The corporate income tax is the third largest source of federal revenue, after the individual income tax and payroll taxes. A corporate tax is a levy placed on the profit of a firm to raise taxes.
After operating earnings is calculated by deducting expenses including the cost of goods sold and depreciation from revenues, enacted tax rates are applied to generate a legal obligation the business owes the government.
Business owners of sole proprietorships, partnerships, and LLCs must pay taxes on all business profits at their individual income tax rates, whether they take the profits out of the business or not. Most corporate income is taxed at the maximum rate. A corporation can also take special deductions.
Some of the allowable deductions are the cost of goods sold, wages and other employee compensation expenses, interest, nonfederal taxes, depreciation, and advertising. There are any things you absolutely must know about corporate taxes.
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