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Www irs gov Publication 80 - Additional Material Prev  Up  Next   Home   More Online Publications
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Understanding Your CP518 Individuals Notice

This is a final reminder notice that we still have no record that you filed your prior tax return(s).


What you need to do

  • File your tax return immediately or explain to us why you don't need to file.
  • Use the response form on your notice to explain:
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    • why you don't have to file
    • that you’ve already filed

If we don't hear from you

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  • If you are owed a refund for the current tax year, or any prior year, it may be delayed because of this unfiled return.

You may want to

 

Page Last Reviewed or Updated: 16-Jan-2014

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Www Irs Gov

Www irs gov Publication 542 - Main Content Table of Contents Businesses Taxed as CorporationsPersonal services. Www irs gov Employee-owners. Www irs gov Other rules. Www irs gov Other rules. Www irs gov Property Exchanged for StockNonqualified preferred stock. Www irs gov Liabilities. Www irs gov Election to reduce basis. Www irs gov Capital Contributions Filing and Paying Income TaxesIncome Tax Return Penalties Estimated Tax U. Www irs gov S. Www irs gov Real Property Interest Accounting MethodsSection 481(a) adjustment. Www irs gov Accounting Periods Recordkeeping Income, Deductions, and Special ProvisionsCosts of Going Into Business Related Persons Income From Qualifying Shipping Activities Election to Expense Qualified Refinery Property Deduction to Comply With EPA Sulfur Regulations Energy-Efficient Commercial Building Property Deduction Corporate Preference Items Dividends-Received Deduction Extraordinary Dividends Below-Market Loans Charitable Contributions Capital Losses Net Operating Losses At-Risk Limits Passive Activity Limits Figuring TaxTax Rate Schedule Alternative Minimum Tax (AMT) Credits Recapture Taxes Accumulated Earnings Tax Distributions to ShareholdersMoney or Property Distributions Distributions of Stock or Stock Rights Constructive Distributions Reporting Dividends and Other Distributions How To Get Tax Help Businesses Taxed as Corporations The rules you must use to determine whether a business is taxed as a corporation changed for businesses formed after 1996. Www irs gov Business formed before 1997. Www irs gov   A business formed before 1997 and taxed as a corporation under the old rules will generally continue to be taxed as a corporation. Www irs gov Business formed after 1996. Www irs gov   The following businesses formed after 1996 are taxed as corporations. Www irs gov A business formed under a federal or state law that refers to it as a corporation, body corporate, or body politic. Www irs gov A business formed under a state law that refers to it as a joint-stock company or joint-stock association. Www irs gov An insurance company. Www irs gov Certain banks. Www irs gov A business wholly owned by a state or local government. Www irs gov A business specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships). Www irs gov Certain foreign businesses. Www irs gov Any other business that elects to be taxed as a corporation. Www irs gov For example, a limited liability company (LLC) can elect to be treated as an association taxable as a corporation by filing Form 8832, Entity Classification Election. Www irs gov For more information about LLCs, see Publication 3402, Taxation of Limited Liability Companies. Www irs gov S corporations. Www irs gov   Some corporations may meet the qualifications for electing to be S corporations. Www irs gov For information on S corporations, see the instructions for Form 1120S, U. Www irs gov S. Www irs gov Income Tax Return for an S Corporation. Www irs gov Personal service corporations. Www irs gov   A corporation is a personal service corporation if it meets all of the following requirements. Www irs gov Its principal activity during the “testing period” is performing personal services (defined later). Www irs gov Generally, the testing period for any tax year is the prior tax year. Www irs gov If the corporation has just been formed, the testing period begins on the first day of its tax year and ends on the earlier of: The last day of its tax year, or The last day of the calendar year in which its tax year begins. Www irs gov Its employee-owners substantially perform the services in (1), above. Www irs gov This requirement is met if more than 20% of the corporation's compensation cost for its activities of performing personal services during the testing period is for personal services performed by employee-owners. Www irs gov Its employee-owners own more than 10% of the fair market value of its outstanding stock on the last day of the testing period. Www irs gov Personal services. Www irs gov   Personal services include any activity performed in the fields of accounting, actuarial science, architecture, consulting, engineering, health (including veterinary services), law, and the performing arts. Www irs gov Employee-owners. Www irs gov   A person is an employee-owner of a personal service corporation if both of the following apply. Www irs gov He or she is an employee of the corporation or performs personal services for, or on behalf of, the corporation (even if he or she is an independent contractor for other purposes) on any day of the testing period. Www irs gov He or she owns any stock in the corporation at any time during the testing period. Www irs gov Other rules. Www irs gov   For other rules that apply to personal service corporations see Accounting Periods, later. Www irs gov Closely held corporations. Www irs gov   A corporation is closely held if all of the following apply. Www irs gov It is not a personal service corporation. Www irs gov At any time during the last half of the tax year, more than 50% of the value of its outstanding stock is, directly or indirectly, owned by or for five or fewer individuals. Www irs gov “Individual” includes certain trusts and private foundations. Www irs gov Other rules. Www irs gov   For the at-risk rules that apply to closely held corporations, seeAt-Risk Limits, later. Www irs gov Property Exchanged for Stock If you transfer property (or money and property) to a corporation in exchange for stock in that corporation (other than nonqualified preferred stock, described later), and immediately afterward you are in control of the corporation, the exchange is usually not taxable. Www irs gov This rule applies both to individuals and to groups who transfer property to a corporation. Www irs gov It also applies whether the corporation is being formed or is already operating. Www irs gov It does not apply in the following situations. Www irs gov The corporation is an investment company. Www irs gov You transfer the property in a bankruptcy or similar proceeding in exchange for stock used to pay creditors. Www irs gov The stock is received in exchange for the corporation's debt (other than a security) or for interest on the corporation's debt (including a security) that accrued while you held the debt. Www irs gov Both the corporation and any person involved in a nontaxable exchange of property for stock must attach to their income tax returns a complete statement of all facts pertinent to the exchange. Www irs gov For more information, see section 1. Www irs gov 351-3 of the Regulations. Www irs gov Control of a corporation. Www irs gov   To be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock. Www irs gov Example 1. Www irs gov You and Bill Jones buy property for $100,000. Www irs gov You both organize a corporation when the property has a fair market value of $300,000. Www irs gov You transfer the property to the corporation for all its authorized capital stock, which has a par value of $300,000. Www irs gov No gain is recognized by you, Bill, or the corporation. Www irs gov Example 2. Www irs gov You and Bill transfer the property with a basis of $100,000 to a corporation in exchange for stock with a fair market value of $300,000. Www irs gov This represents only 75% of each class of stock of the corporation. Www irs gov The other 25% was already issued to someone else. Www irs gov You and Bill recognize a taxable gain of $200,000 on the transaction. Www irs gov Services rendered. Www irs gov   The term property does not include services rendered or to be rendered to the issuing corporation. Www irs gov The value of stock received for services is income to the recipient. Www irs gov Example. Www irs gov You transfer property worth $35,000 and render services valued at $3,000 to a corporation in exchange for stock valued at $38,000. Www irs gov Right after the exchange, you own 85% of the outstanding stock. Www irs gov No gain is recognized on the exchange of property. Www irs gov However, you recognize ordinary income of $3,000 as payment for services you rendered to the corporation. Www irs gov Property of relatively small value. Www irs gov   The term property does not include property of a relatively small value when it is compared to the value of stock and securities already owned or to be received for services by the transferor if the main purpose of the transfer is to qualify for the nonrecognition of gain or loss by other transferors. Www irs gov   Property transferred will not be considered to be of relatively small value if its fair market value is at least 10% of the fair market value of the stock and securities already owned or to be received for services by the transferor. Www irs gov Stock received in disproportion to property transferred. Www irs gov   If a group of transferors exchange property for corporate stock, each transferor does not have to receive stock in proportion to his or her interest in the property transferred. Www irs gov If a disproportionate transfer takes place, it will be treated for tax purposes in accordance with its true nature. Www irs gov It may be treated as if the stock were first received in proportion and then some of it used to make gifts, pay compensation for services, or satisfy the transferor's obligations. Www irs gov Money or other property received. Www irs gov   If, in an otherwise nontaxable exchange of property for corporate stock, you also receive money or property other than stock, you may have to recognize gain. Www irs gov You must recognize gain only up to the amount of money plus the fair market value of the other property you receive. Www irs gov The rules for figuring the recognized gain in this situation generally follow those for a partially nontaxable exchange discussed in Publication 544 under Like-Kind Exchanges. Www irs gov If the property you give up includes depreciable property, the recognized gain may have to be reported as ordinary income from depreciation. Www irs gov See chapter 3 of Publication 544. Www irs gov No loss is recognized. Www irs gov Nonqualified preferred stock. Www irs gov   Nonqualified preferred stock is treated as property other than stock. Www irs gov Generally, it is preferred stock with any of the following features. Www irs gov The holder has the right to require the issuer or a related person to redeem or buy the stock. Www irs gov The issuer or a related person is required to redeem or buy the stock. Www irs gov The issuer or a related person has the right to redeem or buy the stock and, on the issue date, it is more likely than not that the right will be exercised. Www irs gov The dividend rate on the stock varies with reference to interest rates, commodity prices, or similar indices. Www irs gov For a detailed definition of nonqualified preferred stock, see section 351(g)(2) of the Internal Revenue Code. Www irs gov Liabilities. Www irs gov   If the corporation assumes your liabilities, the exchange generally is not treated as if you received money or other property. Www irs gov There are two exceptions to this treatment. Www irs gov If the liabilities the corporation assumes are more than your adjusted basis in the property you transfer, gain is recognized up to the difference. Www irs gov However, if the liabilities assumed give rise to a deduction when paid, such as a trade account payable or interest, no gain is recognized. Www irs gov If there is no good business reason for the corporation to assume your liabilities, or if your main purpose in the exchange is to avoid federal income tax, the assumption is treated as if you received money in the amount of the liabilities. Www irs gov For more information on the assumption of liabilities, see section 357(d) of the Internal Revenue Code. Www irs gov Example. Www irs gov You transfer property to a corporation for stock. Www irs gov Immediately after the transfer, you control the corporation. Www irs gov You also receive $10,000 in the exchange. Www irs gov Your adjusted basis in the transferred property is $20,000. Www irs gov The stock you receive has a fair market value (FMV) of $16,000. Www irs gov The corporation also assumes a $5,000 mortgage on the property for which you are personally liable. Www irs gov Gain is realized as follows. Www irs gov FMV of stock received $16,000 Cash received 10,000 Liability assumed by corporation 5,000 Total received $31,000 Minus: Adjusted basis of property transferred 20,000 Realized gain $11,000   The liability assumed is not treated as money or other property. Www irs gov The recognized gain is limited to $10,000, the cash received. Www irs gov Loss on exchange. Www irs gov   If you have a loss from an exchange and own, directly or indirectly, more than 50% of the corporation's stock, you cannot deduct the loss. Www irs gov For more information, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Www irs gov Basis of stock or other property received. Www irs gov   The basis of the stock you receive is generally the adjusted basis of the property you transfer. Www irs gov Increase this amount by any amount treated as a dividend, plus any gain recognized on the exchange. Www irs gov Decrease this amount by any cash you received, the fair market value of any other property you received, and any loss recognized on the exchange. Www irs gov Also decrease this amount by the amount of any liability the corporation or another party to the exchange assumed from you, unless payment of the liability gives rise to a deduction when paid. Www irs gov    Further decreases may be required when the corporation or another party to the exchange assumes from you a liability that gives rise to a deduction when paid, if the basis of the stock would otherwise be higher than its fair market value on the date of the exchange. Www irs gov This rule does not apply if the entity assuming the liability acquired either substantially all of the assets or the trade or business with which the liability is associated. Www irs gov The basis of any other property you receive is its fair market value on the date of the trade. Www irs gov Basis of property transferred. Www irs gov   A corporation that receives property from you in exchange for its stock generally has the same basis you had in the property, increased by any gain you recognized on the exchange. Www irs gov However, the increase for the gain recognized may be limited. Www irs gov For more information, see section 362 of the Internal Revenue Code. Www irs gov Election to reduce basis. Www irs gov   In a section 351 transaction, if the adjusted basis of the property transferred exceeds the property's fair market value, the transferor and transferee may make an irrevocable election to treat the basis of the stock received by the transferor as having a basis equal to the fair market value of the property transferred. Www irs gov The transferor and transferee make this election by attaching a statement to their tax returns filed by the due date (including extensions) for the tax year in which the transaction occurred. Www irs gov However, if the transferor makes the election by including the certification provided in Notice 2005-70, 2005-41, I. Www irs gov R. Www irs gov B. Www irs gov 694, on or with its tax return filed by the due date (including extensions), then no election need be made by the transferee. Www irs gov    For more information on making this election, see section 362(e)(2)(C) of the Internal Revenue Code, and Notice 2005-70. Www irs gov Capital Contributions This section explains the tax treatment of contributions from shareholders and nonshareholders. Www irs gov Paid-in capital. Www irs gov   Contributions to the capital of a corporation, whether or not by shareholders, are paid-in capital. Www irs gov These contributions are not taxable to the corporation. Www irs gov Basis. Www irs gov   The corporation's basis of property contributed to capital by a shareholder is the same as the basis the shareholder had in the property, increased by any gain the shareholder recognized on the exchange. Www irs gov However, the increase for the gain recognized may be limited. Www irs gov For more information, see Basis of property transferred, above, and section 362 of the Internal Revenue Code. Www irs gov   The basis of property contributed to capital by a person other than a shareholder is zero. Www irs gov   If a corporation receives a cash contribution from a person other than a shareholder, the corporation must reduce the basis of any property acquired with the contribution during the 12-month period beginning on the day it received the contribution by the amount of the contribution. Www irs gov If the amount contributed is more than the cost of the property acquired, then reduce, but not below zero, the basis of the other properties held by the corporation on the last day of the 12-month period in the following order. Www irs gov Depreciable property. Www irs gov Amortizable property. Www irs gov Property subject to cost depletion but not to percentage depletion. Www irs gov All other remaining properties. Www irs gov   Reduce the basis of property in each category to zero before going on to the next category. Www irs gov   There may be more than one piece of property in each category. Www irs gov Base the reduction of the basis of each property on the following ratio:   Basis of each piece of property   Bases of all properties (within that category) If the corporation wishes to make this adjustment in some other way, it must get IRS approval. Www irs gov The corporation files a request for approval with its income tax return for the tax year in which it receives the contribution. Www irs gov Filing and Paying Income Taxes The federal income tax is a pay-as-you-go tax. Www irs gov A corporation generally must make estimated tax payments as it earns or receives income during its tax year. Www irs gov After the end of the year, the corporation must file an income tax return. Www irs gov This section will help you determine when and how to pay and file corporate income taxes. Www irs gov For certain corporations affected by Presidentially declared disasters such as hurricanes, the due dates for filing returns, paying taxes, and performing other time-sensitive acts may be extended. Www irs gov The IRS may also forgive the interest and penalties on any underpaid tax for the length of any extension. Www irs gov For more information, visit www. Www irs gov irs. Www irs gov gov/newsroom/article/0,,id=108362. Www irs gov 00. Www irs gov Income Tax Return This section will help you determine when and how to report a corporation's income tax. Www irs gov Who must file. Www irs gov   Unless exempt under section 501 of the Internal Revenue Code, all domestic corporations in existence for any part of a tax year (including corporations in bankruptcy) must file an income tax return whether or not they have taxable income. Www irs gov Which form to file. Www irs gov   A corporation generally must file Form 1120, U. Www irs gov S. Www irs gov Corporation Income Tax Return, to report its income, gains, losses, deductions, credits, and to figure its income tax liability. Www irs gov Certain organizations and entities must file special returns. Www irs gov For more information, see Special Returns for Certain Organizations, in the Instructions for Form 1120. Www irs gov Electronic filing. Www irs gov   Corporations can generally electronically file (e-file) Form 1120 and certain related forms, schedules, and attachments. Www irs gov Certain corporations with total assets of $10 million or more, that file at least 250 returns a year must e-file Form 1120. Www irs gov However, in certain instances, these corporations can request a waiver. Www irs gov For more information regarding electronic filing, visit www. Www irs gov irs. Www irs gov gov/efile. Www irs gov When to file. Www irs gov   Generally, a corporation must file its income tax return by the 15th day of the 3rd month after the end of its tax year. Www irs gov A new corporation filing a short-period return must generally file by the 15th day of the 3rd month after the short period ends. Www irs gov A corporation that has dissolved must generally file by the 15th day of the 3rd month after the date it dissolved. Www irs gov Example 1. Www irs gov A corporation's tax year ends December 31. Www irs gov It must file its income tax return by March 15th. Www irs gov Example 2. Www irs gov A corporation's tax year ends June 30. Www irs gov It must file its income tax return by September 15th. Www irs gov   If the due date falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day. Www irs gov Extension of time to file. Www irs gov   File Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information and Other Returns, to request an extension of time to file a corporation income tax return. Www irs gov The IRS will grant the extension if you complete the form properly, file it, and pay any tax due by the original due date for the return. Www irs gov   Form 7004 does not extend the time for paying the tax due on the return. Www irs gov Interest, and possibly penalties, will be charged on any part of the final tax due not shown as a balance due on Form 7004. Www irs gov The interest is figured from the original due date of the return to the date of payment. Www irs gov   For more information, see the instructions for Form 7004. Www irs gov How to pay your taxes. Www irs gov   A corporation must pay its tax due in full no later than the 15th day of the 3rd month after the end of its tax year. Www irs gov Electronic Federal Tax Payment System (EFTPS). Www irs gov   Corporations generally must use EFTPS to make deposits of all tax liabilities (including social security, Medicare, withheld income, excise, and corporate income taxes). Www irs gov For more information on EFTPS and enrollment, visit www. Www irs gov eftps. Www irs gov gov or call 1-800-555-4477. Www irs gov Also see Publication 966, The Secure Way to Pay Your Federal Taxes. Www irs gov Note. Www irs gov Forms 8109 and 8109-B, Federal Tax Deposit Coupon, can no longer be used to make federal tax deposits. Www irs gov Penalties Generally, if the corporation receives a notice about interest and penalties after it files its return, send the IRS an explanation and we will determine if the corporation meets reasonable-cause criteria. Www irs gov Do not attach an explanation when the corporation's return is filed. Www irs gov See the instructions for your income tax return. Www irs gov Late filing of return. Www irs gov    A corporation that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. Www irs gov If the corporation is charged a penalty for late payment of tax (discussed next) for the same period of time, the penalty for late filing is reduced by the amount of the penalty for late payment. Www irs gov The minimum penalty for a return that is over 60 days late is the smaller of the tax due or $100. Www irs gov The penalty will not be imposed if the corporation can show the failure to file on time was due to a reasonable cause. Www irs gov Late payment of tax. Www irs gov    A corporation that does not pay the tax when due may be penalized ½ of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. Www irs gov The penalty will not be imposed if the corporation can show that the failure to pay on time was due to a reasonable cause. Www irs gov Trust fund recovery penalty. Www irs gov   If income, social security, and Medicare taxes that a corporation must withhold from employee wages are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. Www irs gov The penalty is the full amount of the unpaid trust fund tax. Www irs gov This penalty may apply to you if these unpaid taxes cannot be immediately collected from the business. Www irs gov   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying these taxes, and who acted willfully in not doing so. Www irs gov   A responsible person can be an officer or employee of a corporation, an accountant, or a volunteer director/trustee. Www irs gov A responsible person also may include one who signs checks for the corporation or otherwise has authority to cause the spending of business funds. Www irs gov   Willfully means voluntarily, consciously, and intentionally. Www irs gov A responsible person acts willfully if the person knows the required actions are not taking place. Www irs gov   For more information on withholding and paying these taxes, see Publication 15 (Circular E), Employer's Tax Guide, and Publication 51, (Circular A), Agricultural Employer's Tax Guide. Www irs gov Other penalties. Www irs gov   Other penalties can be imposed for negligence, substantial understatement of tax, reportable transaction understatements, and fraud. Www irs gov See sections 6662, 6662A, and 6663 of the Internal Revenue Code. Www irs gov Estimated Tax Generally, a corporation must make installment payments if it expects its estimated tax for the year to be $500 or more. Www irs gov If the corporation does not pay the installments when they are due, it could be subject to an underpayment penalty. Www irs gov This section will explain how to avoid this penalty. Www irs gov When to pay estimated tax. Www irs gov   Installment payments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year. Www irs gov Example 1. Www irs gov Your corporation's tax year ends December 31. Www irs gov Installment payments are due on April 15, June 15, September 15, and December 15. Www irs gov Example 2. Www irs gov Your corporation's tax year ends June 30. Www irs gov Installment payments are due on October 15, December 15, March 15, and June 15. Www irs gov   If any due date falls on a Saturday, Sunday, or legal holiday, the installment is due on the next business day. Www irs gov How to figure each required installment. Www irs gov   Use Form 1120-W, Estimated Tax for Corporations, as a worksheet to figure each required installment of estimated tax. Www irs gov You will generally use one of the following two methods to figure each required installment. Www irs gov You should use the method that yields the smallest installment payments. Www irs gov Note. Www irs gov In these discussions, “return” generally refers to the corporation's original return. Www irs gov However, an amended return is considered the original return if it is filed by the due date (including extensions) of the original return. Www irs gov Method 1. Www irs gov   Each required installment is 25% of the income tax the corporation will show on its return for the current year. Www irs gov Method 2. Www irs gov   Each required installment is 25% of the income tax shown on the corporation's return for the previous year. Www irs gov   To use Method 2: The corporation must have filed a return for the previous year, The return must have been for a full 12 months, and The return must have shown a positive tax liability (not zero). Www irs gov Also, if the corporation is a large corporation, it can use Method 2 to figure the first installment only. Www irs gov   See the Instructions for Form 1120-W, for the definition of a large corporation and other special rules for large corporations. Www irs gov Other methods. Www irs gov   If a corporation's income is expected to vary during the year because, for example, its business is seasonal, it may be able to lower the amount of one or more required installments by using one or both of the following methods. Www irs gov The annualized income installment method. Www irs gov The adjusted seasonal installment method. Www irs gov Use Schedule A of Form 1120-W to determine if using one or both of these methods will lower the amount of any required installments. Www irs gov Refiguring required installments. Www irs gov   If after the corporation figures and deposits its estimated tax it finds that its tax liability for the year will be more or less than originally estimated, it may have to refigure its required installments to see if an underpayment penalty may apply. Www irs gov An immediate catchup payment should be made to reduce any penalty resulting from the underpayment of any earlier installments. Www irs gov Underpayment penalty. Www irs gov   If the corporation does not pay a required installment of estimated tax by its due date, it may be subject to a penalty. Www irs gov The penalty is figured separately for each installment due date. Www irs gov The corporation may owe a penalty for an earlier due date, even if it paid enough tax later to make up the underpayment. Www irs gov This is true even if the corporation is due a refund when its return is filed. Www irs gov Form 2220. Www irs gov   Use Form 2220, Underpayment of Estimated Tax by Corporations, to determine if a corporation is subject to the penalty for underpayment of estimated tax and to figure the amount of the penalty. Www irs gov   If the corporation is charged a penalty, the amount of the penalty depends on the following three factors. Www irs gov The amount of the underpayment. Www irs gov The period during which the underpayment was due and unpaid. Www irs gov The interest rate for underpayments published quarterly by the IRS in the Internal Revenue Bulletin. Www irs gov   A corporation generally does not have to file Form 2220 with its income tax return because the IRS will figure any penalty and bill the corporation. Www irs gov However, even if the corporation does not owe a penalty, complete and attach the form to the corporation's tax return if any of the following apply. Www irs gov The annualized income installment method was used to figure any required installment. Www irs gov The adjusted seasonal installment method was used to figure any required installment. Www irs gov The corporation is a large corporation figuring its first required installment based on the prior year's tax. Www irs gov How to pay estimated tax. Www irs gov   A corporation is generally required to use EFTPS to pay its taxes. Www irs gov See Electronic Federal Tax Payment System (EFTPS), earlier. Www irs gov Also see the Instructions for Form 1120-W. Www irs gov Quick refund of overpayments. Www irs gov   A corporation that has overpaid its estimated tax for the tax year may be able to apply for a quick refund. Www irs gov Use Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, to apply for a quick refund of an overpayment of estimated tax. Www irs gov A corporation can apply for a quick refund if the overpayment is: At least 10% of its expected tax liability, and At least $500. Www irs gov Use Form 4466 to figure the corporation's expected tax liability and the overpayment of estimated tax. Www irs gov File Form 4466 before the 16th day of the 3rd month after the end of the tax year, but before the corporation files its income tax return. Www irs gov Do not file Form 4466 before the end of the corporation's tax year. Www irs gov An extension of time to file the corporation's income tax return will not extend the time for filing Form 4466. Www irs gov The IRS will act on the form within 45 days from the date you file it. Www irs gov U. Www irs gov S. Www irs gov Real Property Interest If a domestic corporation acquires a U. Www irs gov S. Www irs gov real property interest from a foreign person or firm, the corporation may have to withhold tax on the amount it pays for the property. Www irs gov The amount paid includes cash, the fair market value of other property, and any assumed liability. Www irs gov If a domestic corporation distributes a U. Www irs gov S. Www irs gov real property interest to a foreign person or firm, it may have to withhold tax on the fair market value of the property. Www irs gov A corporation that fails to withhold may be liable for the tax, and any penalties and interest that apply. Www irs gov For more information, see section 1445 of the Internal Revenue Code; Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities; Form 8288, U. Www irs gov S. Www irs gov Withholding Tax Return for Dispositions by Foreign Persons of U. Www irs gov S. Www irs gov Real Property Interests; and Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U. Www irs gov S. Www irs gov Real Property Interests. Www irs gov Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. Www irs gov Taxable income should be determined using the method of accounting regularly used in keeping the corporation's books and records. Www irs gov In all cases, the method used must clearly show taxable income. Www irs gov Generally, permissible methods include: Cash, Accrual, or Any other method authorized by the Internal Revenue Code. Www irs gov Accrual method. Www irs gov   Generally, a corporation (other than a qualified personal service corporation) must use the accrual method of accounting if its average annual gross receipts exceed $5 million. Www irs gov A corporation engaged in farming operations also must use the accrual method. Www irs gov   If inventories are required, the accrual method generally must be used for sales and purchases of merchandise. Www irs gov However, qualifying taxpayers and eligible businesses of qualifying small business taxpayers are excepted from using the accrual method for eligible trades or businesses and may account for inventoriable items as materials and supplies that are not incidental. Www irs gov   Under the accrual method, an amount is includable in income when: All the events have occurred that fix the right to receive the income, which is the earliest of the date: The required performance takes place, Payment is due, or Payment is received; and The amount can be determined with reasonable accuracy. Www irs gov   Generally, an accrual basis taxpayer can deduct accrued expenses in the tax year when: All events that determine the liability have occurred, The amount of the liability can be figured with reasonable accuracy, and Economic performance takes place with respect to the expense. Www irs gov   There are exceptions to the economic performance rule for certain items, including recurring expenses. Www irs gov See section 461(h) of the Internal Revenue Code and the related regulations for the rules for determining when economic performance takes place. Www irs gov Nonaccrual experience method. Www irs gov   Accrual method corporations are not required to maintain accruals for certain amounts from the performance of services that, on the basis of their experience, will not be collected, if: The services are in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting; or The corporation's average annual gross receipts for the 3 prior tax years does not exceed $5 million. Www irs gov   This provision does not apply if interest is required to be paid on the amount or if there is any penalty for failure to pay the amount timely. Www irs gov Percentage of completion method. Www irs gov   Long-term contracts (except for certain real property construction contracts) must generally be accounted for using the percentage of completion method described in section 460 of the Internal Revenue Code. Www irs gov Mark-to-market accounting method. Www irs gov   Generally, dealers in securities must use the mark-to-market accounting method described in section 475 of the Internal Revenue Code. Www irs gov Under this method any security held by a dealer as inventory must be included in inventory at its FMV. Www irs gov Any security not held as inventory at the close of the tax year is treated as sold at its FMV on the last business day of the tax year. Www irs gov Any gain or loss must be taken into account in determining gross income. Www irs gov The gain or loss taken into account is treated as ordinary gain or loss. Www irs gov   Dealers in commodities and traders in securities and commodities can elect to use the mark-to-market accounting method. Www irs gov Change in accounting method. Www irs gov   A corporation can change its method of accounting used to report taxable income (for income as a whole or for the treatment of any material item). Www irs gov The corporation must file Form 3115, Application for Change in Accounting Method. Www irs gov For more information, see Form 3115 and Publication 538. Www irs gov Section 481(a) adjustment. Www irs gov   The corporation may have to make an adjustment under section 481(a) of the Internal Revenue Code to prevent amounts of income or expense from being duplicated or omitted. Www irs gov The section 481(a) adjustment period is generally 1 year for a net negative adjustment and 4 years for a net positive adjustment. Www irs gov However, a corporation can elect to use a 1-year adjustment period if the net section 481(a) adjustment for the change is less than $25,000. Www irs gov The corporation must complete the appropriate lines of Form 3115 to make the election. Www irs gov See the Instructions for Form 3115. Www irs gov Accounting Periods A corporation must figure its taxable income on the basis of a tax year. Www irs gov A tax year is the annual accounting period a corporation uses to keep its records and report its income and expenses. Www irs gov Generally, corporations can use either a calendar year or a fiscal year as its tax year. Www irs gov Unless special rules apply, a corporation generally adopts a tax year by filing its first federal income tax return using that tax year. Www irs gov For more information, see Publication 538. Www irs gov Personal service corporation. Www irs gov   A personal service corporation must use a calendar year as its tax year unless: It elects to use a 52–53 week tax year that ends with reference to the calendar year; It can establish a business purpose for a different tax year and obtains approval of the IRS. Www irs gov See Form 1128, Application To Adopt, Change, or Retain a Tax Year, and Publication 538; or It elects under section 444 of the Internal Revenue Code to have a tax year other than a calendar year. Www irs gov Use Form 8716, Election to Have a Tax Year Other Than a Required Tax Year, to make the election. Www irs gov   If a personal service corporation makes a section 444 election, its deduction for certain amounts paid to employee-owners may be limited. Www irs gov See Schedule H (Form 1120), Section 280H Limitations for a Personal Service Corporation (PSC), to figure the maximum deduction. Www irs gov Change of tax year. Www irs gov   Generally, a corporation must get the consent of the IRS before changing its tax year by filing Form 1128. Www irs gov However, under certain conditions, a corporation can change its tax year without getting the consent. Www irs gov For more information, see Form 1128 and Publication 538. Www irs gov Recordkeeping A corporation should keep its records for as long as they may be needed for the administration of any provision of the Internal Revenue Code. Www irs gov Usually records that support items of income, deductions, or credits on the return must be kept for 3 years from the date the return is due or filed, whichever is later. Www irs gov Keep records that verify the corporation's basis in property for as long as they are needed to figure the basis of the original or replacement property. Www irs gov The corporation should keep copies of all filed returns. Www irs gov They help in preparing future and amended returns and in the calculation of earnings and profits. Www irs gov Income, Deductions, and Special Provisions Rules on income and deductions that apply to individuals also apply, for the most part, to corporations. Www irs gov However, the following special provisions apply only to corporations. Www irs gov Costs of Going Into Business When you go into business, treat all costs you incur to get your business started as capital expenses. Www irs gov However, a corporation can elect to deduct a limited amount of start-up or organizational costs. Www irs gov Any costs not deducted can be amortized. Www irs gov Start-up costs are costs for creating an active trade or business or investigating the creation or acquisition of an active trade or business. Www irs gov Organizational costs are the direct costs of creating the corporation. Www irs gov For more information on deducting or amortizing start-up and organizational costs, see the instructions for your income tax return. Www irs gov Also see, Publication 535, chapter 7, Costs You Can Deduct or Capitalize, and chapter 8, Amortization. Www irs gov Related Persons A corporation that uses an accrual method of accounting cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until the corporation makes the payment and the corresponding amount is includible in the related person's gross income. Www irs gov Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. Www irs gov If a deduction is denied, the rule will continue to apply even if the corporation's relationship with the person ends before the expense or interest is includible in the gross income of that person. Www irs gov These rules also deny the deduction of losses on the sale or exchange of property between related persons. Www irs gov Related persons. Www irs gov   For purposes of this rule, the following persons are related to a corporation. Www irs gov Another corporation, that is a member of the same controlled group (as defined in section 267(f) of the Internal Revenue Code). Www irs gov An individual who owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. Www irs gov A trust fiduciary, when the trust or the grantor of the trust owns, directly or indirectly, more than 50% in value of the outstanding stock of the corporation. Www irs gov An S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. Www irs gov A partnership, if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital or profits interest in the partnership. Www irs gov Any employee-owner, if the corporation is a personal service corporation (see Personal service corporation, earlier), regardless of the amount of stock owned by the employee-owner. Www irs gov Ownership of stock. Www irs gov   To determine whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following apply. Www irs gov Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, is treated as being owned proportionately by or for its shareholders, partners, or beneficiaries. Www irs gov An individual is treated as owning the stock owned, directly or indirectly, by or for the individual's family. Www irs gov Family includes only brothers and sisters (including half brothers and half sisters), a spouse, ancestors, and lineal descendants. Www irs gov Any individual owning (other than by applying (2), above) stock in a corporation, is treated as also owning the stock owned directly or indirectly by that individual's partner. Www irs gov To apply (1), (2), or (3), above, stock constructively owned by a person under (1) is treated as actually owned by that person. Www irs gov But stock constructively owned by an individual under (2) or (3) is not treated as actually owned by the individual for applying either (2) or (3) to make another person the constructive owner of that stock. Www irs gov Reallocation of income and deductions. Www irs gov   Where it is necessary to clearly show income or prevent tax evasion, the IRS can reallocate gross income, deductions, credits, or allowances between two or more organizations, trades, or businesses owned or controlled directly, or indirectly, by the same interests. Www irs gov Complete liquidations. Www irs gov   The disallowance of losses from the sale or exchange of property between related persons does not apply to liquidating distributions. Www irs gov More information. Www irs gov   For more information about the related person rules, see Publication 544. Www irs gov Income From Qualifying Shipping Activities A corporation may make an election to be taxed on its notional shipping income at the highest corporate tax rate. Www irs gov If a corporation makes this election it may exclude income from qualifying shipping activities from gross income. Www irs gov Also if the election is made, the corporation generally may not claim any loss, deduction, or credit with respect to qualifying shipping activities. Www irs gov A corporation making this election may also elect to defer gain on the disposition of a qualifying vessel. Www irs gov A corporation uses Form 8902, Alternative Tax on Qualifying Shipping Activities, to make the election and figure the alternative tax. Www irs gov For more information regarding the election, see Form 8902. Www irs gov Election to Expense Qualified Refinery Property A corporation can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct 50% of the cost of qualified refinery property (defined in section 179C(c) of the Internal Revenue Code), placed in service before January 1, 2014. Www irs gov The deduction is allowed for the year in which the property is placed in service. Www irs gov A subchapter T cooperative can make an irrevocable election on its return by the due date (including extensions) to allocate this deduction to its owners based on their ownership interest. Www irs gov For more information, see section 179C of the Internal Revenue Code and the related Regulations. Www irs gov Deduction to Comply With EPA Sulfur Regulations A small business refiner can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct up to 75% of qualified costs paid or incurred to comply with the Highway Diesel Fuel Sulfur Control Requirements of the Environmental Protection Agency (EPA). Www irs gov A subchapter T cooperative can make an irrevocable election on its return filed by the due date (including extensions) to allocate the deduction to its owners based on their ownership interest. Www irs gov For more information, see sections 45H and 179B of the Internal Revenue Code and the related Regulations. Www irs gov Energy-Efficient Commercial Building Property Deduction A corporation can claim a deduction for costs associated with energy-efficient commercial building property, placed in service before January 1, 2014. Www irs gov In order to qualify for the deduction: The costs must be associated with depreciable or amortizable property in a Standard 90. Www irs gov 1-2001 domestic building; The property must be either a part of the interior lighting system, the heating, cooling, ventilation and hot water system, or the building envelope (defined in section 179D(c)(1)(C) of the Internal Revenue Code); and The property must be installed as part of a plan to reduce the total annual energy and power costs of the building by 50% or more. Www irs gov The deduction is limited to $1. Www irs gov 80 per square foot of the building less the total amount of deductions taken for this property in prior tax years. Www irs gov Other rules and limitations apply. Www irs gov The corporation must reduce the basis of any property by any deduction taken. Www irs gov The deduction is subject to recapture if the corporation fails to fully implement an energy savings plan. Www irs gov For more information, see section 179D of the Internal Revenue Code. Www irs gov Also see Notice 2006-52, 2006-26 I. Www irs gov R. Www irs gov B. Www irs gov 1175, clarified and amplified by Notice 2008-40, 2008-14 I. Www irs gov R. Www irs gov B. Www irs gov 725, and any successor. Www irs gov Corporate Preference Items A corporation must make special adjustments to certain items before it takes them into account in determining its taxable income. Www irs gov These items are known as corporate preference items and they include the following. Www irs gov Gain on the disposition of section 1250 property. Www irs gov For more information, see section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. Www irs gov Percentage depletion for iron ore and coal (including lignite). Www irs gov For more information, see Mines and Geothermal Deposits under Mineral Property in chapter 9 of Publication 535. Www irs gov Amortization of pollution control facilities. Www irs gov For more information, see Pollution Control Facilities in chapter 8 of Publication 535 and section 291(a)(5) of the Internal Revenue Code. Www irs gov Mineral exploration and development costs. Www irs gov For more information, see Exploration Costs and Development Costs in chapter 7 of Publication 535. Www irs gov For more information on corporate preference items, see section 291 of the Internal Revenue Code. Www irs gov Dividends-Received Deduction A corporation can deduct a percentage of certain dividends received during its tax year. Www irs gov This section discusses the general rules that apply. Www irs gov The deduction is figured on Form 1120, Schedule C, or the applicable schedule of your income tax return. Www irs gov For more information, see the Instructions for Form 1120, or the instructions for your applicable income tax return. Www irs gov Dividends from domestic corporations. Www irs gov   A corporation can deduct, within certain limits, 70% of the dividends received if the corporation receiving the dividend owns less than 20% of the corporation distributing the dividend. Www irs gov If the corporation owns 20% or more of the distributing corporation's stock, it can, subject to certain limits, deduct 80% of the dividends received. Www irs gov Ownership. Www irs gov   Determine ownership, for these rules, by the amount of voting power and value of the paying corporation's stock (other than certain preferred stock) the receiving corporation owns. Www irs gov Small business investment companies. Www irs gov   Small business investment companies can deduct 100% of the dividends received from taxable domestic corporations. Www irs gov Dividends from regulated investment companies. Www irs gov   Regulated investment company dividends received are subject to certain limits. Www irs gov Capital gain dividends received from a regulated investment company do not qualify for the deduction. Www irs gov For more information, see section 854 of the Internal Revenue Code. Www irs gov No deduction allowed for certain dividends. Www irs gov   Corporations cannot take a deduction for dividends received from the following entities. Www irs gov A real estate investment trust (REIT). Www irs gov A corporation exempt from tax under section 501 or 521 of the Internal Revenue Code either for the tax year of the distribution or the preceding tax year. Www irs gov A corporation whose stock was held less than 46 days during the 91-day period beginning 45 days before the stock became ex-dividend with respect to the dividend. Www irs gov Ex-dividend means the holder has no rights to the dividend. Www irs gov A corporation whose preferred stock was held less than 91 days during the 181-day period beginning 90 days before the stock became ex-dividend with respect to the dividend if the dividends received are for a period or periods totaling more than 366 days. Www irs gov Any corporation, if your corporation is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. Www irs gov Dividends on deposits. Www irs gov   Dividends on deposits or withdrawable accounts in domestic building and loan associations, mutual savings banks, cooperative banks, and similar organizations are interest, not dividends. Www irs gov They do not qualify for this deduction. Www irs gov Limit on deduction for dividends. Www irs gov   The total deduction for dividends received or accrued is generally limited (in the following order) to: 80% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from 20%-owned corporations, then 70% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from less-than-20%-owned corporations (reducing taxable income by the total dividends received from 20%-owned corporations). Www irs gov Figuring the limit. Www irs gov   In figuring the limit, determine taxable income without the following items. Www irs gov The net operating loss deduction. Www irs gov The domestic production activities deduction. Www irs gov The deduction for dividends received. Www irs gov Any adjustment due to the nontaxable part of an extraordinary dividend (see Extraordinary Dividends, below). Www irs gov Any capital loss carryback to the tax year. Www irs gov Effect of net operating loss. Www irs gov   If a corporation has a net operating loss (NOL) for a tax year, the limit of 80% (or 70%) of taxable income does not apply. Www irs gov To determine whether a corporation has an NOL, figure the dividends-received deduction without the 80% (or 70%) of taxable income limit. Www irs gov Example 1. Www irs gov A corporation loses $25,000 from operations. Www irs gov It receives $100,000 in dividends from a 20%-owned corporation. Www irs gov Its taxable income is $75,000 ($100,000 – $25,000) before the deduction for dividends received. Www irs gov If it claims the full dividends-received deduction of $80,000 ($100,000 × 80%) and combines it with an operations loss of $25,000, it will have an NOL of ($5,000). Www irs gov Therefore, the 80% of taxable income limit does not apply. Www irs gov The corporation can deduct the full $80,000. Www irs gov Example 2. Www irs gov Assume the same facts as in Example 1, except that the corporation only loses $15,000 from operations. Www irs gov Its taxable income is $85,000 before the deduction for dividends received. Www irs gov After claiming the dividends-received deduction of $80,000 ($100,000 × 80%), its taxable income is $5,000. Www irs gov Because the corporation will not have an NOL after applying a full dividends-received deduction, its allowable dividends-received deduction is limited to 80% of its taxable income, or $68,000 ($85,000 × 80%). Www irs gov Extraordinary Dividends If a corporation receives an extraordinary dividend on stock held 2 years or less before the dividend announcement date, it generally must reduce its basis in the stock by the nontaxed part of the dividend. Www irs gov The nontaxed part is any dividends-received deduction allowable for the dividends. Www irs gov Extraordinary dividend. Www irs gov   An extraordinary dividend is any dividend on stock that equals or exceeds a certain percentage of the corporation's adjusted basis in the stock. Www irs gov The percentages are: 5% for stock preferred as to dividends, or 10% for other stock. Www irs gov Treat all dividends received that have ex-dividend dates within an 85-consecutive-day period as one dividend. Www irs gov Treat all dividends received that have ex-dividend dates within a 365-consecutive-day period as extraordinary dividends if the total of the dividends exceeds 20% of the corporation's adjusted basis in the stock. Www irs gov Disqualified preferred stock. Www irs gov   Any dividend on disqualified preferred stock is treated as an extraordinary dividend regardless of the period of time the corporation held the stock. Www irs gov   Disqualified preferred stock is any stock preferred as to dividends if any of the following apply. Www irs gov The stock when issued has a dividend rate that declines (or can reasonably be expected to decline) in the future. Www irs gov The issue price of the stock exceeds its liquidation rights or stated redemption price. Www irs gov The stock is otherwise structured to avoid the rules for extraordinary dividends and to enable corporate shareholders to reduce tax through a combination of dividends-received deductions and loss on the disposition of the stock. Www irs gov   These rules apply to stock issued after July 10, 1989, unless it was issued under a written binding contract in effect on that date, and thereafter, before the issuance of the stock. Www irs gov More information. Www irs gov   For more information on extraordinary dividends, see section 1059 of the Internal Revenue Code. Www irs gov Below-Market Loans If a corporation receives a below-market loan and uses the proceeds for its trade or business, it may be able to deduct the forgone interest. Www irs gov A below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Www irs gov A below-market loan generally is treated as an arm's-length transaction in which the borrower is considered as having received both the following: A loan in exchange for a note that requires payment of interest at the applicable federal rate, and An additional payment in an amount equal to the forgone interest. Www irs gov Treat the additional payment as a gift, dividend, contribution to capital, payment of compensation, or other payment, depending on the substance of the transaction. Www irs gov Foregone interest. Www irs gov   For any period, forgone interest is equal to: The interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. Www irs gov See Below-market loans, in chapter 4 of Publication 535 for more information. Www irs gov Charitable Contributions A corporation can claim a limited deduction for charitable contributions made in cash or other property. Www irs gov The contribution is deductible if made to, or for the use of, a qualified organization. Www irs gov For more information on qualified organizations, see Publication 526, Charitable Contributions. Www irs gov Also see, Exempt Organizations Select Check (EO Select Check) at www. Www irs gov irs. Www irs gov gov/charities, the on-line search tool for finding information on organizations eligible to receive tax-deductible contributions. Www irs gov Note. Www irs gov You cannot take a deduction if any of the net earnings of an organization receiving contributions benefit any private shareholder or individual. Www irs gov Cash method corporation. Www irs gov   A corporation using the cash method of accounting deducts contributions in the tax year paid. Www irs gov Accrual method corporation. Www irs gov   A corporation using an accrual method of accounting can choose to deduct unpaid contributions for the tax year the board of directors authorizes them if it pays them by the 15th day of the 3rd month after the close of that tax year. Www irs gov Make the choice by reporting the contribution on the corporation's return for the tax year. Www irs gov A declaration stating that the board of directors adopted the resolution during the tax year must accompany the return. Www irs gov The declaration must include the date the resolution was adopted. Www irs gov Limitations on deduction. Www irs gov   A corporation cannot deduct charitable contributions that exceed 10% of its taxable income for the tax year. Www irs gov Figure taxable income for this purpose without the following. Www irs gov The deduction for charitable contributions. Www irs gov The dividends-received deduction. Www irs gov The deduction allowed under section 249 of the Internal Revenue Code. Www irs gov The domestic production activities deduction. Www irs gov Any net operating loss carryback to the tax year. Www irs gov Any capital loss carryback to the tax year. Www irs gov Farmers and ranchers. Www irs gov    Corporations that are farmers and ranchers should see section 170(b)(2) of the Internal Revenue Code for special rules that may affect the deduction limit. Www irs gov Carryover of excess contributions. Www irs gov   You can carry over, within certain limits, to each of the subsequent 5 years any charitable contributions made during the current year that exceed the 10% limit. Www irs gov You lose any excess not used within that period. Www irs gov For example, if a corporation has a carryover of excess contributions paid in 2010 and it does not use all the excess on its return for 2011, it can carry any excess over to 2012, 2013, 2014, and 2015, if applicable. Www irs gov Any excess not used in 2015 is lost. Www irs gov Do not deduct a carryover of excess contributions in the carryover year until after you deduct contributions made in that year (subject to the 10% limit). Www irs gov You cannot deduct a carryover of excess contributions to the extent it increases a net operating loss carryover. Www irs gov Cash contributions. Www irs gov   A corporation must maintain a record of any contribution of cash, check, or other monetary contribution, regardless of the amount. Www irs gov The record can be a bank record, receipt, letter, or other written communication from the donee indicating the name of the organization, the date of the contribution, and the amount of the contribution. Www irs gov Keep the record of the contribution with the other corporate records. Www irs gov Do not attach the records to the corporation's return. Www irs gov For more information on cash contributions, see Publication 526. Www irs gov Gifts of $250 or more. Www irs gov   Generally, no deduction is allowed for any contribution of $250 or more unless the corporation gets a written acknowledgement from the donee organization. Www irs gov The acknowledgement should show the amount of cash contributed, a description of the property contributed, and either gives a description and a good faith estimate of the value of any goods or services provided in return for the contribution or states that no goods or services were provided in return for the contribution. Www irs gov The acknowledgement should be received by the due date (including extensions) of the return, or, if earlier, the date the return was filed. Www irs gov Keep the acknowledgement with other corporate records. Www irs gov Do not attach the acknowledgement to the return. Www irs gov Contributions of property other than cash. Www irs gov   If a corporation (other than a closely-held or a personal service corporation) claims a deduction of more than $500 for contributions of property other than cash, a schedule describing the property and the method used to determine its fair market value must be attached to the corporation's return. Www irs gov In addition the corporation should keep a record of: The approximate date and manner of acquisition of the donated property and The cost or other basis of the donated property held by the donor for less than 12 months prior to contribution. Www irs gov   Closely held and personal service corporations must complete and attach Form 8283, Noncash Charitable Contributions, to their returns if they claim a deduction of more than $500 for non-cash contributions. Www irs gov For all other corporations, if the deduction claimed for donated property exceeds $5,000, complete Form 8283 and attach it to the corporation's return. Www irs gov   A corporation must obtain a qualified appraisal for all deductions of property claimed in excess of $5,000. Www irs gov A qualified appraisal is not required for the donation of cash, publicly traded securities, inventory, and any qualified vehicles sold by a donee organization without any significant intervening use or material improvement. Www irs gov The appraisal should be maintained with other corporate records and only attached to the corporation's return when the deduction claimed exceeds $500,000; $20,000 for donated art work. Www irs gov   See Form 8283 for more information. Www irs gov Qualified conservation contributions. Www irs gov   If a corporation makes a qualified conservation contribution, the corporation must provide information regarding the legal interest being donated, the fair market value of the underlying property before and after the donation, and a description of the conservation purpose for which the property will be used. Www irs gov For more information, see section 170(h) of the Internal Revenue Code. Www irs gov Contributions of used vehicles. Www irs gov   A corporation is allowed a deduction for the contribution of used motor vehicles, boats, and airplanes. Www irs gov The deduction is limited, and other special rules apply. Www irs gov For more information, see Publication 526. Www irs gov Reduction for contributions of certain property. Www irs gov   For a charitable contribution of property, the corporation must reduce the contribution by the sum of: The ordinary income and short-term capital gain that would have resulted if the property were sold at its FMV and For certain contributions, the long-term capital gain that would have resulted if the property were sold at its FMV. Www irs gov   The reduction for the long-term capital gain applies to: Contributions of tangible personal property for use by an exempt organization for a purpose or function unrelated to the basis for its exemption; Contributions of any property to or for the use of certain private foundations except for stock for which market quotations are readily available; and Contributions of any patent, certain copyrights, trademark, trade name, trade secret, know-how, software (that is a section 197 intangible), or similar property, or applications or registrations of such property. Www irs gov Larger deduction. Www irs gov   A corporation (other than an S corporation) may be able to claim a deduction equal to the lesser of (a) the basis of the donated inventory or property plus one-half of the inventory or property's appreciation (gain if the donated inventory or property was sold at fair market value on the date of the donation), or (b) two times basis of the donated inventory or property. Www irs gov This deduction may be allowed for certain contributions of: Certain inventory and other property made to a donee organization and used solely for the care of the ill, the needy, and infants. Www irs gov Scientific property constructed by the corporation (other than an S corporation, personal holding company, or personal service corporation) and donated no later than 2 years after substantial completion of the construction. Www irs gov The property must be donated to a qualified organization and its original use must be by the donee for research, experimentation, or research training within the United States in the area of physical or biological science. Www irs gov Computer technology and equipment acquired or constructed and donated no later than 3 years after either acquisition or substantial completion of construction to an educational organization for educational purposes within the United States. Www irs gov Contributions to organizations conducting lobbying activities. Www irs gov   Contributions made to an organization that conducts lobbying activities are not deductible if: The lobbying activities relate to matters of direct financial interest to the donor's trade or business and The principal purpose of the contribution was to avoid federal income tax by obtaining a deduction for activities that would have been nondeductible under the lobbying expense rules if conducted directly by the donor. Www irs gov More information. Www irs gov   For more information on charitable contributions, including substantiation and recordkeeping requirements, see section 170 of the Internal Revenue Code, the related regulations, and Publication 526. Www irs gov Capital Losses A corporation can deduct capital losses only up to the amount of its capital gains. Www irs gov In other words, if a corporation has an excess capital loss, it cannot deduct the loss in the current tax year. Www irs gov Instead, it carries the loss to other tax years and deducts it from any net capital gains that occur in those years. Www irs gov A capital loss is carried to other years in the following order. Www irs gov 3 years prior to the loss year. Www irs gov 2 years prior to the loss year. Www irs gov 1 year prior to the loss year. Www irs gov Any loss remaining is carried forward for 5 years. Www irs gov When you carry a net capital loss to another tax year, treat it as a short-term loss. Www irs gov It does not retain its original identity as long term or short term. Www irs gov Example. Www irs gov A calendar year corporation has a net short-term capital gain of $3,000 and a net long-term capital loss of $9,000. Www irs gov The short-term gain offsets some of the long-term loss, leaving a net capital loss of $6,000. Www irs gov The corporation treats this $6,000 as a short-term loss when carried back or forward. Www irs gov The corporation carries the $6,000 short-term loss back 3 years. Www irs gov In year 1, the corporation had a net short-term capital gain of $8,000 and a net long-term capital gain of $5,000. Www irs gov It subtracts the $6,000 short-term loss first from the net short-term gain. Www irs gov This results in a net capital gain for year 1 of $7,000. Www irs gov This consists of a net short-term capital gain of $2,000 ($8,000 − $6,000) and a net long-term capital gain of $5,000. Www irs gov S corporation status. Www irs gov   A corporation may not carry a capital loss from, or to, a year for which it is an S corporation. Www irs gov Rules for carryover and carryback. Www irs gov   When carrying a capital loss from one year to another, the following rules apply. Www irs gov When figuring the current year's net capital loss, you cannot combine it with a capital loss carried from another year. Www irs gov In other words, you can carry capital losses only to years that would otherwise have a total net capital gain. Www irs gov If you carry capital losses from 2 or more years to the same year, deduct the loss from the earliest year first. Www irs gov You cannot use a capital loss carried from another year to produce or increase a net operating loss in the year to which you carry it back. Www irs gov Refunds. Www irs gov   When you carry back a capital loss to an earlier tax year, refigure your tax for that year. Www irs gov If your corrected tax is less than the tax you originally owed, use either Form 1139, Corporate Application for Tentative Refund, or Form 1120X, Amended U. Www irs gov S. Www irs gov Corporation Income Tax Return, to apply for a refund. Www irs gov Form 1139. Www irs gov    A corporation can get a refund faster by using Form 1139. Www irs gov It cannot file Form 1139 before filing the return for the corporation's capital loss year, but it must file Form 1139 no later than 1 year after the year it sustains the capital loss. Www irs gov Form 1120X. Www irs gov   If the corporation does not file Form 1139, it must file Form 1120X to apply for a refund. Www irs gov The corporation must file the Form 1120X within 3 years of the due date, includin