Tax Reform

After tax reform, many corporations will pay blended tax rate.

IRS Tax Reform Tax Tip 2018-173, November 7, 2018

Last year’s tax reform legislation replaced the graduated corporate tax structure with a flat 21 percent corporate tax rate. This new maximum tax rate for corporations is effective for tax years beginning after Dec. 31, 2017.

A corporation with a fiscal year that includes Jan. 1, 2018, will pay federal income tax using what is called a blended tax rate. They will not use the flat 21 percent tax rate for their entire fiscal year. To calculate their blended tax rate, these corporations will:

The blended rate applies to all fiscal year corporations whose fiscal year includes Jan. 1, 2018.  Fiscal year corporations that have already filed their federal income tax returns that do not reflect the blended rate may want to consider filing an amended return.

This change will affect many tax forms and instructions that corporations use.