Which statement about corporate tax returns is correct?

• A. C corporations file separate tax returns; S corporations file pass-through returns
• B. All corporations file the same form
• C. Non-profits pay corporate tax
• D. Corporations never file state tax returns

Answer: (A)

The tax treatment of corporations depends on whether the entity is taxed as a C corporation or an S corporation. C corporations are separate taxable entities, so they file their own corporate tax return and pay tax at the corporate level. S corporations, on the other hand, pass through their income to shareholders, who report it on their personal tax returns, so the entity itself generally does not pay federal income tax.

That’s why the statement is correct: C corporations file separate tax returns for the entity, and S corporations file pass-through returns (with authorship of income to shareholders via Schedule K-1). Form details to remember include Form 1120 for C corps and Form 1120S for S corps.

Non-profits are typically tax-exempt on income related to their exempt purpose and don’t pay corporate income tax (though they file informational returns like Form 990). Corporations often file state tax returns as well, so the claim that they never file state returns isn’t correct. And not all corporations file the same form, since C and S corporations have different return requirements.