S Corporation Workshop Return 1

Transcription

1 S Corporation Workshop Return 1 Title: S Corporation Workshop Return 1 Summary: In this lesson, you will learn the following: 1. Create Form 1120S; 2. Complete Schedules K-1; 3. Complete Form 4562, Depreciation and Amortization, with multiple depreciation worksheets; 4. E- file this S corporation return. Steps for S Corporation Workshop Return 1 Start a new return using 40-1XXXXXX. Use your company s EFIN for XX-XXXX. Fairyland Woodcarving manufactures wood products. They are located at 539 North Avenue, Lebanon, GA The company was incorporated on February 11, 1990, and elected to be an S Corporation on January 1, Gross receipts for the year were $846,652. Expenses are listed below. Bad debts...$4,824 Bank charges...$37 Commissions...$4,036 Business interest...$1,433 Legal fees...$6,645 Licenses and permits...$1,055 Meals (to be reduced)..$1,339 Office expense...$4,712 Postage...$1,678 Officer s salaries...$132,525 Telephone...$6,028 The following items are being depreciated. ( XX is current year.) Description Tools Equipment Placed in Service Cost Method Convention 01/01/ /01/2010 in Business $85,000 Asset Worksheet 01/15/ /15/2012 in Business Asset Worksheet $13,930 Sprayer 04/15/20XX $1,900 Recovery Period Depreciation AMT Depreciation HY 5 $80,104 $77,920 HY 7 $7,838 $6,251 HY 7 The S corporation has elected to take the Section 179 deduction for the full amount of the cost of the sprayer. 1

2 S Corporation Workshop Return 1 The amount of shareholder-employee compensation included in the expenses is $115,000. Kara Winters, the company s President, earned this compensation. James Brown, the Secretary, received the rest. His Social Security number is 429-XX-XXXX. Depreciation claimed on the books is $8,520. Purchases were $292,980 and cost of labor was $225,602. Inventory at the end of the year was $29,482. Fairyland Woodcarving uses the lower of cost or market method to value closing inventory. The rules of Section 263A do apply for property produced or acquired for resale, and there was no change in determining quantities, cost or valuations between opening and closing inventory. They use the accrual method of accounting. The answers to the questions in Schedule B, lines 3 13a should be No. At the beginning of the year, there was: $2,438 in cash $85,674 in accounts receivable $32,149 in inventory Depreciable assets totaled $98,930; accumulated depreciation was $84,234 Prepaid insurance was $2,088 Prepaid interest was $278 At the end of the year, there was: Cash of $16,129 Accounts receivable was $96,798 Prepaid insurance was $2,623 Prepaid interest was $6,079 Liabilities are listed below. Beginning of the year Accounts payable...$33,812 Mortgages (under 1 yr)...$21,018 Loans from shareholders...$1,314 Mortgages (over 1 yr)...$4,235 Capital stock...$5,000 Additional paid-in capital..$15,000 Retained earnings...$54,611 Accrued/ withheld taxes...$8,831 Accrued payroll...$2,022 End of year Accounts payable...$32,376 Mortgages (under 1 yr)...$6,590 Capital stock...$5,000 Additional paid-in capital..$22,342 Accrued payroll...$4,079 Accrued interest...$9,055 The balance of the accumulated adjustments account at the beginning of the year was $42,174. There were three shareholders. Kara Winters lives at 248 Juniper Drive, Rome, GA and her Social Security number is 426-XX-XXXX. She owns 50% of the stock. Since Kara owns most of the stock, if there are any extra amounts due to rounding, she should have these amounts included in her Schedule K-1. She received $57,500 in property distributions other than dividends. Kara s beginning stock basis is $16,200, and loan basis is $1,314 (all of which was repaid this year). She contributed this year s additional paid-in capital. 2

3 S Corporation Workshop Return 1 Helen Puck lives at 86 Main Street, Kingston, GA Her Social Security number is 427-XX-XXXX and she owns 25% of the stock. She received $28,750 in property distributions other than dividends. Helen s beginning stock basis is $3,350. Michael Night owns 25% of the stock. His Social Security number is 428-XX-XXXX and his address is 368 Park Avenue, Rome, GA He received $28,750 in property distributions other than dividends. Michael s beginning stock basis is $3,350. All shareholders would like to have their basis calculated. The S corporation will electronically file the return. Kara will sign the return. She wants you to enter her PIN, which is

4 S Corporation Workshop Return 2 Title: S Corporation Workshop Return 2 Summary: In this lesson, you will learn the following: 1. Create Form 1120S; 2. Complete Schedules K-1; 3. Paper file this S corporation return. Steps for S Corporation Workshop Return 2 Start a new return using 40-2XXXXXX. Use your company s EFIN for XX- XXXX. The Vision Source, Inc. sells vision supplies and is located at 386 North Glass Avenue, Cedar Bluff, AL The company was incorporated on March 19, 1995 and became an S corporation on May 15, Gross receipts for the year were $288,541, and inventory purchases were $238,749. Expenses are listed below. Officer s wages...$12,000 Taxes and licenses...$1,214 Interest paid...$927 Accounting...$3,061 Bank charges...$60 Commissions...$9,599 Delivery fees...$122 Insurance...$1,033 Office expense...$3,868 Postage...$2,902 Telephone...$7,834 Travel...$6,930 Contract labor...$350 Sample expenses...$818 The rules of Section 263A do not apply for property produced or acquired for resale, and there was no change in determining quantities, cost or valuations between opening and closing inventory. The S corporation uses the cash method of accounting. All of the questions in Schedule B, lines 3-13a, should be answered No. At the beginning of the year, the S corporation had cash of $21,608. At the end of the year, cash was $7,526 and accounts receivable was $1,948. 1

5 S Corporation Workshop Return 2 Liabilities are listed below. Beginning of year Accounts payable...$8,934 Mortgage (less than 1 yr) $29,430 Capital stock...$50,000 Retained earnings... $(66,756) End of year Accounts payable...$9,000 SUTA accrual...$230 Sales tax payable...$208 Capital stock...$50,000 Additional paid-in capital...$17,718 The balance of the accumulated adjustments account at the beginning of the year was $(66,756). There was one shareholder. Pearl Riker, whose Social Security Number is 454- XX-XXXX, lives at 32 Indian Drive, Centre, AL 35960, owns 100% of the stock, and received all of the officer s salary. The beginning stock basis is $1,200. She wants you to compute her basis. The S corporation filed its return at the Cincinnati service center. Pearl wants the return to be mailed. 2

6 S Corporation Workshop Return 3 Title: S Corporation Workshop Return 3 Summary: In this lesson, you will learn the following: 1. Create Form 1120S; 2. Complete Schedules K-1; 3. Complete Form 4562, Depreciation and Amortization, with multiple depreciation worksheets; 4. Review Form 4797, Sales of Business Property; 5. Paper file this S corporation return. Steps for S Corporation Workshop Return 3 Start a new return using 40-3XXXXXX. Watson Automotive is located at 4501 Wilson Way, Rome, GA They specialize in automotive service. The company was incorporated on October 1, 1995, and elected to become an S corporation the same day. Gross receipts during the year were $272,644. Returns totaled $242. Expenses are listed below. Salaries...$55,684 Repairs...$4,285 Bad debts...$190 Rent...$23,540 Taxes and licenses...$1,094 Interest paid...$1,948 Advertising...$4,357 Accounting...$2,046 Automobile expense.$1,660 Bank charges...$812 Subscriptions...$250 Insurance...$15,754 Office expense...$73 Outside services...$2,010 Supplies...$5,226 Tools...$105 Utilities...$5,348 Payroll taxes...$4,555 Equipment rental...$2,443 Credit card fees...$4,016 Cash over/short...$49 Three items are being amortized. These are listed below. Description Placed in Recovery Cost Service Period Amortization Loan fees 09/01/1996 $2,000 5 $2,000 Loan fees 01/01/2007 $3, $1,853 Goodwill 02/01/2010 $95, $24,805 Several items were depreciated. ( XX is the current year.) 1

7 S Corporation Workshop Return 3 Placed in Recovery AMT Section Description Service Cost Method Convention Period Depreciation Depreciation 179 Battery 04/30/2005 $535 charger HY 7 $535 Flush 04/09/2008 $2,675 machine HY 7 $2,317 $2,184 Jack 06/30/2008 $408 HY 7 $353 $333 Jack 06/30/2008 $300 HY 7 $260 $245 Aligner 02/01/2001 $13,300 HY 7 $13,300 $13,300 $10,000 Tire 11/01/2003 $3,165 changer HY 5 $3,165 Tool box 01/01/1997 $100 HY 7 $100 Aim 02/12/2010 $2,782 HY 7 $1,912 $1,589 Rolling jack 02/12/2010 $819 HY 7 $563 $467 Shed 01/21/2010 $4,042 HY 7 $2,279 $2,309 Flush 02/01/2010 $3,540 machine HY 7 $2,434 $2,022 Equipment 02/01/2010 $38,650 HY 7 $26,575 $22,077 Equipment 06/07/20XX $535 HY 7 Equipment 06/02/20XX $698 HY 7 Truck 05/27/2010 $16,816 HY 5 $11,973 $9,812 For the equipment placed in service this year 6/07/20XX and 6/02/20XX the S corporation has elected to take the Section 179 deduction for the full amount of the cost The truck was placed in service on May 27, All 7,891 miles driven were for the business this year. There is written evidence of the business use. The vehicle was available for personal use after business hours (though it was not used for personal use), was used by a more than 5% owner, and another vehicle was available for personal use. The truck is not subject to any depreciation limitations. The truck was sold on September 3 of this year for $7,281. The amount of shareholder-employee compensation included in salaries was $15,000. 2

8 S Corporation Workshop Return 3 Inventory at the beginning of the year was $9,854, and purchases were $109,006. Inventory at the end of the year was $7,842. The cost method of accounting was used. The rules of section 263A for property produced or acquired for resale do not apply to the corporation, and there was no change in determining cost between opening and closing inventory. The company uses the accrual method of accounting. For Schedule B, questions 3 through 13a should be answered No. Cash at the beginning of the year was $3,665. Depreciable assets totaled $87,132, with accumulated depreciation of $59,741. Amortized assets were $100,087. $22,017 of that had been amortized. Other assets totaled $370. At the end of the year, cash was $36,363. At the beginning of the year, accounts payable was $15,003. Loans from shareholders were $81,832, mortgages payable in more than one year were $40,005, and capital stock was $1,000. Retained earnings were $(21,173), payable sales tax was $1,467, payroll taxes were $976, and snap on tools was $240. At the end of the year, accounts payable was $8,504, loans from shareholders were $39,578, and capital stock was $1,496. The balance of accumulated adjustments account at the beginning of the year was $81,043. There were two shareholders. Each of them owned 50% of the company s stock and would like their basis computed. Anna Marie Andrews lives at 2341 Patterson Way, Rome, GA Her Social Security number is 425-XX-XXXX. Her beginning stock basis is $500 and she contributed the additional stock. Anna Marie had loaned $50,000 to the company, $21,127 of which was repaid during the year. The loan balance and basis at the beginning of the year were $40,916. Aaron Jefferson s Social Security number is 426-XX-XXXX and his address is 18 Lenin Drive, Kingston, GA His beginning stock basis is $500. Aaron had also loaned $50,000 to the company, $21,127 of which was repaid during the year. The loan balance and basis at the beginning of the year were $40,916. The S corporation s return is being filed at the Cincinnati Internal Revenue Service Center. Anna and Aaron would like to mail this return. 3

9 S Corporation Workshop Return 4 Title: S Corporation Workshop Return 4 Summary: In this lesson, you will learn the following: 1. Create Form 1120S; 2. Complete Schedules K-1; 3. Complete Form 4562, Depreciation and Amortization, with multiple depreciation worksheets; 4. Make the election not to claim special depreciation; 5. Paper file this S corporation return. Steps for S Corporation Workshop Return 4 Start a new return using 40-4XXXXXX. Use your company s EFIN for XX-XXXX. Samson Auto Reconditioning, Inc., a reconditioning service, is located at 374 Oak Avenue, Atlanta, GA The company elected to be an S corporation on the same day that they were incorporated June 29, Gross receipts for the year were $114,391. Expenses are listed below. Officer s salaries...$23,550 Repairs...$1,702 Rent...$7,910 Payroll taxes...$2,384 Licenses...$245 Interest paid...$1,778 Advertising...$1,178 Automobile expense...$390 Bank Charges...$416 Dues...$300 Insurance...$5,081 Legal fees...$2,054 Meals (50%)...$481 Miscellaneous...$361 Office expense...$1,647 Outside services...$30,585 Telephone...$6,219 Utilities...$2,645 There is also some property that is being depreciated. The assets are listed below. ( XX is the current year.) The corporation does not want to take special depreciation. Placed in Recovery AMT Description Service Cost Method Convention Period Depreciation Depreciation Furniture 07/15/2011 $290 HY 7 $163 $131 Equipment 07/15/2011 $1,349 HY 7 $759 $606 Spray gun 07/01/2011 $170 HY 7 $96 $77 Computer 09/15/2011 $740 HY 5 $527 $423 Pressure washer 08/15/20XX $1,642 HY 7 1

10 S Corporation Workshop Return 4 Description Placed in Service Cost Method Convention Recovery Period Air compressor 09/15/20XX $964 HY 7 Depreciation AMT Depreciation The inventory at the beginning of the year was $350, other costs were $15,631, and the inventory at the end of the year was $350. The cost method was used to value closing inventory. The rules of Section 263A do not apply to property that is produced or acquired for resale, and there was no change in determining quantities, cost or valuations between opening and closing inventory. They use the cash method of accounting. For Schedule B, questions 3 through 13a should be answered No, except the answer to question 10 should be Yes. The company does want completed the portions of the return that the IRS does not require. There are some items that should be included in the shareholder s share, but not in the S corporation s income. The total interest income included in portfolio income is $2, and total charitable contributions were $136. Cash at the beginning of the year was $877, and the basis of depreciable assets was $2,549, with $1,086 of that already depreciated. At the end of the year, there was $80 in cash, $3,300 in loans to shareholders, and a security deposit of $725. Liabilities are listed below. Beginning of the year Payroll taxes...$2,298 Farmer s First (1) LT note payable..$8,000 Farmer s First (2) LT note payable..$9,197 Capital stock...$284 Retained earnings... $(17,089) End of the year Payroll taxes... $7,683 Farmer s First (1) LT note payable... $5,632 Farmer s First (2) LT note payable. $11,252 Loans from shareholders... $1,055 Capital stock... $284 The balance of the accumulated adjustments account at the beginning of the year was $(17,089). There were two shareholders who each owned 50% of the stock and each earned 50% of the officers salaries. Compute each shareholder s basis. Eric Springer, the company s President, lives at 440 Main Street, Atlanta, GA 30311, and his Social Security number is 427-XX-XXXX. He received $4,996 in property distributions other than dividends and loaned $528 to the company. Eric s beginning stock basis is $1,000. Melissa Weaver s Social Security number is 428-XX-XXXX. She is the company s Treasurer and lives at 863 Peachtree Road, Atlanta, GA She received $4,997 in property distributions other than dividends and loaned $527 to the company. Melissa s beginning stock basis is $1,000. The S corporation will file the tax return at the Cincinnati service center. This return should be mailed. 2

11 S Corporation Workshop Return 5 Title: S Corporation Workshop Return 5 Summary: In this lesson, you will learn the following: 1. Create Form 1120S; 2. Complete Form 4562, Depreciation and Amortization with multiple depreciation worksheets; 3. Complete Schedule K-1; 4. Paper file the S corporation return. Steps for S Corporation Workshop Return 5 Start a new return using 40-5XXXXXX. Use your company s EFIN for XX- XXXX. Lincoln Software, Inc. is located at 145 Lincoln Avenue, Baldwin, GA 30511, and was incorporated on September 14, They elected to become an S corporation the same day. Gross receipts for the year were $158,843. Purchases during the year were $60,180. Expenses are listed below. Officer s salaries...$55,266 Rent...$1,557 Payroll taxes...$4,228 State unemployment...$209 State franchise tax...$100 City franchise tax...$3,839 Pension plans...$18,816 Accounting...$635 Automobile expense...$1,346 Computer expense...$60 Telephone...$120 Training...$4,415 Professional literature...$858 Cellular phone...$388 The corporation also depreciated some property. (Replace XX with the current year.) Placed in Service Cost Method Convention 10/01/2010 $3,614 Description Computer equipment Computer equipment 05/01/20XX $1,313 Recovery Period Depreciation AMT Depreciation Section 179 HY 5 $508 $460 $3,000 HY 5 The company would like to take the Section 179 deduction for the total cost of the computer equipment that was placed in service this year. The company uses the cost method to value its inventory. The rules of section 263A for property produced or acquired for resale do not apply, and there was no change in determining quantities, cost or valuations between opening and closing inventory. 1

12 S Corporation Workshop Return 5 The company uses the cash method of accounting for their computer consulting and software business. For Schedule B, questions 3 through 13a should be answered No, except the answer to question 10b should be Yes. The company does want completed the portions of the return that the IRS does not require. At the beginning of the year, cash was $1,615, other assets were $300, the basis of depreciable assets was $3,614, and accumulated depreciation was $3,437. Additional paid-in capital at the beginning of the year was $1,882, and retained earnings were $210. At the end of the year, cash was $6,128 and other assets totaled $300. Additional paid-in capital was still $1,882. The balance of the accumulated adjustments account at the beginning of the year was $210. There was one shareholder. Margaret Tulley is the company s President and lives at 146 East State Street, Baldwin, GA Her Social Security number is 429-XX-XXXX. She owns 100% of the stock and earned all of the officers salaries. Margaret received property distributions other than dividends totaling $1,000 during the year. Her beginning stock basis is $850. Compute Margaret s basis. The S corporation will file their return to the Cincinnati service center. Margaret wants to mail this return to the IRS. 2