How to Submit Estimated Taxes for Corporations to the IRS

C corp estimated tax payments work like withholding for employees. Your company pays in ahead of time so that you don't end up staring at your tax forms on April 15 and realizing you can't cover your tax bill. In the 21st century, a corporation usually has to pay estimated taxes online, the IRS says.

Tip

A C corporation owing $500 or more in income tax has to make four quarterly estimated tax payments to the IRS. You estimate your total tax on Form 1120-W, then pay 25 percent on each due date, using an electronic funds transfer system.

Who Has to Pay and When?

You have to make C corp estimated tax payments if your corporation expects to owe at least $500 in taxes when you file your return. If you elected to form an S corporation, your business doesn't pay income tax. However the IRS says you still have to file estimated payments if the corporate taxes on built-in gains, excess net passive income and investment credit recapture add up to $500 or more.

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The IRS says to use Form 1120-W to calculate C corp estimated tax payments, 1120-S for an S corporation. Payments are due on the 15th day of the fourth, sixth, ninth and 12th months of the tax year, or the first business day after if the due date is a weekend or holiday. If your tax year is the calendar year, you pay on the 15th of April, June, September and December. This is unlike the individual payment schedule, in which the last payment is due Jan. 15.

Individuals paying estimated tax receive IRS vouchers for the quarterly payments. Corporations cannot make Form 1120 estimated tax payments by vouchers, Drake Software says, as payments are all handled electronically.

C Corp Estimated Tax Payments

The 1120-W form - for Worksheet - is where you calculate your C corp estimated tax payments. The 1120-S form serves the same purpose for an S corporation. The process for figuring the total is fairly simple, as tax accounting goes.

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  1. Calculate your taxable income.
  2. Multiply the total by 21 percent, the corporate tax rate.
  3. If you can claim any tax credits, write down the total and subtract from your tax bill. The 1120-W how-to on the IRS website includes instructions on figuring your credits.
  4. Add to your bill for any other taxes you owe, such as recaptured tax credits or base erosion minimum tax.
  5. $500
  6. Enter your previous year's tax. If that bill is less than the anticipated bill for the current year, use last year as the basis for this year's estimated payments.
  7. Divide whichever figure you're using as the basis by four. You pay 25 percent of the total bill on each of the four due dates. If your income is variable, the 1120-W also includes a worksheet for calculating adjusted seasonal installments.

As a corporation, your company has to use electronic funds transfer to make federal tax deposits, including employment taxes, excise taxes, income tax and estimated tax payments. The standard method is the free Electronic Federal Tax Payment System. You can use the system yourself, arrange for your bank or tax professional to do it - they may charge a fee - or have your bank make a same-day wire payment for your estimated taxes.

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