Can a C corporation deduct federal income tax on Form 1120?
I've recently started a small manufacturing business and incorporated as a C corporation last year. As I'm preparing our first tax return using Form 1120, I'm confused about whether we can deduct the federal income taxes we paid throughout the year as a business expense. Our accountant seems to think we can't, but I could have sworn I read somewhere that corporations can write off their tax payments. We paid about $18,500 in federal income tax through quarterly estimated payments, and if we could deduct that amount, it would make a significant difference to our bottom line. Can anyone clarify if a C corporation can write off federal income tax payments on Form 1120? I'm trying to make sure we're taking advantage of every legitimate deduction available to us.
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Mei Wong
No, C corporations cannot deduct federal income tax payments on their Form 1120. This is a common misunderstanding. While C corps can deduct many business expenses, federal income taxes are specifically not deductible under the tax code. You can, however, deduct state and local income taxes, property taxes, and certain other taxes as business expenses on your 1120. Many business owners confuse this and think all taxes are deductible. Make sure you are taking advantage of all legitimate business expense deductions though - rent, salaries, supplies, depreciation, employee benefits, etc. These will help reduce your taxable income.
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Liam Sullivan
•What about if we paid some taxes in a previous year but they were for the current tax year? Like estimated payments? Are those ever deductible or is it the same rule?
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Mei Wong
•Federal estimated tax payments are still federal income taxes, so they follow the same rule - they're not deductible regardless of when you paid them. The timing doesn't change their deductibility status. State and local estimated tax payments would still be deductible though, as those are considered valid business expenses. Just make sure you're deducting them in the proper tax year based on your accounting method.
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Amara Okafor
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Giovanni Colombo
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Fatima Al-Qasimi
•I'm a bit skeptical about AI tax services. How does it compare to just hiring a CPA who specializes in corporate taxes? My concern is that these services might miss important nuances specific to certain industries.
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Amara Okafor
•It actually reviews your specific documents and forms - you upload them and it analyzes the specifics of your situation, not just generic advice. It caught several deductions my previous accountant missed. As for comparing to a CPA, I still use my accountant for final review, but taxr.ai helps me prepare everything much more thoroughly beforehand. It's especially good at industry-specific deductions - it knew about manufacturing-specific tax breaks I had no idea existed. I use both for the best results.
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Fatima Al-Qasimi
Just wanted to follow up after trying taxr.ai. I'm genuinely impressed! I uploaded my previous 1120 and it immediately identified three deductions we missed totaling almost $9,700. It specifically pointed out that while federal income tax isn't deductible, we had overlooked deducting our state franchise tax and some local business taxes. The interface was surprisingly easy to use and it explained everything in plain English instead of tax jargon. Definitely using this for all our corporate returns going forward.
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StarStrider
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Dylan Campbell
•Wait, how does this actually work? Do they just call for you or what? I'm confused how a third party service can magically get through the IRS phone system when it's impossible for everyone else.
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Fatima Al-Qasimi
•This sounds like complete BS honestly. Nobody can "hack" their way through IRS hold times. They're probably just calling repeatedly and getting lucky, something you could do yourself. I'll stick with my accountant's advice instead of paying for a glorified auto-dialer.
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StarStrider
•They don't call for you - they use technology that navigates the IRS phone tree and waits on hold, then alerts you when there's an actual person on the line. You take the call from there and speak directly with the IRS agent yourself. I was skeptical too, but it actually worked. They don't "hack" anything - they just have a system that stays on hold so you don't have to. I spent over 4 hours on different days trying to get through myself with no luck, so for me it was worth it to finally get my questions answered directly from the IRS.
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Fatima Al-Qasimi
I need to publicly eat my words about Claimyr. After struggling for another week trying to get through to the IRS about my C corp questions, I broke down and tried it. Within 37 minutes I was talking to an actual IRS representative who confirmed exactly what I needed to know about deducting different types of taxes on the 1120. I hate admitting I was wrong, but this service works exactly as advertised. Saved me hours of frustration and hold music. Now I know for certain that federal income taxes aren't deductible, but got clarification on several other tax types that ARE deductible that I wasn't claiming.
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Sofia Torres
This might be a stupid question, but I'm new to C corps. If we can't deduct federal income tax, are there other types of federal taxes that CAN be deducted? Like payroll taxes or something? Just trying to understand where the line is drawn.
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Mei Wong
•Not a stupid question at all! Yes, there are federal taxes you CAN deduct: - The employer portion of Social Security and Medicare taxes (FICA) - Federal unemployment taxes (FUTA) - Customs duties - Federal excise taxes The main one you CANNOT deduct is federal income tax. It's confusing because some federal taxes are deductible while others aren't, but that's how the tax code works.
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Sofia Torres
•Thank you so much! That clarifies things a lot. We've been paying all these taxes but I wasn't sure which ones we could count as deductions. Our bookkeeper hasn't been very clear on this point.
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Dmitry Sokolov
Just to add something - we deduct our state corporate income taxes, property taxes, sales taxes, payroll taxes, and a few others. Our accountant said it saved us about $8,300 last year. Make sure whoever is doing your taxes knows to look for ALL possible tax deductions even if federal income tax isn't one of them.
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GalaxyGlider
•Thanks for this insight! I had no idea there were so many different tax deductions still available even if federal income tax isn't deductible. I need to review our expenses more carefully to make sure we're categorizing everything correctly. Our state corporate tax alone was around $5,200 last year, so that's definitely worth deducting. I'm going to have a follow-up meeting with our accountant to go through this in detail. Really appreciate everyone's help!
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Justin Trejo
Great thread everyone! As someone who's been running a C corp for about 5 years now, I can confirm what others have said - federal income tax is definitely NOT deductible. I learned this the hard way my first year when I tried to claim it and got flagged during an audit. What I've found helpful is keeping a detailed spreadsheet of all tax payments throughout the year, categorizing them as either deductible or non-deductible. This makes tax prep much smoother. The deductible ones for us include state franchise taxes, local business license fees, property taxes on our facility, and the employer portion of payroll taxes. One thing I didn't see mentioned - if you're in a state with gross receipts taxes or other business-specific taxes, those are typically deductible too. We pay a gross receipts tax in our state that amounts to about $3,400 annually, and that's been a legitimate deduction for us. Also, don't forget about any business personal property taxes you might be paying on equipment, vehicles, etc. Those add up and are definitely deductible business expenses.
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StarStrider
•This is really helpful, especially the part about keeping a detailed spreadsheet! I'm just getting started with my C corp and trying to set up good record-keeping habits from the beginning. Could you share more details about how you organize that spreadsheet? Like what columns you use or how you categorize everything? I want to make sure I'm tracking things properly so I don't miss any legitimate deductions or accidentally claim something I shouldn't. Also, I hadn't even thought about business personal property taxes - we have some equipment and a company vehicle, so I'll need to look into whether we're paying those taxes and make sure they're being tracked properly.
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