Corporate tax laws can sometimes be very complicated, and can be confusing to understand. What’s more, corporate tax laws are very different from state to state. Some corporations are associated with certain tax breaks or tax benefits. Some corporate forms that are associated with unique tax treatment may include:
- Non-Profit Corporations: These may be eligible for certain tax breaks, deductions, and refunds based on charitable activities and charitable giving.
- Foreign Corporations: A foreign corporation is a corporation that is incorporated in a different state from the state(s) of its business activity. Some states such as Delaware offer more lenient tax treatment. Such states are known as corporate haven states.
- Delaware and Nevada Corporations: As mentioned, many businesses choose to file in Delaware to take advantage of the unique corporate laws there. Nevada is another similar state.
Lastly, while not specifically a "tax break", there are major differences between C corporations and S corporations. In a C corporation, it is the corporation that pays taxes as an entity. With S corporations, it is the shareholders who pay taxes.
This can spell different results depending on the yearly profits for the corporation. Companies that file as S corporations need to beware of double taxation issues. On the other hand, members of C corporations often experience various tax-free benefits, since it is the corporation that handles the taxes.
In most cases, the corporation needs to specifically request for the tax credit or deduction. On the other hand, altering tax information in order to make the company appear eligible for a tax break can be considered a violation.
If the company is found to be in violation of a corporate tax law, it may prompt an investigation by a government agency. This may involve a close examination of the company’s tax documents to determine if there are any issues with fraud or other types of white collar crime. This can often be a complicated process.
What Are the Penalties for Corporate Tax Violations?
Penalties for corporate tax violations may include:
- Loss or suspension of business operating licenses
- In some cases, criminal charges and criminal fines
- Civil damages if other parties suffered losses due to the violation
Corporate tax laws and corporate tax breaks can sometimes be confusing to understand. You may need to hire a business lawyer if you have any questions regarding the business laws in your state. Your attorney can assist you in preparing tax documents, filing papers with the court, and representing you if you need to file a lawsuit.