Florida Corporate Tax
As in any other country, Florida has its very own set of rules and policies about the different kinds of tax that they collect. Among the central tax that is being collected in Florida is the sales tax, as well as use tax. Corporate income tax and intangible tax are also among the main taxes being collected in this country.
In Florida, they do not collect a personal income tax.
When doing business in Florida, it is imperative that the company or the corporation fulfill an obligation to file a corporate income tax or franchise tax. Fl corporate tax is required from all corporations operating businesses in this country unless they are tax-exempt. It is also required for those who are getting income or are living in Florida.
By this, it also means that all corporations that are federally taxed as corporations are subject to the tax. For businesses out of Florida, though, federal income is adjusted based on different factors, which include the business’ sales, payroll, and property. Additional Florida adjustments include the pluses and the minuses that are matched against the business’ activities within Florida as opposed to the entity’s activities outside.
All businesses, companies, and corporations, even those out of state, but earn or receive an income in Florida are also required to do their tax returns and file a Florida corporate income tax (unless they are exempt). These entities must file their tax returns even if they do not have a tax due.
Some entities that are exempt from filing tax are sole proprietorships, S corporations, estates of decedents, testamentary trusts, and individuals unless they need to pay federal income tax that they owe.
The Florida corporate tax rate is set at 5.5% and is applicable to all income. However, exemptions usually decrease a corporation’s tax rate significantly. Although this is the case, the company is obliged to settle the higher amount of the standard rate fewer credits and exemptions, or the business can also opt to do the 3.3%, which is the alternative minimum tax rate.
As for small businesses like a C- corporation, though, the tax rate is set at 21% or an average of 19.8%. Tax payment from businesses, however, may vary, depending on the type of entity.
Any business, corporation, or company, including all the other entities that are required to file their tax, are expected to fill out the necessary and appropriate tax return. This process must be done even if these entities do not owe any tax.
There are certain organizations that are exempted from tax, including Florida S corporations that are not really obliged to file a Florida corporate tax return as long they do not have federal taxable income.
Who then is required to file a Florida corporate tax?
Basically, all entities including all corporations, businesses, companies even the tax-exempt organizations, and associations such as bank and savings associations, homeowner and condominium associations, Florida S corporate companies, political organizations, a limited liability company (LLC), and an LLC that is categorized as a partnership for Florida and federal income tax purpose are all required to file a Florida corporate tax for as long as they are transacting business, earning income or living in Florida.
As for the case of a sole member LLC, they are not required to file a separate Florida corporate tax return as they are not included for federal and Florida income tax purposes. Its income is reported on the owner’s tax return.
A piece of additional information on the homeowner’s association is that if they file a federal return on form 1120, they are required to file a Florida corporate income tax return, even if there is no tax due. But if they file federal form 1120-H, then they do not have to file a Florida corporate income tax return.
Though generally, a not-for-profit corporation also needs to file a Florida corporate income tax, there are some types of these corporations that are tax- exempted but are required to file a Florida corporate income tax return if the entity has an unrelated business taxable income or if they file federal forms 1120-C or 990-T with the Internal Revenue Service (IRS).
How is Florida Corporate Income Tax Rate Computed?
According to the Florida Department of Revenue, the way Florida corporate income tax is computed is based on the federal taxable income then revamped by some subtractions, adjustments, and additions to come up with the new federal income.
This new federal income is prorated using Florida’s 3- factor formula, which is a weighted average of 3 factors which comprise: 25% for the property, 25% for the payroll, and 50% for the sales. After this, non- business income that is designated to Florida is added to the newly adjusted Florida portion of the federal income.
After this addition, the exemption is then subtracted in order to come up with the Florida net income. Finally, you can arrive at the tax by multiplying Florida net income by the corresponding tax rate that is based on the beginning taxable year, prior to January 1, 2019, January 1, 2019- December 31, 2021; and on or after January 1, 2022.
Are There Corporate Income Tax Rate Incentives?
In Florida, there are so many incentives that can be generated through corporate income tax. One example is getting credits when you pay salaries in Florida. Another one is when you pay assessments and other types of tax, and you can get credits as well when you make investments or build businesses in Florida.
Aside from these incentives, Florida may also be popular for businesses or even individuals because the filing of a personal income tax is not required. What more is that they only have a 6% sales tax.
To avoid penalties and trouble with the Florida Department of Revenue, it is best to know when the due dates are, and what appropriate forms to file.
For the corporate tax, the appropriate form is the Florida Corporate Income/ Franchise Tax Return or Florida Form F-1120. This must be filed yearly, even if there is no tax due.
Florida Form F-1120 is due on: for the tax year ending on June 30, the due is on or before the 1st day of the 4th month following the close of the tax year. For any other tax year endings, the due is on or before the 1st day of the 5th month following the close of the tax year.
Other important notes to remember is the 15th day after the due date without extension is for the filing of the federal return for the taxable year.
Knowing these due dates are very important to save you from tax penalties because if you file a late tax, a 10% penalty of any unpaid tax for every 30 days or fraction thereof without exceeding 50% of unpaid tax is charged.
However, if there is no tax due, a $50 penalty per month or a fraction thereof without exceeding $300 will be in effect. Another floating rate of interest would be applicable to late tax payment as well as underpayments.
Are there Extensions to the Filing of Tax?
If the business wishes to have an extension with regards to the filing of their corporate income tax rate, they may do so by filing Florida Tentative Income/ Franchise Tax Return, as well as Application for Extension of Time to File Return or Form F- 7004 along with the business’ tax payment with the original due date of their return.
This kind of process may be filed electronically. Though extensions for filing a corporate income tax return is allowed, this does not mean that the payment due date is extended as well. Should the business fail to pay on time, the penalty will be based and calculated from the original due date of the corporate income tax return.
These extensions are only good for six months except for those with June 30 tax year-end, as extensions for those are valid for seven months.
Is There a Minimum Corporate Tax?
There used to be an alternative minimum tax before the taxable years preceding January 1, 2018. After that, there is none.
What If the Business Wishes to be Considered as a Florida S Corporate?
If the entity is already registered, they can simply submit a copy of the IRS Notice of Acceptance as an S corporation; or they can also give a copy of the 1st page of the federal form 1120-S.
When Should Estimated Tax Payments be Made?
Each taxpayer has an obligation to make estimated tax payments if they can foresee that the corporate income tax liability will go beyond $2,500. Should the corporation incur a debt that exceeds $2,500 in Florida corporate tax every year, then estimated tax payments should be made on Florida Form F-1120 ES or Declaration/ Installment of Florida Estimated Income/ Franchise Tax?
With estimated tax payments, four equal installments that would sum up to 90% of the current year’s corporate tax liability can be made.
This can be filed electronically.
If there is an underpayment, there will be a 12% penalty that will be charged for each year.
Is There an Exemption for Corporate Income Tax?
There can only be one exemption for taxpayers that belong to a controlled group that consists of taxpayers and the associated group that is sister companies regardless if they are filing an incorporated form or not.