Delaware C Corp Tax Filing Requirements

Delaware’s reputation as a favorable state for incorporation attracts a significant number of businesses. For those structured as a C corporation, this choice carries specific tax filing responsibilities at both the federal and state levels. A C corporation is a legal entity separate from its owners, meaning the corporation itself is taxed on its profits.

Federal Tax Obligations

The primary federal tax requirement for a C corporation is the filing of Form 1120, the U.S. Corporation Income Tax Return. This form is used to report the company’s income, gains, losses, deductions, and credits to the Internal Revenue Service (IRS) and to calculate the corporation’s federal income tax liability.

Corporations cannot wait until the final filing deadline to pay their taxes and are required to make quarterly estimated tax payments if they expect to owe at least $500. These payments cover the tax liability as income is earned, and corporations can use Form 1120-W as a worksheet to figure the proper amount. The payments are typically due on the 15th day of the 4th, 6th, 9th, and 12th months of the corporation’s tax year.

The standard deadline for filing Form 1120 is the 15th day of the fourth month after the end of the corporation’s fiscal year, which is April 15th for calendar-year companies. If a corporation needs more time, it can get an automatic six-month extension by filing Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns. This extension provides additional time to file the return, not to pay the tax owed.

Delaware State-Level Tax Obligations

The most universal state-level duty is the Delaware Franchise Tax. This tax is levied on nearly every corporation registered in Delaware for the privilege of being incorporated in the state. It must be paid annually, regardless of whether the company conducts business, has assets, or generated revenue in Delaware.

Corporations have two methods to calculate their Franchise Tax: the Authorized Shares Method and the Assumed Par Value Capital Method, and can choose the one that results in a lower tax. The Authorized Shares Method bases the tax on the number of authorized shares, with tiers starting at $175 for 5,000 shares or less. The Assumed Par Value Capital Method uses the company’s gross assets and issued shares in its calculation and has a minimum tax of $400. The Franchise Tax payment and a mandatory Annual Report must be filed electronically by the March 1st deadline each year.

Separate from the Franchise Tax is the Delaware Corporate Income Tax, which applies only to corporations that derive income from business activities conducted within the state. A company with no operational footprint in Delaware, such as employees or property, is not subject to this tax. For those that do conduct business in Delaware, the tax is calculated on net income apportioned to the state. The return is filed using Form CIT-TAX, and the deadline aligns with the federal deadline.

Information and Documents Needed for Filing

To complete federal and state tax returns, a corporation must gather specific financial and administrative documents.

For the federal Form 1120, necessary information includes:

• The company’s Employer Identification Number (EIN)
• Comprehensive financial statements for the tax year, including an Income Statement and a Balance Sheet
• Records of all federal and state estimated tax payments made during the year
• Details regarding the compensation of all corporate officers

For Delaware-specific filings, additional information is required:

• The company’s seven-digit Delaware File Number
• The physical address of the principal place of business
• The names and mailing addresses of all company directors and at least one officer
• The exact number of authorized shares and their par value for the Authorized Shares method
• The total gross assets and the total number of issued shares for the Assumed Par Value Capital method

The Filing and Payment Process

For the federal Form 1120, corporations can file electronically or by mail, though the IRS encourages e-filing. If a payment is due, it can be made through the Electronic Federal Tax Payment System (EFTPS), electronic funds withdrawal, or IRS Direct Pay.

The Delaware Annual Report and the accompanying Franchise Tax payment must be filed and paid electronically through the Division of Corporations’ online portal. Payment can be made by credit card or electronic check (ACH), as there is no paper filing option for domestic corporations.

For the Delaware Corporate Income Tax, the Form CIT-TAX and any payment can be submitted to the Division of Revenue through its online portal or by mail. A complete copy of the federal Form 1120 must be attached to the Delaware Form CIT-TAX when it is filed.