Let’s start with stating the obvious: your business activities cannot come to a halt just because the tax season is under way. If, however, you are bold enough to take the plunge and perform tax preparation yourself instead of going to an experienced corporate tax consultant in San Diego, you might soon realize you are in over your head. Only then will you truly understand why hiring a tax consultant is a wise business decision.
And then there are other things to consider, such as how well you understand the process of filing business taxes. Of course, you know that the purpose of business taxes is for the government to generate income.
But what is the difference between corporate taxation and pass-through taxation? Do you know what running an LLC means in terms of taxes? How about the tax implications of running a sole proprietorship? A tax consultant can fill you in on all this and more, giving you the much-needed insight that is all the more valuable if you are just deciding on the entity type for your future business.
Is corporate tax progressive?
When it comes to individual taxes, the rules are relatively simple. The system is based on the principle of progressivity. In other words, the system has been designed to impose higher taxes on the wealthy, in proportion to their income. The higher the income, the higher the taxes. This is known as graduated income taxes.
But does this rule apply to corporate taxes?
The current federal corporate tax rate is flat and set at 21%. Although it would make sense that a higher earning company should pay higher taxes than, say, a start-up, this is not the case. But the explanation why this is the case is fairly simple: it’s economics 101. The burden of paying corporate taxes does not really fall on the company. It is people that bear taxes, not the companies.
However, this absence of corporate tax progressivity remains a somewhat controversial issue. Some experts in economics claim that having progressive corporate taxes would not only be unreasonable, but also blatantly unfair.
Is corporate tax on revenue or profit?
A corporate tax is a levy that the government imposes on whatever profit a company makes, which depends on both the revenue and the expenses of a company, all its current expenses being fully tax-deductible. The government then uses the money pouring in from corporate taxes as its source of income.
So how exactly is a company’s profit calculated? To calculate the operating earnings of a company, we need to factor in revenues and expenses, that is deduct its current expenses (the cost of goods sold and depreciation, for instance) from its total revenue.
Corporate tax preparation in San Diego made easy
Here at David York’s Tax Service, we know the ins and outs of the tax preparation process. We can guide you through the process and help you understand it. Our experienced, fully responsive tax consultants will handle your taxes with expertise and without letting anything slip through the cracks.
Let us spare you the headache of missing deadlines and paying penalties and interest. We can also handle all your bookkeeping. You can meet us for initial consultation here in San Diego’s Mission Valley. We are at your service year-round.