Question

1. Identify five documents that must accompany the corporation tax return when it is filed to the Tax Authority.

2. How can an individual reduce their tax liability.

Answer 1

1.) If you have a corporation or have formed a LLC, each year you're required to prepare an annual corporate tax return. Your business structure and how you choose to pay yourself and others determine the necessary documents you need to adequately prepare the tax return. Under some circumstances, even if you're the business owner, you may still need to submit a personal tax return as well as a corporate tax return.

1040

If you are a LLC or you hired yourself as an employee of your corporation and gave yourself a salary, that personal income must be listed on your 1040. The 1040 is your personal income tax return. Some corporations are considered "pass-through" entities in which profit and loss "pass through" the business and to the member or owner of the company. The member or owners of the company are then required to list the income, profit and losses on their personal income tax return.

Schedule C

Schedule C lists deductions, dividends and any profit or losses the business incurred. Schedule C usually allows you to list expenses that were required to run your business. For example, the mileage to and from business meetings and lunches can be written off as an expense. You need an employer identification number for your schedule C for your corporation, which you should have received from the IRS. Schedule C is not a stand-alone document and is usually accompanied by your 1040 or 1120.

Form 1120

Form 1120 if your annual corporate tax return. Form 1120 also includes Schedule C. Form 1140 requires basic information about the corporation, such as the employer Identification number, a list of any deductions and compensation to your officers or board of directors. Form 1120 also includes lists of other schedules that may or may not apply to your business. For example, Schedule A includes the cost of goods sold, and Schedule K lists information about your corporation, such as your accounting and business type.

Form 1065

If you're in a partnership; for example, a limited liability partnership, you may need to fill out Form 1065 for the related income. Partnerships, according to the IRS, do not pay taxes on their income. However, the profit and loss passes through to the partners' individual tax returns.

Other Forms and Taxes

If you have employees or independent contractors, you need other forms to submit as well. For example, W-2 and W-3 forms must be sent to the Social Security Administration if you withheld Social Security and Medicare from your employees. You must electronically file IRS Form 944 for federal unemployment taxes as well. For each independent contractor you pay more than $600 for services or work completed, you must include Form 1099-misc. If you paid more than $10 in royalties or broker payments you may need to issue Form 1099-misc, also. Some forms have different deadlines. Speak with your attorney or certified public accountant to determine the dates and deadlines for paying various corporate taxes.

2.) Understanding the tax credits and deductions that we're eligible for, and calculating them correctly, can mean the difference between owing more money at tax time or receiving a welcome refund. Here are some simple ways to minimize your tax liability.

• The key to minimizing your tax liability is reducing the amount of your gross income that is subject to taxes.
• Putting pre-tax dollars into a retirement plan like a 401(k) is one easy way to reduce your taxable income for the year.
• If you sell an investment that has lost value, you can use that loss to offset other income.