Paying and Filing Income Taxes The federal income tax is a pay-as-you-go tax. A corporationgenerally must make estimated tax payments as it earns or receivesincome during its tax year. After the end of the year, the corporationmust file an income tax return. This section will help you determinewhen and how to pay and file corporate income taxes. Estimated Tax Generally, a corporation must make installment payments ofestimated tax if it expects its estimated tax (income tax minuscredits) to be $500 or more. If the corporation does not pay theinstallments when they are due, it may be subject to an underpaymentpenalty. This section will explain how to avoid this penalty. When to pay estimated tax.Installment payments of estimated tax are due by the 15th day ofthe 4th, 6th, 9th, and 12th months of the corporation's tax year. Example 1.Your corporation's tax year ends December 31. Installment paymentsof estimated tax are due on April 15, June 15, September 15, andDecember 15. Example 2.Your corporation's tax year ends June 30. Installment payments ofestimated tax are due on October 15, December 15, March 15, and June15. If any due date falls on a Saturday, Sunday, or legal holiday, theinstallment is due on the next regular business day. How to figure each required installment.Use Form 1120-W as a worksheet to figure eachrequired installment of estimated tax. You will generally use one ofthe following two methods to figure each required installment. Youshould use the method that requires the smallest installment payments. Note:In these discussions, "return" generally refers to thecorporation's original return. However, an amended return isconsidered the original return if the amended return is filed by thedue date (including extensions) of the original return. Method 1.Each required installment is 25% of the income tax the corporationwill show on its return for the current year. Method 2.Each required installment is 25% of the income tax shown on thecorporation's return for the previous year. To use Method 2: The corporation must have filed a return for the previousyear, The return must have been for a full 12 months, and The return must have shown a positive tax liability (notzero). Also, if the corporation is a large corporation, it can useMethod 2 to figure only the first installment. A large corporation is one with at least $1 million of modifiedtaxable income in any of the last 3 years. Modified taxable income istaxable income figured without net operating loss or capital losscarrybacks or carryovers. Other methods.If a corporation's income is expected to vary during the yearbecause, for example, its business is seasonal, it may be able tolower the amount of one or more required installments by using one orboth of the following methods. The annualized income installment method. The adjusted seasonal installment method. Use Schedule A of Form 1120-W to see if using one or bothof these methods will lower the amount of one or more requiredinstallments. Refiguring required installments.If after the corporation figures and deposits estimated tax itfinds that its tax liability for the year will be much more or lessthan originally estimated, it may have to refigure its requiredinstallments. If earlier installments were underpaid, the corporationmay owe an underpayment penalty. An immediate catchup payment should be made to reduce the amount ofany penalty resulting from the underpayment of any earlierinstallments, whether caused by a change in an estimate, not making adeposit, or a mistake. Underpayment penalty.If the corporation does not pay a required installment of estimatedtax by its due date, it may be subject to a penalty. The penalty isfigured separately for each installment due date. The corporation mayowe a penalty for an earlier due date, even if it paid enough taxlater to make up the underpayment. This is true even if thecorporation is due a refund when its return is filed. Form 2220.Use Form 2220 to determine if a corporation is subject to thepenalty for underpayment of estimated tax and, if so, the amount ofthe penalty. If the corporation is charged a penalty, the amount of the penaltydepends on the following three factors. The amount of the underpayment. The period during which the underpayment was due andunpaid. An interest rate for underpayments that is publishedquarterly by the IRS in the Internal Revenue Bulletin. A corporation generally does not have to file Form 2220 with itsincome tax return because the IRS will figure any penalty and bill thecorporation. However, even if the corporation does not owe a penalty,complete and attach the form to the corporation's tax return if any ofthe following apply. The annualized income installment method was used to figureany required installment. The adjusted seasonal installment method was used to figureany required installment. The corporation is a large corporation and Method 2 was usedto figure its first required installment. How to pay estimated tax.Unless you volunteer or are required to make electronic deposits,you should mail or deliver your payment with a completed Form8109 to an authorized financial institutionor to the Federal Reserve Bank for your area. For more information,see the instructions for Form 1120-W. Electronic deposits.Use the Electronic Federal Tax Payment System (EFTPS) tomake electronic deposits of tax. A corporation is required to useEFTPS for all tax deposits due after 1999, if the corporation's totaldeposits of employment, excise, and corporate income taxes were morethan $200,000 in 1998. If you are required to use EFTPS and do not doso, you may be subject to a penalty. If you are not required to useEFTPS, you may volunteer to do so. Phone: To enroll in EFTPS, call 1-800- 945-8400or 1-800-555-4477. For generalinformation about EFTPS, call 1-800-829-1040. Quick refund of overpayments.A corporation that has overpaid its estimated tax for the tax yearmay be able to apply for a quick refund of the overpayment. Form 4466.Use Form 4466 to apply for a quick refund of an overpayment ofestimated tax. A corporation can apply for a quick refund if theoverpayment is: At least 10% of its expected tax liability,and At least $500. Use Form 4466 to figure the corporation's expected taxliability and the overpayment of estimated tax. File Form 4466 before the 16th day of the 3rd month after the endof the tax year, but before the corporation files its income taxreturn. An extension of time to file the corporation's income taxreturn will not extend the time for filing Form 4466. The IRS will acton the form within 45 days from the date you file it. Income Tax Returns This section will help you determine when and how to report acorporation's income tax. Who must file.Unless exempt under section 501 of the Internal Revenue Code, alldomestic corporations (including corporations in bankruptcy) must filean income tax return whether or not they have taxable income. What form to file.A corporation must generally file Form 1120 to reportits income, gains, losses, deductions, credits, and to figure itsincome tax liability. However, a corporation may file Form1120-A if its gross receipts, total income, and totalassets are each under $500,000 and it meets certain otherrequirements. Also, certain organizations must file special returns.For more information, see the instructions for Forms 1120 and1120-A. When to file.Generally, a corporation must file its income tax return by the15th day of the 3rd month after the end of its tax year. A newcorporation filing a short-period return must generally file by the15th day of the 3rd month after the short period ends. A corporationthat has dissolved must generally file by the 15th day of the 3rdmonth after the date it dissolved. Example 1.A corporation's tax year ends December 31. It must file its incometax return by March 15th. Example 2.A corporation's tax year ends June 30. It must file its income taxreturn by September 15th. If the due date falls on a Saturday, Sunday, or legal holiday, thecorporation may file on the next business day. Extension of time to file.File Form 7004 to request a 6-month extension of timeto file a corporation income tax return. The IRS will grant theextension if you complete the form properly, file it, and pay anybalance due by the due date for the return for which the extensionapplies. Form 7004 does not extend the time for paying the tax due on thereturn. Interest will be charged on any part of the final tax due notshown as a balance due on Form 7004. The interest is figured from theoriginal due date of the return to the date of payment. For more information, see the instructions for Form 7004. Penalty for late filing of return.A corporation that does not file its tax return by the due date,including extensions, may be penalized 5% of the unpaid tax for eachmonth or part of a month the return is late, up to a maximum of 25% ofthe unpaid tax. If the corporation is charged a penalty for latepayment of tax (discussed next) for the same period of time, thispenalty is reduced by the amount of that penalty. The minimum penaltyfor a return that is over 60 days late is the smaller of the tax dueor $100. The penalty will not be imposed if the corporation can showthat the failure to file on time was due to a reasonable cause.Corporations that file late must attach a statement explaining thereasonable cause. Penalty for late payment of tax.Cordoba luxury hotelsA corporation that does not pay the tax when due may be penalized 1/2 of 1% of the unpaid tax for each month or part of a monththe tax is not paid, up to a maximum of 25% of the unpaid tax. Thepenalty will not be imposed if the corporation can show that thefailure to pay on time was due to a reasonable cause. However, thispenalty does not apply to late payments of required installments ofestimated tax. Trust fund recovery penalty.If income, social security, and Medicare taxes that a corporationmust withhold from employee wages are not withheld or are notdeposited or paid to the United States Treasury, the trust fundrecovery penalty may apply. The penalty is the full amount of theunpaid trust fund tax. This penalty may apply to you if these unpaidtaxes cannot be immediately collected from the business. The trust fund recovery penalty may be imposed on all persons whoare determined by the IRS to be responsible for collecting, accountingfor, and paying over these taxes, and who acted willfully in not doingso. A responsible person can be an officer or employee of acorporation, an accountant, or a volunteer director/trustee. Aresponsible person also may include one who signs checks for thecorporation or otherwise has authority to cause the spending ofbusiness funds. Willfully means voluntarily, consciously, andintentionally. A responsible person acts willfully if the person knowsthe required actions are not taking place. For more information on withholding and paying these taxes, seePublication 15, Circular E, Employer's Tax Guide. Amended return.Use Form 1120X to correct any error in a Form 1120 orForm 1120-A as originally filed, or as later adjusted by anamended return, a claim for refund, or an examination.