Why it matters
The 2025 Form 1120 instructions, the latest IRS edition, multiply taxable income by 21%. A tax year 2026 return uses the 2026 instructions once issued. The return is due the 15th day of the 4th month after year end. Controlled-group members also complete Schedule O, which apportions certain benefits. Estimated tax is due once $500 is expected, and retained earnings may draw a 20% accumulated earnings tax.
Example
Hypothetical calendar-year C corporation: $180,000 of taxable income on Form 1120. Tax is $180,000 x 0.21 = $37,800, leaving $142,200. Expecting over $500, it owes installments on the 15th day of the 4th, 6th, 9th and 12th months; a shortfall is figured on Form 2220. A dividend from the $142,200 is a second layer: the shareholder reports Form 1099-DIV, and the result depends on the shareholder.
Related terms
Questions about C corp tax rate
Does a C corp pay 21% on every dollar of income?
Yes on taxable income, which is income after deductions. Publication 542 has corporations multiply taxable income by 21%, with no lower bracket and no separate personal service corporation rate. The 2025 Form 1120 instructions use the same 21%; check the 2026 instructions when the IRS releases them.
Can a C corp avoid the second layer of tax on dividends?
Not by itself. A corporate shareholder can deduct 50% of dividends from a corporation it owns less than 20% of, and 65% at 20% or more, subject to limits. Individuals report Form 1099-DIV dividends and may owe the 3.8% net investment income tax on Form 8960 above the IRS-listed statutory thresholds: $200,000 single, $250,000 joint.