How to Calculate Payable Income Tax
Original post by Shula Asher Silberstein of Demand Media
Businesses must report and pay income tax using Form 1120 from the Internal Revenue Service. This form allows businesses to report their total income and subtract business expenses, such as the cost of goods sold and administrative costs from their business income. After calculating income tax, businesses report the total tax due on this form and submit payment with the form.
Obtain form 1120 from the IRS' website or contact the IRS by telephone to get a form in the mail.
Calculate your business' net income using Form 1120. Report your gross receipts and the costs of goods sold as well as returns and other expenses. Subtract the expenses from your gross receipts to determine the net income. Report your net income on Line 28.
Report any net operating loss that you are carrying forward for the year on Line 29. Subtract it from net income and put the total on Line 30.
Look up the tax on your Line 30 total on the table on Page 18 of the Form 1120 instructions. Find the range your taxable income falls into and follow the instructions to calculate it. For example, if your income is $68,000, take 25 percent of $18,000 and add $7,500 to the total.
Put the total tax on Line 31. Subtract any estimated tax payments from the total tax due to determine how much tax you owe.
- Form 1120
About the Author
Shula Asher Silberstein has been writing fiction and nonfiction since 2006. He writes about social issues, especially those of concern to the LGBTQ community. He has written a novel, "Shades of Gay." Silberstein holds a Master of Fine Arts in screenwriting and fiction from the University of Southern California.