Frequently Asked Questions

What is the tax obligation of C corporations at both federal and state levels?

C corporations, which are the most common business type, are subject to both federal and state income taxes. This is due to their business structure where shareholders and owners must report distributions they receive from the business as dividends on their personal income tax return and pay applicable taxes. Additionally, C corporations pay corporate tax on the same revenue, leading to a situation known as double taxation. However, it's important to note that not all businesses are subject to corporate income tax. For instance, if a business is registered as a pass-through entity, such as sole proprietorships, partnerships, and S corporations, it is not required to pay tax at the corporate level. The profits from these businesses pass directly to the owners and are reported on their personal tax return as income. Furthermore, some nonprofit organizations registered in New York are eligible for income or revenue exemptions from state and federal taxation. These include charities, labor unions, recreational and social groups, religious organizations, and scientific groups and educational institutions, provided they are certified under the relevant sections of the Internal Revenue Code (IRC).