What Is A Consolidated Tax Return? (Question)

A consolidated tax return is a corporate income tax return of an affiliated group of corporations, who elect to report their combined tax liability on a single return.

What is the difference between consolidated and combined tax returns?

Corporations are legal entities and taxed the same as people. Combined tax returns are filed by companies that are nationwide chains and filed in each state that in which they conduct business.

Who must file a consolidated tax return?

Only entities organized in the United States and treated as corporations may file a consolidated Federal income tax return. The return is filed by a “common parent” and only those subsidiaries in which the common parent owns 80% or more of the vote AND value.

Are you required to file a consolidated tax return?

All corporations are required to file separate tax returns unless the corporations are members of an affiliate group that files a consolidated tax return. The tax liability for one corporation may be higher than the combined tax liability of a consolidated corporation.

What are the benefits or advantages of filing a consolidated income tax return?

The advantages in filing consolidated returns include:

  • offsetting the profits of one company against losses of another;
  • netting out capital gains and losses;
  • no tax on intercompany distributions;
  • the recognition of income is deferred on intercompany transactions;

What states allow consolidated tax returns?

Today, 24 states (including Connecticut starting in tax year 2016) and the District of Columbia require combined reporting. These include Illinois (1982), Maine (1986), Massachusetts (2008), New Hampshire (1981), New York (2007), Rhode Island (2014), Vermont (2004), and Wisconsin (2009).

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Can an S corporation file a consolidated return?

Because S corporations cannot be included in an affiliated group, an S corporation cannot join in the filing of a consolidated return. However, a C corporation subsidiary can elect to join in the filing of a consolidated return with its affiliated C corporations.

How do I file a consolidated tax return?

Electing to File a Consolidated Tax Return Each affiliated corporation must consent to file a consolidated tax return by filing Form 1122 and returning it along with Form 1120, the tax form for U.S. corporations. After that point, any new member of the associated group must join in the consolidated tax return.

What is consolidated file?

Introduction. Conso file is a consolidated data of the statements that are processed (regular and correction) for the relevant financial year, quarter and the form type. Deductors have to furnish a quarterly TDS (Tax Deducted at Source)/TCS (Tax Collected at Source) statement as per the Income Tax Department guidelines

Can LLC file consolidated return?

An LLC may function as a parent or subsidiary. An LLC does not have an obligation to file a consolidated return; in some situations, it is advantageous to regard certain holdings as independent entities responsible for their own tax.

What is a Florida consolidated return?

Consolidated Returns The privilege of electing to file a Florida consolidated income tax return is limited to an affiliated group where the parent corporation is subject to the Florida Income Tax Code and: 1. The affiliated group must have filed a consolidated return for federal income tax purposes.

What is a consolidated 1099?

1099 Consolidated Statement Retail accounts- First Mailing The Consolidated Form 1099 is the collection of all applicable Forms 1099 merged into one document. It reflects information that is reported to the IRS and is designed to assist you with filing your federal income tax return.

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Who must file Form 1122?

The common parent corporation of a consolidated group must attach a separate Form 1122 to the group’s consolidated income tax return for each subsidiary corporation for the first tax year each subsidiary consents to be included in the consolidated return.

What is the benefit of filing a consolidated return and what are the ownership requirements for filing a consolidated return?

The principal advantage of filing consolidated returns is the ability to combine the income and loss of each member of an affiliated group into a single taxable income. 8 Thus, net operating losses of one member of the group can be used to offset the taxable income of another member.

Which of the following is a disadvantage to filing a consolidated return?

the disadvantages of filing a consolidated return include: ☐ the election to file consolidated returns is binding for future years and may only be terminated by disbanding the group or seeking permission of the internal revenue service. ☐ Tax credits may be limited by operating losses of other members.

What are the major advantages and disadvantages for filing a consolidated tax return?

What are the major advantages and disadvantages of filing a consolidated tax​ return? An advantage includes income of a profitable member can be offset by losses of another member. ​ However, a disadvantage includes losses of an unprofitable member may limit deductions or credits of a profitable member.

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