All corporations are subject to taxation by the Internal Revenue Service. The Internal Revenue Code contains several provisions on taxation. These provisions have been evaluated and authorized by Congress. Most of these provisions have been periodically revised and are effective for taxpayers filing income tax returns for the current year.
Particular sections of a law code are called tax provisions. They are part of the Tax Code, covering different types of taxation. Taxation is one of the primary concerns of Congress and is considered a necessary step in correcting tax imbalance. Particular provisions of laws help in correcting the tax system and in ensuring that the tax burden is reduced for the majority of citizens. Among the major tax provisions are:
Taxation on corporate level: The taxation of corporate profits and capital gains is based on the profit or loss generated by the corporate level activity. Part of this income is subject to tax, through dividends; some portion is subject to tax through the installment facility and the remaining portion is exempt. Partial incorporation (or partial dividend elimination) can be obtained by minimizing or eliminating the so-called double taxation of corporate profits resulting from separation of profits on the corporate level and dividends paid to shareholders on behalf of the company. Full incorporation can only be obtained by ignoring the existence of the corporate entity for corporate income tax purposes, taxing only shareholders and owners on dividends and capital gains and disregarding the corporate level income or its profits. Full incorporation of a business involves no tax because profits made by the business are taxed only at the corporate level.
Tax issues and concerns on the U.S. corporate level include the differences between the repatriation of foreign earnings and the treatment of such earnings under the U.S. tax laws. The treatment of foreign dividends under the law would require payment of U.S. tax on the amount of dividend received, regardless of whether the dividend was paid from a U.S. company or an offshore company. Such a condition would have adverse implications on the ability of U.S. companies to attract investment.
There are certain procedural issues to be resolved before filing your tax return. Issues regarding the filing of U.S. tax liability would include the filing of U.S. tax return (if you are a U.S. citizen) or tax returns of a foreign national, the preparation of U.S. tax return, payment of the appropriate fees to the IRS and filing of tax payment agreements. There are also certain procedural issues to be resolved before the submission of your tax return to the IRS. Among these issues would be the preparation of the federal tax return, whether payment would be required from the taxpayer’s accounts in a foreign country and the tax return’s acceptance by the IRS.
Generally speaking, corporate taxes are generally more onerous than individual income taxes. This is because the corporate laws of most countries, including the United States, do not apply to individuals or corporations but rather the jurisdictions that issue these tax returns. A unique feature of the corporate laws of many countries is the provision of pass-through income, which refers to the portion of profit that a corporation earns that is not treated as income by the corporation but instead becomes the income of its shareholders. Thus, profits that are earned by the corporation in the United States may be exempt from U.S. corporate taxation if they are made through a pass-through entity. In addition, corporations may pay their taxes directly to the IRS instead of making their profits available to their shareholders if the corporation elects to treat its profits as exempt from taxation under the provisions of the tax code.