what advantages does a company get for paying income tax?

Question

what decides the income tax?
what if a company shows less/no profit?
do/can the tax guys check with banks?

any serious info related to company tax is welcome

Answer 1

The major benefit is that you will not go to jail.

There are pages and pages of regulations regarding income tax that can be accessed online.

Doesn't matter if you show little or no profit. You are still in business and owe income tax.

Of course the tax "guys" check with banks.

If you have a problem with paying your tax, go to the IRS and talk to them. That's better, by far, than avoiding paying or trying to find a solution.

Answer 2

Income tax rates are decided by the federal and state government. There are volumes and volumes of US Tax Code that businesses (and individuals, for that matter) are required to comply with.

If a company shows no profit, then there won't be a tax liability. However, the company can carry back the loss two years to reduce prior tax liability or carryforward the loss to future years to apply against income in that year.

The "tax guys" can check with banks, but they need "due cause" to do so. It's not like the IRS can just start snooping into company bank records. If the IRS is suspicious of business activity, though, they have the legal ability to access the financial records of any US business (or individual, too).

The corporate tax system is set up on what is referred to as a graduated tax method. The first $50,000 of income is taxed at 15%, the next bracketed amount of money is taxed at a higher rate, and so on. That gives businesses the incentive to reduce their reportable net income as much as possible to avoid heavy taxation.

Hope that helps!

Answer 3

the advantage of paying the taxes they owe is that they can sleep well at night without worrying about the irs sending them to jail with some big fines.