Federal and California Tax Rates and Fees

(Updated July 26, 2012)

I. Business Entities

A. C Corporations

1. Federal taxes

a) Income Taxes

Corporations:

Over

But Not Over

The Tax Is

Of The
Amount Over

$0

$50,000

15%

$0

$50,000

$75,000

$7,500 + 25%

$50,000

$75,000

$100,000

$13,750 + 34%

$75,000

$100,000

$335,000

$22,250 + 39%

$100,000

$335,000

$10,000,000

$113,900 + 34%

$335,000

$10,000,000

$15,000,000

$3,400,000 + 35%

$10,000,000

$15,000,000

$18,333,333

$5,150,000 + 38%

$15,000,000

$18,333,333

And Over

35%

0

Personal service corporations are subject to a flat tax of 35% regardless of their income. Reference: IRS Pub 542 (03/12).

 

b) Accumulated Earnings Tax

In addition to the regular tax, a corporation may be liable for an additional 15% tax on accumulated taxable income in excess of $250,000 (or $150,000 for business whose principal function is performing services in the fields of accounting, actuarial science, architecture, consulting, engineering, health (including veterinary services), law, and the performing arts, and personal service corporations). Reference: IRS Pub 542 (03/12).

2. CA State Taxes

a) California charges C corporations, as well as S corporations, LLCs and limited partnerships, a minimum annual franchise tax of $800, payable to the Franchise Tax Board. Reference: CA FTB FAQ.

b) California imposes an 8.84% flat tax on C corporations. Bank and Financial C-Corporations are taxed at 10.84%. Reference: CA FTB Tax Rates.

B. S Corporations

1. Federal taxes. S corporations are treated as pass-through tax entities, meaning that the profits or losses of the corporation pass through the business and are reflected and taxed on the individual tax returns of the shareholder, rather than being reported and taxed at a separate business level.

2. CA state taxes. An S corporation is taxed on its net income at a rate of 1.5 percent, with a minimum tax of $800. Financial S corporations are taxed at a rate of 3.5%. Reference: CA FTB S Corporation FAQ.

C. Limited Liability Companies

1. Federal taxes. LLCs can elect to be taxed as a pass through entity (partnership taxation) or a corporation (corporate taxation). As a pass through entity, the profits or losses of the LLC pass through the business and are reflected and taxed on the individual tax returns of the members, rather than being reported and taxed at a separate business level. If the LLC elects corporate tax treatment, it will then be taxed at the applicable corporate tax rates.

2. CA state taxes.

a) California imposes on LLCs, as well as C corporations, S corporations and limited partnerships, a minimum annual franchise tax of $800, payable to the Franchise Tax Board. Reference: CA FTB LLC FAQ.

b) California imposes on LLCs an additional “gross receipts fee,” which is essentially a tax based on the LLC's total income from all sources derived from or attributable to the state of California, and includes the cost of goods sold.

Gross receipts from California  Over

Not Over

Fee

$0

$249,999

$0

$250,000

$499,999

$900

$500,000

$999,999

$2,500

$1,000,000

$4,999,999

$6,000

$5,000,000

. . . . . . . . . . . .

$11,790

Reference: FTB Forrm 568 (2011).

II. Payroll Taxes

A. Federal Payroll Taxes (2012)

1. Federal Unemployment (FUTA) Tax. For 2012, the FUTA tax rate is 6.0%. This tax applies to the first $7,000 paid to each employee as wages during the year. Generally, you can take a credit against your FUTA tax for contributions to state unemployment funds up to a maximum 5.4% of FUTA taxable wages, resulting in a FUTA tax rate after credit of 0.6%. This credit may be reduced if the state has an outstanding loan from the federal government that was used to pay UI benefits. For CA, the 2011 FUTA tax rate after credit and credit reduction is 0.9%. References: IRS Pub 15; IRS Headliner Volume 317 December 7, 2011.

2. Social Security Tax (FICA). The employee tax rate for social security is 4.2% on wages paid and tips received before March 1, 2012. The employee tax rate for social security increases to 6.2% on wages paid and tips received after February 29, 2012. The employer tax rate for social security is 6.2%. Total, this is 10.4%. The 2012 wage base limit is $110,100, for a maximum of $6,826.20. Reference: IRS Pub 15.

3. Medicare Tax. The employee tax rate for Medicare is 1.45%. The employer tax rate for Medicare tax is also 1.45%. Total, this is 2.9%. There is no wage base limit for Medicare tax; all covered wages are subject to Medicare tax. Reference: IRS Pub 15.

B. CA Payroll Taxes

1. Unemployment Insurance (UI). The UI taxable wage limit for 2012 is $7,000 per employee, per year. The UI tax rate for new employers is 3.4 percent for up to three years. The UI rate schedule in effect for 2012 is Schedule "F+", which provides for UI contribution rates from 1.5% to 6.2%. Reference: CA EDD rates and withholding schedules.

2. Employment Training Tax (ETT). The 2012 ETT rate is 0.1 percent (.001) of the first $7,000 per employee, per year. Reference: CA EDD rates and withholding schedules.

3. State Disability Insurance (SDI). The 2012 SDI tax rate (which includes Disability Insurance and Paid Family Leave) is 1.0 percent. SDI taxable wage limit is $95,585 per employee, per year, for a maximum of $955.85. Reference: CA EDD rates and withholding schedules.

III. Self-employment tax (SE Tax)

This is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. The self-employment tax rate for self-employment income earned in calendar year 2012 is 13.3% (10.4% for Social Security and 2.9% for Medicare). For self-employment income earned in 2010, the self-employment tax rate is 15.3% (12.4% for social security and 2.9% for Medicare). Only the first $106,800 of the individual’s combined wages, tips, and net earnings are subject to any combination of the 12.4% social security part of the self employment tax, social security tax, or railroad retirement (tier 1) tax. All net earnings of at least $400 are subject to the Medicare part of the self employment tax. Reference: IRS Self-Employment Tax page.

IV. Other Federal

A. Personal Income Tax Rate Schedules

Married individuals filing joint returns and surviving spouses

If Taxable Income Is: The Tax Is:
Not over $17,000 10% of the taxable income
Over $17,000 but not over $69,000 $1,700 plus 15% of the excess over $17,000
Over $69,000 but not over $139,350 $9,500 plus 25% of the excess over $69,000
Over $139,350 but not over $212,300 $27,087.50 plus 28% of the excess over $139,350
Over $212,300 but not over $379,150 $47,513.50 plus 33% of the excess over $212,300
Over $379,150 $102,574 plus 35% of the excess over $379,150
Standard deduction $11,600

References: IRS tax rate schedules; IRS Pub 501.

Unmarried individuals (other than surviving spouses and heads of households)

If Taxable Income Is: The Tax Is:
Not over $8,500 10% of the taxable income
Over $8,500 but not over $34,500 $850 plus 15% of the excess over $8,500
Over $34,500 but not over $83,600 $4,750 plus 25% of the excess over $34,500
Over $83,600 but not over $174,400 $17,025 plus 28% of the excess over $83,600
Over $174,400 but not over $379,150 $42,449 plus 33% of the excess over $174,400
Over $379,150 $110,016.50 plus 35% of the excess over $379,150
Standard deduction $5,800

References: IRS tax rate schedules; IRS Pub 501.

B. Federal Long-Term Capital Gains and Qualifying Dividends (Rate on qualified dividends and gains for assets held at least 12 months)

  1. Maximum capital gains rate: 15%. This is for any gain that is not collectibles gain, gain on small business stock, or unrecaptured section 1250 gain. Reference: IRS Pub 550 (2011).

 

Last updated July 26, 2012.

 

Allen M. Lee  Mr. Lee’s practice focuses on business, corporate and intellectual property matters, including the creation, protection and exploitation of intellectual property assets.  He counsels clients on business formation, general corporate matters, trademark, copyright, trade secret, patent, licensing, internet and domain name issues, among other things.  For more information contact: Allen M. Lee, a Professional Law Corporation, Tel: (408) 249-2735, Fax: (408) 260-8263, Email: allen@allenmlee.com, Internet: www.allenmlee.com.

 

 



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