Taxation of transparent organizations and alternative minimum tax

Taxation of transparent organizations and alternative minimum tax

Every U.S. resident should have a good understanding of the fundamentals of the national tax system. This is not so easy considering the complexity of the system. If citizens can handle this task on their own due to the large number of hints from the state, it is very difficult for corporations to work with their own taxes. In fact, there are a lot of peculiarities that need to be taken into account. 

For this reason, most corporations use the services of professional companies, which can help with the preparation of the tax. This is the best option for you to solve this issue responsibly. For example, here is a reliable company that can help with tax preparation tucson az https://southwesttaxassociates.com/

Taxation of organizational and legal forms with the status of transparent

Taxation of legal entities with the status of transparent is carried out at the level of business owners/partners. Profit, regardless of whether it was actually distributed among the partners, is included in the appropriate proportion of the partner’s profit and is taxed at the applicable tax rates. If the partners of a transparent form of business are not residents of the USA (except for S corporations, because in this form of business only individuals and residents of the USA can be shareholders), only the income received from activities in the USA or from sources in the USA is taxed. Losses are also allocated to partners.

Organizational and legal forms that have the status of transparent are required to submit annual reports to the U.S. federal tax authorities no later than the 15th day of the fourth month after the end of the reporting period. The exception is S corporations, which have the same reporting deadlines as regular C corporations. 

Alternative Minimum Tax

Alternative minimum tax is a kind of income tax and is levied on legal entities that have a significant amount of profit. This tax is a mechanism for maintaining equality of payment of taxes, as these legal entities save large amounts of ordinary income tax by reducing the tax base with various deductions provided by the tax legislation.

The procedure for calculating the tax is as follows:

  1. Profit calculated at payment of the income tax, it is corrected for earlier accepted to a deduction tax privileges, and also the loss of the last periods, netted against profit in the accounting period.
  2. A deduction of $40,000 is made from the adjusted profit amount. If the adjusted profit exceeds $150,000, the deduction is reduced by 25 cents for each dollar in excess of the $150,000 limit.
  3. From the result that was obtained in the point 2, the preliminary tax at the rate of 20% is calculated.
  4. The difference between the preliminary tax and the calculated income tax has to be paid to the budget (with the income tax).

Small corporations are exempt from this tax. A corporation is considered to be small if its average annual turnover for the previous 3 years does not exceed 7.5 million dollars. In the first three years of the corporation’s existence this limit is 5 million dollars.

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