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IRS Releases Report of 2008 Corporate Tax Return Statistics

Tax

By Ron Kramer

Recently, the Internal Revenue Service (IRS) released its report on 2008 Statistics of Income for Corporation Income Tax Returns. The report contains data by industry on assets, liabilities, receipts, deductions, net income, income subject to tax, tax and tax credits for all corporate tax returns filed between July 1, 2008 and June 30, 2009 (the 2008 tax year). It is interesting to look at the statistics to see how U.S. businesses file their tax returns. The report provides statistics of large businesses (includes many publicly traded companies filing as regular C corporations) and small businesses that generally file their tax returns as pass-through S corporations.

Section 1 of the 2008 report provides statistics summarizing overall corporate tax reporting for the 2008 tax year. Section 1 notes that approximately 5.8 million returns were filed for active corporations for tax year 2008, and approximately 4.1 million (or about 71%) were filed as pass-through entities such as S corporations, Regulated Investment Companies (RIC) and Real Estate Investment Trusts (REIT). The 2008 report indicates that the following number and type of corporate tax returns were filed for the 2008 tax year. 

Form Type

Description

Number of Returns

 
       

1120

Reguar C Corporation

1,762,483

 
1120-L Life Insurance Company

945

 
1120-PC Property and Casualty Insurance Company

7,670

 
1120-RIC Regulated Investment Company (RIC)

13,140

(1)
1120-REIT Real Estate Investment Company (REIT)

1,660

(1)
1120-F Foreign Corporation

11,379

 
1120-S S Corporation

4,049,944

(1)
       
  Total Returns Filed for 2008 Tax Year

5,847,221

 

(1) Taxed as a pass-through entity. Pass-through entities pay little or no federal income tax at the corporate level. Instead, they are required to pass any profits or losses to their shareholders who then pay income taxes at individual tax rates.

As noted from the table above, S corporations accounted for almost 70% of the number of corporate tax returns filed for tax year 2008, and thus 70% of the number of corporate businesses conducted in the United States. This is important to note in terms of tax policy. The Obama administration wants to increase individual income taxes on wealthy Americans (those making more than $250,000 a year). It should be noted that the owners of many of the 4,049,944 companies reporting as S corporations may be reporting taxable incomes in excess of $250,000; however, as business owners, it is assumed that they are also repaying debt and reinvesting at least some of that income in the hiring of new employees and in new equipment to maintain or expand their businesses. Higher income taxes imposed on owners of these companies, accordingly, means less cash flow for reinvestment.

Although S corporations represented approximately 70% of the corporate tax returns filed for the 2008 tax year, it is interesting to note from the statistics just how small “small” business is compared to large businesses filing as C corporations. A comparison of the overall corporate statistics for the 2008 tax year to the same statistics for S corporations highlights the discrepancy: 

Statistic

Total - All Corporations

S Corporations

 Number of Returns Filed

5,847,221

4,049,944

Total Assets

$ 76,799,143,905,000

$ 3,367,303,575,000

Total Receipts

$ 28,589,771,221,000

$ 6,126,386,899,000

Net Income

$ 984,342,037,000

$ 240,026,386,000

Income Subject to Tax

$ 978,152,640,000

$ 317,090,537,000

Although S corporations are clearly the prevalent form of corporation conducting business, the financial statistics for large businesses clearly overshadow those of corporations operating as S corporations. However, when S corporations are combined with other forms of small businesses like sole proprietorships, partnerships and limited liability companies (LLCs), small business is a formidable force in the U.S. economy. The Office of Advocacy of the U.S. Small Business Administration provides these facts as to how important small businesses are to the U.S. economy:

Small businesses:

  • Represent 99.7% of all employer firms in the U.S.;
  • Employ just over half of all private sector employees;
  • Pay 44% of total U.S. private payroll;
  • Have generated 64% of net new jobs over the past 15 years;
  • Create more than half of the nonfarm private gross domestic product (GDP);
  • Hire 40% of high tech workers (such as scientists, engineers, and computer programmers); and
  • Made up 97.3% of all identified exporters; and produced 30.2% of the known export value in FY 2007.

The Statistics of Income Program was mandated on the IRS by the Revenue Act of 1916 to provide an annual publication of statistics related to the operation of the Internal Revenue laws on various taxpayers. The information gathered is used to analyze tax policy, project tax revenues and estimate the impact of tax law changes and their effects on tax collections. In this regard, the primary users of the reports are the Office of Tax Analysis of the U.S. Treasury Department and the Congressional Joint Committee on Taxation (JCT). Hopefully, the 2008 Statistics will be used to help shape the proper tax policy toward owners of small business corporations.

 

For further information, please contact Ron Kramer.

Visit our website if you'd like more information on Schneider Downs Tax Advisory Group.

 

 

Schneider Downs provides accountingtax, wealth management, technology and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA and Columbus, OH. 

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.

 


 

 

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