Corporate Tax - Tax Returns

Tax Returns

Most systems require that corporations file an annual income tax return. Some systems (such as the Canadian and United States systems) require that taxpayers self assess tax on the tax return. Other systems provide that the government must make an assessment for tax to be due. Some systems require certification of tax returns in some manner by accountants licensed to practice in the jurisdiction, often the company's auditors.

Tax returns can be fairly simple or quite complex. The systems requiring simple returns often base taxable income on financial statement profits with few adjustments, and may require that audited financial statements be attached to the return. Returns for such systems generally require that the relevant financial statements be attached to a simple adjustment schedule. By contrast, United States corporate tax returns require both computation of taxable income from components thereof and reconciliation of taxable income to financial statement income.

Many systems require forms or schedules supporting particular items on the main form. Some of these schedules may be incorporated into the main form. For example, the Canadian corporate return, Form T-2, an 8 page form, incorporates some detail schedules but has nearly 50 additional schedules that may be required.

Some systems have different returns for different types of corporations or corporations engaged in specialized businesses. The United States has 13 variations on the basic Form 1120 for S corporations, insurance companies, Domestic international sales corporations, foreign corporations, and other entities. The structure of the forms and imbedded schedules vary by type of form.

Preparation of non-simple corporate tax returns can be time consuming. For example, the U.S. Internal Revenue Service states in the instructions for Form 1120 that the average time needed to complete form is over 56 hours, not including record keeping time and required attachments.

Tax return due dates vary by jurisdiction, fiscal or tax year, and type of entity. In self-assessment systems, payment of taxes is generally due no later than the normal due date, though advance tax payments may be required. Canadian corporations must pay estimated taxes monthly. In each case, final payment is due with the corporation tax return.