C-Corporation Income & Expenses

C-CORPORATION INCOME AND EXPENSES

A C-Corporations pay corporate taxes on earnings before distributing remaining amounts to the shareholders in the form of dividends.  Individual shareholders are then subject to personal income taxes on the dividends they receive. Therefore, in a C-Corporation the owners, or shareholders, are taxed separately from the entity. Thus, the taxing of profits from the business is at both corporate and personal levels, creating a double taxation situation. In contrast because an S-corporation is a pass through entity, it is not itself subject to income tax; rather, the shareholders of the S-corporation are the one subject to tax on their share of profit or loss.

Deductible Business expenses are any eligible expenses incurred in the ordinary course of business. Business expenses are deductible and are always netted against total business income. Business expenses Must be ordinary and necessary to operate your business or trade. Ordinary expenses mean that most business owners in the same type of business or trade as yours would commonly pay for these expenses. Necessary expenses mean that the expenses help you in doing your business, are suitable, and you may not be able to operate the business if these expenses were not incurred. Personal expenses are not deductible.

Capital expenses are those costs incurred by you or your company when acquiring or upgrading or maintaining physical assets such as property, industrial buildings, or equipment. These capital expenses are recognized as business assets and must be capitalized, rather than deducted. These expenses are deducted over a number of years through depreciation. Example of such expenses include costs of computers, furniture, property, equipment, trucks, etc. According to the IRS, the three types of costs that must be capitalized are business start-up costs, business assets, and improvements.

The expenses in the fillable form below are for your guidance, please feel free to add any other ordinary and necessary expense that you incurred while operating your business. Please note that the IRS expects you to have a verifiable documented evidence of the expenses that you show in your taxes. Please keep all your records for five years.

Please download and fill the following forms  as you prepare to do your taxes.

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