organized in that state are treated as domestic, and entities organized outside that state are treated as foreign. [5]

Some types of corporations (S corporations, mutual funds, etc.) are not taxed at the corporate level, and their shareholders are taxed on the corporation's income as it is recognized. [6] Corporations which are not S Corporations are known as C corporations.

Domestic corporations are taxed on their worldwide income at the federal and state levels. [7] Corporate income tax is based on net taxable income as defined under federal or state law. Generally, taxable income for a corporation is gross income (business and possibly non-business receipts less cost of goods sold) less allowable tax deductions. Certain income, and some corporations, are subject to a tax exemption. Also, tax deductions for interest and certain other expenses paid to related parties are subject to limitations.

Corporations may choose their tax year. Generally, a tax year must be 12 months or 52/53 weeks long. The tax year need not conform to the financial reporting year, and need not coincide with the calendar year, provided books are kept for the selected tax year. [8] Corporations may change their tax year, which may require Internal Revenue Service consent. [9] Most state income taxes are determined on the same tax year as the federal tax year.

as a percentage of GDP

for the US and OECD countries, 2008 [10] [11]

Federal corporate income tax is imposed at graduated rates. The lower rate brackets apply to lower rates of income when compared to higher tax brackets that coincide with higher rates of taxable income. All taxable income is subject to tax at 34% or 35% where taxable income exceeds $335,000. Tax rates imposed below the federal level vary widely by jurisdiction, from under 1% to over 16%. State and local income taxes are allowed as tax deductions in computing federal taxable income.

Groups of companies are permitted to file single returns for the members of a controlled group or unitary group, known as consolidated returns, at the federal level, and are allowed or required to do so by certain states. The consolidated return reports the members' combined taxable incomes and computes a combined tax. Where related parties do not file a consolidated return in a jurisdiction, they are subject to transfer pricing rules. Under these rules, tax authorities may adjust prices charged between related parties.

Shareholders of corporations are taxed separately upon the distribution of corporate earnings and profits as a dividend. Tax rates on dividends are at present lower than on ordinary income for both corporate and individual shareholders. To ensure that shareholders pay tax on dividends, two withholding tax provisions may apply: withholding tax on foreign shareholders, and “backup withholding” on certain domestic shareholders.

Corporations must file tax returns in all U.S. jurisdictions imposing an income tax. Such returns are a self-assessment of tax. Corporate income tax is payable in advance installments, or estimated payments, at the federal level and for many states.

Corporations may be subject to withholding tax obligations upon making certain varieties of payments to others, including wages and distributions treated as dividends. These obligations are generally not the tax of the corporation, but the system may impose penalties on the corporation or its officers or employees for failing to withhold and pay over such taxes.

Nearly all of the states and some localities impose a tax on corporation income. The rules for determining this tax vary widely from state to state. Many of the states compute taxable income with reference to federal taxable income, with specific modifications. The states do not allow a tax deduction for income taxes, whether federal or state. Further, most states deny tax exemption for interest income that is tax exempt at the federal level.

Most states tax domestic and foreign corporations on taxable income derived from business activities apportioned to the state on a formulary basis. Many states apply a "throw back" concept to tax domestic corporations on income not taxed by other states. Tax treaties do not apply to state taxes.

Under the U.S. Constitution, states are prohibited from taxing income of a resident of another state unless the connection with the taxing state reach a certain level (called “nexus9rdquo;). [13] Most states do not tax non-business income of out of state corporations. Since the tax must be fairly apportioned, the states and localities compute income of out of state corporations (including those in foreign countries) taxable in the state by applying formulary apportionment to the total business taxable income of the corporation. Many states use a formula based on ratios of property, payroll, and sales within the state to those items outside the state.

The first federal income tax was enacted in 1861, and expired in 1872, amid constitutional challenges. A corporate income tax was enacted in 1894, but a key aspect of it was shortly held unconstitutional. In 1909, Congress enacted an excise tax on corporations based on income. After ratification of the Sixteenth amendment to the U.S. Constitution, this became the corporate provisions of the federal income tax. [14] Amendments to various provisions affecting corporations have been in most or all revenue acts since. Corporate tax provisions are incorporated in Title 26 of the United States Code, known as the Internal Revenue Code. The present rate of tax on corporate income was adopted in the Tax Reform Act of 1986. [15]

In 2010, corporate tax revenue constituted about 9% of all federal revenues or 1.3% of GDP. [16]

Business entities may elect to be treated as corporations taxed at the entity and member levels or as "flow through" entities taxed only at the member level. However, entities organized as corporations under U.S. state laws and certain foreign entities are treated, per se, as corporations, with no optional election. The Internal Revenue Service issued the so-called “check-the-box9rdquo; regulations in 1997 under which entities may make such choice by filing Form 8832. Absent such election, default classifications for domestic and foreign business entities, combined with voluntary entity elections to opt out of the default classifications (except in the case of “per se corporations” (as defined below)). [17] If an entity not treated as a corporation has more than one equity owner and at least one equity owner does not have limited liability (e.g., a general partner), it will be classified as a partnership (i.e., a pass-through), and if the entity has a single equity owner and the single owner does not have limited liability protection, it will be treated as a disregarded entity (i.e., a pass-through).

Some entities treated as corporations may make other elections that enable corporate income to be taxed only at the shareholder level, and not at the corporate level. Such entities are treated similarly to partnerships. The income of the entity is not taxed at the corporate level, and the members must pay tax on their share of the entity's income. These include:

  • S Corporations, all of whose shareholders must be U.S. citizens or resident individuals; other restrictions apply. The election requires the consent of all shareholders. If a corporation is not an S corporation from its formation, special rules apply to the taxation of income earned (or gains accrued) before the election.
  • Regulated investment companies (RICs), commonly referred to as mutual funds.
  • Real Estate Investment Trusts (REITs).

Determinations of what is taxable and at what rate are made at the federal level based on U.S. tax law. Many but not all states incorporate federal law principles in their tax laws to some extent. Federal taxable income equals gross income [18] (gross receipts and other income less cost of goods sold) less tax deductions. [19] Gross income of a corporation and business deductions are determined in much the same manner as for individuals. [20] All income of a corporation is subject to the same federal tax rate. However, corporations may reduce other federal taxable income by a net capital loss [21] and certain deductions are more limited. [22] Certain deductions are available only to corporations. These include deductions for dividends received [23] and amortization of organization expenses. [24] Some states tax business income of a corporation differently than nonbusiness income. [25]

Principles for recognizing income and deductions may differ from financial accounting principles. Key areas of difference include differences in the timing of income or deduction, tax exemption for certain income, and disallowance or limitation of certain tax deductions. [26] IRS rules require that these differences be disclosed in considerable detail for non-small corporations on Schedule M-3 to Form 1120.

For regular income tax purposes, a system of graduated marginal tax rates is applied to all taxable income, including capital gains. Through 2015, the marginal tax rates on a corporation's taxable income are as follows:

in the United States in 2010 [28]

Notes: The rates above are for regular corporate taxes based on income (including those called franchise taxes) and exclude the effect of alternative taxes and minimum taxes. Most states have a minimum income or franchise tax. The above rates generally apply to entities treated as corporations other than S Corporations and financial institutions, which may be subject to different rates of tax. Tax rates are before credits and reductions for corporations operating in certain parts of the state.

(a) Excludes the effect of graduated tax rates based on level of income.

(b) The Michigan Business Tax applies to incorporated and unincorporated businesses, and is based on alternative measure of income that may not relate to net income.

(c) Businesses with an entire net income greater than $100K pay 9% in all taxable income, companies with entire net income greater than $50K and less than or equal to $100K pay 7.5% on all taxable income, and companies with entire net income less than or equal to $50K pay 6.5% on all taxable income.

(d) A tax on gross receipts, the commercial activity tax (CAT), was phased in from 2005 to 2008 while the corporate franchise tax (CFT, Ohio's corporate net income tax) was phased out. Beginning April 1, 2009, the CAT rate was fully phased in at 0.26%.

(e) The top income tax rate (7.9% on income over $250K) applies to tax years beginning on or after January 1, 2009, and before January 1, 2011.

(f) Excludes local corporate income tax.

(g) Excludes the effect of alternative tax bases, such as sales or assets.

(h) Other tax rates may apply to certain corporations.

(i) Missouri allows a deduction for federal income tax payments, reducing the effective state tax rate.

(j) A higher rate applies if the corporation elects "water's edge" apportionment.

(k) Also applies to unincorporated entities.

(l) While not called an income tax, Texas imposes a franchise tax at the higher of a tax based on capital or a graduated tax based on income.

The table to the right lists the tax rates on corporate income applied by each state, but not by local governments within states. Because state and local taxes are deductible expenses for federal income tax purposes, the effective tax rate in each state is not a simple addition of federal and state tax rates.

It should be noted that while a state may not levy a corporate income tax, they may impose other taxes that are similar. For example, Washington state does not have an income tax but levies a B&O (business and occupation tax) which is arguably a larger burden because the B&O tax is calculated as a percentage of revenue rather than a percentage of net income, like the corporate income tax. This means even loss-making enterprises are required to pay the tax.

Corporations, like other businesses, may be eligible for various tax credits which reduce federal, state or local income tax. [30] The largest of these by dollar volume is the federal foreign tax credit. [31] [32] This credit is allowed to all taxpayers for income taxes paid to foreign countries. The credit is limited to that part of federal income tax before other credits generated by foreign source taxable income. The credit is intended to mitigate taxation of the same income to the same taxpayer by two or more countries, and has been a feature of the U.S. system since 1918. Other credits include credits for certain wage payments, credits for investments in certain types of assets including certain motor vehicles, credits for use of alternative fuels and off-highway vehicle use, natural resource related credits, and others. See, e.g., the Research & Experimentation Tax Credit.

Deferral is one of the main features of the worldwide tax system that allows U.S. multinational companies to delay paying taxes on foreign profits. Under U.S. tax law, companies are not required to pay U.S. tax on their foreign subsidiaries’ profits for many years, even indefinitely until the earnings are returned to U.S. Therefore, it is one of the main reasons that U.S. corporations pay low taxes, even though the corporate tax rate in the U.S. is one of the highest rates (35%) in the world.

Deferral is beneficial for U.S. companies to raise the cost of capital relatively to their foreign-based competitors. Their foreign subsidiaries can reinvest their earnings without incurring additional tax that allows them to grow faster. It is also valuable to U.S. corporations with global operations, especially for corporations with income in low-tax countries. Some of the largest and most profitable U.S. corporations pay exceedingly low tax rates [33] through their use of subsidiaries in so-called tax haven countries. Eighty-three of the United States’s 100 biggest public companies have subsidiaries in countries that are listed as tax havens or financial privacy jurisdictions, according to the Government Accountability Office. [34]

deferred foreign cash balances

that are greater than $5 billion, 2012 [35]

However, tax deferral encourages U.S. companies to make job-creating investments offshore even if similar investments in the United States can be more profitable, absent tax considerations. Furthermore, companies try to use accounting techniques to record profits offshore by any way, even if they keep actual investment and jobs in the United States. This explains why U.S. corporations report their largest profits in low-tax countries like the Netherlands, Luxembourg, and Bermuda, though clearly that is not where most real economic activity occurs. [34] [ dead link ]

A tax deduction is allowed at the federal, state and local levels for interest expense incurred by a corporation in carrying out its business activities. Where such interest is paid to related parties, such deduction may be limited. [36] The classification of instruments as debt on which interest is deductible or as equity with respect to which distributions are not deductible is highly complex and based on court-developed law. The courts have considered 26 factors in deciding whether an instrument is debt or equity, and no single factor predominates. [37]

Federal tax rules also limit the deduction of interest expense paid by corporations to foreign shareholders based on a complex calculation designed to limit the deduction to 50% of cash flow. [38] Some states have other limitations on related party payments of interest and royalties.

for corporations 2005–2009 [39]

(billions of dollars)

U.S. rules provide that certain corporate events are not taxable to corporations or shareholders. Significant restrictions and special rules often apply. The rules related to such transactions are quite complex, and exist primarily at the federal level. Many of the states follow federal tax treatment for such events.

The formation of a corporation by controlling corporate or non-corporate shareholder(s) is generally a nontaxable event. [40] Generally, in tax free formations the tax attributes of assets and liabilities are transferred to the new corporation along with such assets and liabilities.

Example: John and Mary are United States residents who operate a business. They decide to incorporate for business reasons. They transfer assets of the business to Newco, a newly formed Delaware corporation of which they are the sole shareholders, subject to accrued liabilities of the business, solely in exchange for common shares of Newco. This transfer should not generally cause gain or loss recognition for John, Mary, or Newco. [41] Newco assumes John and Mary's tax basis in the assets it acquires. [42] If on the other hand Newco also assumes a bank loan in excess of the basis of the assets transferred less the accrued liabilities, John and Mary will recognize taxable gain for such excess. [43]

Corporations may merge or acquire other corporations in a manner treated as nontaxable to either of the corporations and/or to their shareholders. [44] Generally, significant restrictions apply if tax free treatment is to be obtained. For example, Bigco acquires all of the shares of Smallco from Smallco shareholders in exchange solely for Bigco shares. This acquisition is not taxable to Smallco or its shareholders under U.S. tax law if certain requirements are met, [45] even if Smallco is then liquidated into or merged with Bigco. [46]

In addition, corporations may change key aspects of their legal identity, capitalization, or structure in a tax free manner. Examples of reorganizations that may be tax free include mergers, liquidations of subsidiaries, share for share exchanges, exchanges of shares for assets, changes in form or place of organization, and recapitalizations. [47]

Advance tax planning might mitigate tax risks resulting from a business reorganization or potentially enhance tax savings. [48]

Shareholders of corporations are subject to corporate or individual income tax when corporate earnings are distributed. [50] Such distribution of earnings is generally referred to as a dividend.

Dividends received by other corporations may be taxed at reduced rates, or exempt from taxation, if the dividends received deduction applies. Dividends received by individuals (if the dividend is a "qualified dividend") are taxed at reduced rates. [51] Exceptions to shareholder taxation apply to certain nonroutine distributions, including distributions in liquidation of an 80% subsidiary [52] or in complete termination of a shareholder's interest. [53]

If a corporation makes a distribution in a non-cash form, it must pay tax on any gain in value of the property distributed. [54]

The United States does not generally require withholding tax on the payment of dividends to shareholders. However, withholding tax is required if the shareholder is not a U.S. citizen or resident or U.S. corporation, or in some other circumstances (see Tax withholding in the United States).

U.S. corporations are permitted to distribute amounts in excess of earnings under the laws of most states under which they may be organized. A distribution by a corporation to shareholders is treated as a dividend to the extent of earnings and profits (E&P), a tax concept similar to retained earnings. [55] E&P is current taxable income, with significant adjustments, plus prior E&P reduced by distributions of E&P. Adjustments include depreciation differences under MACRS, add-back of most tax exempt income, and deduction of many non-deductible expenses (e.g., 50% of meals and entertainment). [56] Corporate distributions in excess of E&P are generally treated as a return of capital to the shareholders. [57]

The liquidation of a corporation is generally treated as an exchange of a capital asset under the Internal Revenue Code. If a shareholder bought stock for $300 and receives $500 worth of property from a corporation in a liquidation, that shareholder would recognize a capital gain of $200. An exception is when a parent corporation liquidates a subsidiary, which is tax-free so long as the parent owns more than 80% of the subsidiary. There are certain anti-abuse rules to avoid the engineering of losses in corporate liquidations. [58]

The United States taxes foreign (i.e., non-U.S.) corporations differently than domestic corporations. [59] Foreign corporations generally are taxed only on business income when the income is effectively connected with the conduct of a U.S. trade or business (i.e., in a branch). This tax is imposed at the same rate as the tax on business income of a resident corporation. [60]

The U.S. also imposes a branch profits tax on foreign corporations with a U.S. branch, to mimic the dividend withholding tax which would be payable if the business was conducted in a U.S. subsidiary corporation and profits were remitted to the foreign parent as dividends. The branch profits tax is imposed at the time profits are remitted or deemed remitted outside the U.S. [61]

In addition, foreign corporations are subject to withholding tax at 30% on dividends, interest, royalties, and certain other income. Tax treaties may reduce or eliminate this tax. This tax applies to a "dividend equivalent amount," which is the corporation's effectively connected earnings and profits for the year, less investments the corporation makes in its U.S. assets (money and adjusted bases of property connected with the conduct of a U.S. trade or business). The tax is imposed even if there is no distribution.

Corporations 80% or more owned by a common parent corporation may file a consolidated return for federal and some state income taxes. [62] These returns include all income, deductions, and credits of all members of the controlled group, generally expressed without intercompany eliminations. Some states allow or require a combined or consolidated return for U.S. members of a "unitary" group under common control and in related businesses. Certain transactions between group members may not be recognized until the occurrence of events for other members. For example, if Company A sells goods to sister Company B, the profit on the sale is deferred until Company B uses or sells the goods. All members of a consolidated group must use the same tax year.

Transactions between a corporation and related parties are subject to potential adjustment by tax authorities. [63] These adjustments may be applied to both U.S. and foreign related parties, and to individuals, corporations, partnerships, estates, and trusts.

United States federal income tax incorporates an alternative minimum tax. This tax is computed at a lower tax rate (20% for corporations), and imposed based on a modified version of taxable income. Modifications include longer depreciation lives assets under MACRS, adjustments related to costs of developing natural resources, and an addback of certain tax exempt interest. [64]

Corporations may also be subject to additional taxes in certain circumstances. These include taxes on excess accumulated undistributed earnings and personal holding companies [65] and restrictions on graduated rates for personal service corporations. [66]

Some states, such as New Jersey, impose alternative taxes based on measures other than taxable income. Among such measures are gross income, pipeline revenues, gross receipts, and various asset or capital measures. In addition, some states impose a tax on capital of corporations or on shares issued and outstanding. The U. S. state of Michigan previously taxed businesses on an alternative base that did not allow compensation of employees as a tax deduction and allowed full deduction of the cost of production assets upon acquisition.

Corporations subject to U.S. tax must file federal and state income tax returns. [68] Different tax returns are required at the federal and some state levels for different types of corporations or corporations engaged in specialized businesses. The United States has 13 variations on the basic Form 1120 for S corporations, insurance companies, Domestic International Sales Corporations, foreign corporations, and other entities. The structure of the forms and the imbedded schedules vary by type of form.

United States federal corporate tax returns require both computation of taxable income from components thereof and reconciliation of taxable income to financial statement income. Corporations with assets exceeding $10 million must complete a detailed 3 page reconciliation on Schedule M-3 indicating which differences are permanent (i.e., do not reverse, such as disallowed expenses or tax exempt interest) and which are temporary (e.g., differences in when income or expense is recognized for book and tax purposes).

Some state corporate tax returns have significant imbedded or attached schedules related to features of the state's tax system that differ from the federal system. [69]

Preparation of non-simple corporate tax returns can be time consuming. For example, the U.S. Internal Revenue Service states that the average time needed to complete Form 1120-S, for privately held companies electing flow through status, is over 56 hours, not including recordkeeping time. [70]

Federal corporate tax returns for most types of corporations are due by the 15th day of the third month following the tax year (March 15 for calendar year). [71] State corporate tax return due dates vary, but most are due either on the same date or one month after the federal due date. Extensions of time to file are routinely granted. [72]

Penalties may be imposed at the federal and state levels for late filing or non-filing of corporate income tax returns. [73] In addition, other substantial penalties may apply with respect to failures related to returns and tax return computations. [74] Intentional failure to file or intentional filing of incorrect returns may result in criminal penalties to those involved. [75]

IRS Publication 542, Corporations

Standard tax texts

  • Willis, Eugene; Hoffman, William H. Jr., et al: South-Western Federal Taxation, published annually. 2013 edition (cited above as Willis|Hoffman) ISBN978-1-133-18955-8.
  • Pratt, James W.; Kulsrud, William N., et al: Federal Taxation, updated periodically. 2013 edition ISBN978-1-133-49623-6 (cited above as Pratt & Kulsrud).
  • Fox, Stephen C., Income Tax in the USA, published annually. 2013 edition ISBN978-0-985-18231-1

  • Bittker, Boris I. and Eustice, James S.: Federal Income Taxation of Corporations and Shareholders: abridged paperback ISBN978-0-7913-4101-8 or as a subscription service. Cited above as Bittker & Eustice.
  • Crestol, Jack; Hennessey, Kevin M.; and Yates, Richard F.: "Consolidated Tax Return : Principles, Practice, Planning, 1998 ISBN978-0-7913-1629-0
  • Kahn & Lehman. Corporate Income Taxation
  • Healy, John C. and Schadewald, Michael S.: Multistate Corporate Tax Course 2010, CCH, ISBN978-0-8080-2173-5 (also available as a multi-volume guide, ISBN978-0-8080-2015-8)
  • Hoffman, et al.: Corporations, Partnerships, Estates and Trusts, ISBN978-0-324-66021-0
  • Momburn, et al.: Mastering Corporate Tax, Carolina Academic Press, ISBN978-1-59460-368-6
  • Keightley, Mark P. and Molly F. Sherlock: The Corporate Income Tax System: Overview and Options for Reform, Congressional Research Service, 2014.

Liberty Tax Online Review – State & Federal Tax Preparation

  • CPA Involvement: Optional; available to lower-priced plans for $4.95 surcharge, free with higher-priced plans
  • Plans: EZ, $14.95 for 1040EZ situations only; Basic, $19.95 for moderately complex situations; Deluxe, $39.95 for Schedule C filers; Premium, $69.95 for most complex situations
  • State Returns Included: No; $26.95 for each state return
  • Pay With Your Refund: No
  • Audit Defense: Basic audit assistance (informational only) free for all users; advanced audit assistance available for a fee; no audit representation available
  • Mobile Capabilities: Limited (mobile-responsive website)

Liberty Tax Online is an online tax prep program created and distributed by Liberty Tax, one of the United States’ leading tax prep companies. It’s backed by a thousands-strong, coast-to-coast network of Liberty Tax branches, at least one of which is probably within easy driving distance of your home. If you get stumped at any point during the filing process, you can seamlessly transfer your halfway-done return to a physical Liberty Tax office – a nice fallback that online-only competitors can’t offer.

Liberty Online is a great tax filing option for tax situations of virtually any complexity. However, it does have a significant disadvantage that’s worth noting: Though Liberty Tax dropped its prices a bit for 2017, there’s still no free filing option. No matter how simple your tax situation is, you need to pay at least $14.95 for your federal return and $31.95 for each state. Compared to competitors with similar capabilities and features, including TaxHub and TaxPoint, Liberty Online is on the pricey side.

Like most competing online tax prep services, Liberty Online has an accuracy guarantee at all price points. If you’re hit with an IRS penalty or interest charge due to a Liberty Online calculation error, Liberty Online provides full reimbursement.

Initially, Liberty Tax Online takes an interview-style approach to the tax prep process. You’re asked a series of questions, such as “Do you own a home?” and “Do you have any dependents?” in a logical order. Liberty Online uses your answers to determine which forms and schedules you need to complete your return, and which plan option is appropriate for your tax situation.

Then, after you’ve selected a plan, you can choose which forms and schedules to fill out, leaning on the “Learn More” buttons next to each item for explanation and guidance on tricky topics. Throughout the filing process, you can move back and forth between sections at will using the tabs at the top of your screen.

If you’ve used eSmart Tax before, Liberty Online’s plans, features, and overall user experience will immediately seem familiar. That’s because eSmart Tax is also owned by Liberty Tax’s parent company. Though the two platforms are eerily similar at times, Liberty Online’s higher prices make it impossible to forget which is which.

The EZ plan is only appropriate for tax situations simple enough to be handled with IRS Form 1040EZ only – basically, situations that don’t involve itemized deductions, investments, or self-employment income. It costs $14.95 for your federal return and $26.95 for each state return.

The EZ plan’s features include:

  • Free Chat & Email Support. Liberty Online offers free support via online chat and email. Chat requests typically produce a response within 30 minutes during extended business hours (8am to 2am Eastern, Monday through Saturday; 9am to 2am Eastern, Sunday), while emailed questions can take up to 24 hours to answer. Both chat and email support are appropriate for questions about the Liberty Online platform itself, not for detailed questions about tax matters.
  • Pro Tax Support for a Fee. Liberty Online makes on-staff tax professionals available to provide accurate, detailed answers about your taxes via email. This service carries a one-time fee of $4.95 for EZ filers. During tax season, queries can take up to 72 hours to produce a response.
  • Prior Year Return Access. Liberty Online stores all prior year returns in its database. They’re accessible anytime at no charge.
  • W-2 Importing. You can import your W-2 directly from your employer, rather than entering the information manually.
  • Competitor Importing. You can also import prior year tax returns from competing online tax prep services, provided they are in PDF format.
  • Support for Earned Income Tax Credit. If you qualify for the Earned Income Tax Credit, you can file Schedule EIC here.
  • Affordable Care Act Support. This plan includes full support for Affordable Care Act documentation, including Exemption and Hardship forms.
  • Amendments & Prior Year Return Filing. If you need to amend your current year (if already filed) or prior year return, or need to file an entirely new prior year return, Liberty Online allows you to do so for free.

Liberty Online’s Basic plan charges $19.95 for your federal return and $26.95 for each state return. It’s ideal for filers with moderately complex tax situations, including itemized deductions and health savings accounts, but isn’t appropriate for business owners and people with lots of investment income.

The Basic plan has all the features and functions of the EZ package, plus:

  • Itemized Deductions. The Basic plan supports Schedule A, which allows you to itemize your deductions.
  • Interest & Ordinary Dividend Income. This plan supports Schedule B, which you need to file if you earned more than $1,500 in interest and ordinary dividend income during the tax year.
  • Support for Health Savings Accounts. This plan supports all forms related to Health Savings Accounts (HSAs).

The Deluxe plan charges $39.95 for your federal return and $26.95 for each state return. It’s appropriate for filers with more complex situations, including self-employed individuals required to file Schedule C. However, it’s not meant for the most complex tax situations, including income from farming or real estate, nor for entrepreneurs who need to report capital gains or losses from their businesses.

The Deluxe plan comes with all the features and functions of the lower-priced plans, plus:

  • Free Pro Tax Support. Liberty Online waives the $4.95 Pro Tax support fee for Deluxe plan customers. You’re entitled to unlimited, free professional support with this package.
  • Sole Proprietor/Independent Professional Forms/Schedules. If you’re an independent professional or small business owner and need to file Schedule C, you can do so with this package. You can also file all the forms necessary to claim business tax deductions and credits related to your activities, such as home office deductions.

The Premium plan charges $69.95 for your federal return and $26.95 for each state return. It’s marketed to people who incurred capital gains or losses from small business activities or property sales, filers who earn income from farming or rental property, and others with complex tax situations.

The Premium plan includes all the features and functions of the three lower plans, plus:

  • Capital Gains/Losses. If you have capital gains or losses from property sales or sales of stocks, mutual funds, and other securities, you can file Schedule D and all other applicable forms with this plan.
  • Business Income. If you are a shareholder in a partnership or S-corporation, you can file Schedule K-1 to report your business income with this plan.
  • Rental Property Income. If you have income from rental properties, you can file Schedule E and related forms with this plan.
  • Income from Farming. If you earned income from agricultural activities, you can file Schedule F and related forms here.

  • Tax Estimator. Liberty Online’s handy Tax Estimator is a complimentary, simulated mini-return. You can use it to gauge the size of your refund or tax liability before you file.
  • Real-Time Refund Display. Liberty Online shows your refund or tax liability in the upper right corner of your screen. The amount changes in real time based on inputted information.
  • Help Sidebar. Liberty Online’s unchanging right sidebar includes buttons for finding and contacting your nearest Liberty Tax office, accessing standard questions (the system’s FAQ section), starting a live chat session with a representative, and contacting the support team (including tax pros, if your plan allows) by email or phone.
  • Maximum Refund Guarantee. Like most online tax prep services, Liberty Online has a maximum refund guarantee. If you file an identical return with a competitor and receive a larger federal refund (or smaller federal tax liability), Liberty Online refunds your tax preparation fees.
  • Refer a Friend Bonus and Discount. You get $10 for each referral who completes and files their taxes with Liberty Online. Each referral gets a 50% discount on their filing fees. If you refer a friend who subsequently files at a physical Liberty Tax office, your per-person referral bonus jumps to $50.
  • Office Appointments. If you feel stuck at any point during the preparation process, you can schedule an appointment with your nearest Liberty Tax office and complete your return there. It takes just a moment to schedule a time slot online, and there’s no charge to do so (though, if you complete your return in person, you’re likely to face additional charges at filing time).
  • Tax School. If you’re interested in learning more about tax law and the tax filing process, sign up for one of Liberty Online’s many Tax School courses. Offered in partnership with the University of Phoenix, these courses typically run several weeks, with the most involved requiring about 80 class hours online or in person. Course costs run from $50 to about $250. Some, such as state-specific Basic Income Tax Courses, are great segues into the tax preparation industry and may help get you a job as an in-office Liberty Tax preparer.
  • Audit Support. If you’re audited by the IRS, Liberty Online promises to review any correspondence that you receive and advise you on how to respond or proceed. This service is free for anyone who files a Liberty Online return. However, Liberty Online stops short of providing representation during the audit process, and there’s no package you can purchase through Liberty Online that confers this benefit.
  • Enhanced Audit Assistance. This is an add-on package through which Liberty Tax professionals take a more hands-on approach to your IRS audit. Enhanced Audit Assistance includes pre-audit recommendations about the types of documents the IRS might request from you, assistance responding to IRS communication, and advice about your options once the audit process is complete. However, this doesn’t involve actual representation or negotiation.
  • Easy Advance. Through February 28, 2017, Liberty Tax offers tax refund loans (known as Easy Advance) for filers who qualify for Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC). Funds are typically dispersed within 24 hours of the filer’s federal return acceptance. This is a useful option for early filers who don’t want to wait for EITC or ACTC refunds, which can take until the second half of February to arrive. However, Early Advance loans may carry interest charges and require an underwriting process, so it’s best to inquire with Liberty Tax staff before signing up.

1. Refer a Friend Bonus/Discount Can Add Up

If you know a lot of people who still need to file their taxes this year, Liberty Online’s refer a friend bonus can put real cash in your pocket. And, if you’re lucky enough to be referred to the service by someone else, your savings could be even bigger – the 50% discount comes to about $50 when applied to the Premium package (assuming federal and one state). No other online tax prep program has such a generous referral deal for referrers and referees alike.

2. Clean, User-Friendly Interface

Liberty Online’s interface isn’t exactly pretty. The dominant colors are white (background) and black (text), with some flat blues and reds thrown in. But the layout is super easy to follow. Each item is clearly laid out on pages with other like items, maintaining a sense of cohesiveness as you progress through your return. You don’t have to click through an excessive number of pages, as is the case with TurboTax. And, in addition to a right sidebar with useful help resources, most items have “Learn More” tags that, when clicked, deliver succinct pop-up explanations that disappear when you click “OK.9rdquo;

3. Comes With Access to Physical Branches

Liberty Online customers enjoy access to more than 4,000 physical Liberty Tax branches. That’s a big help for novice filers who need more guidance than an online support interface can provide, as well as more experienced filers who decide they want the peace of mind that comes with an in-person prep process. It’s easy to transfer a partly completed return to your local Liberty Tax office, so there’s little friction if and when you decide to make the switch. Most of Liberty Online’s cut-rate competitors, including TaxAct and FreeTaxUSA, don’t offer in-person support.

4. Easy to Move Back and Forth Within Return

It’s easy to go back and forth through your Liberty Online return. Importantly, you can skip ahead to sections that you haven’t yet completed at any time. This allows you to prepare complex returns over a period of days or weeks, completing each form and schedule once you receive the documents necessary to do so. By contrast, H&R Block requires you to complete your return in order, and only allows you to skip around to sections that you’ve already completed.

5. Long Customer Service Hours

Liberty Online has super-long customer service hours – 8am to 2am most days. That’s much better than competitors such as TaxSlayer, which stay open into the evening (Eastern time), but not long enough to help West Coast taxpayers preparing their returns after dinner.

Liberty Online doesn’t have a free filing option. The cheapest plan sets you back $41.90, assuming one state return. That’s considerably more than FreeTaxUSA, whose cheapest plan costs $12.95, and infinitely more than TaxAct, whose bare-bones plan costs nothing.

2. Costs More Than eSmart Tax

Liberty Online strongly resembles eSmart Tax in look, feel, and function. That’s not entirely surprising, given that the same company owns them. What is surprising is the fact that most Liberty Online federal plans cost double the equivalent eSmart Tax plans (state returns cost about the same at both platforms). eSmart Tax customers enjoy the same perks as Liberty Online customers, including access to physical Liberty Tax branches, so the price discrepancy is puzzling.

The only difference that’s immediately obvious to me is Liberty Online’s interface. It’s cleaner in subtle ways and devoid (in my experience) of programming issues. eSmart Tax has a choppier interface and presented me with some vexing errors.

3. Low-Priced Plans Have Limited Capabilities

Liberty Online’s low-cost plans have very limited capabilities. The EZ plan, for instance, is only appropriate for 1040EZ filers, with no support for any major schedules. That’s a big drawback relative to budget-friendly filing services such as FreeTaxUSA, whose free plan supports most major forms and schedules.

4. Odd Default Selections for Bulleted Questions

Liberty Online’s multi-choice bullet lists come with a highlighted default selection. This would be convenient if the default choices so often didn’t make sense. For instance, when I indicated that I was married, the next set of questions asked whether I lived with my spouse at the end of the tax year and whether we had lived apart for more than six months during the tax year, and so on. The default choices for these questions were “No9rdquo; and “Yes,9rdquo; respectively.

In other words, the software assumed that we had lived apart for part or all of the year – certainly a possibility, but one that only a minority of married couples face. Had I been rushing through my return, I might have failed to notice and change these selections, creating problems down the line. While it’s important to take care at every step of the tax prep process, no matter how complicated your situation is, it’s also reasonable to ask your tax prep software to put the onus on filers with less common situations, rather than require the majority of filers (as in this case) to change questionable default bullet settings.

Liberty Online’s 10-minute timeout fuse is among the shortest of any tax prep software program I’ve ever used. At several points during the prep process, I walked away from the computer for a short break and returned to find my account logged out. Worse, certain account activities, such as maneuvering through “Learn More” content, don’t reset the timeout clock – so you can be logged out of your account while actively using it.

Roughly 50 years ago, everyone prepared their taxes by hand – either by themselves or with professional help. Today, millions of taxpayers complete their returns online, without ever talking to another human. Most of the time, and particularly in simple tax situations, this works just fine.

On the other hand, it’s nice to have the option to do things the old-fashioned way. Liberty Tax Online isn’t the only tax prep program that’s backed by a network of physical branches staffed by real, live humans. eSmart Tax, H&R Block, and Jackson Hewitt Online also have vast branch networks in reserve. If you value the ability to change course during the tax prep process, one of these options is calling your name.

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