Things You'll Need
Asset Information Worksheets from prior year returns
Gather all the current documents: the Form 1120 or 1120S, the Profit and Loss Statement, Balance Sheet and information for all assets purchased in the current year. Using the Profit and Loss Statement, enter in the gross sales into box 1a of the 1120. Place the returns and allowances into box 1b, these would be all the refunds to customers when they return items. Subtract the amount in 1b from 1a and your answer into box 1c.
Find the cost of goods sold on the profit and loss statement and enter the total on line 2 of the 1120. Subtracting line 2 from line 1c will give you the Gross Profit on Line 3.
The rest of the portion of the income section of the 1120 are for other income the corporation has made through dividends, interest, rents and royalties received and any capital gains or losses. The total after all income has been added is put on line 11 for Total income.
Separate all expenses on the Profit and Loss statement and fill in the second portion of the 1120 Form which is for deductions. Once all these expenses have been added to the appropriate boxes you will have the total deductions on line 27. Subtract line 27 from the amount in line 11 or Total Income, the result will be your taxable income for the current tax year.
If the corporation had a Net Operating Loss, you would place the current year's allowable portion of that NOL into box 28. Box 29a would be the allowed NOL deduction. Box 29b is for any of the special deductions from Schedule C of the 1120.
Using the Tax Rate Schedule (page 18 of the Form 1120 Instructions, Schedule J) calculate the tax owed and put
the tax on line 31. Using the prior year return check to see if there were any 2008 overpayments of taxes that were credited to 2009 and any estimated tax payments made through the year.Once these calculations have been made there will be either an amount owed or an overpayment.
Get the balance sheet from the current tax year and the prior year's balance sheet. Pull out the prior year return and turn to the Schedule L section of the return. Schedules A through K essentially act as worksheets to help you fill in the income section of the 1120. Look at the Schedule L on the 1120 and fill in the beginning of the year figures on the left side of the return, columns a and b. (The beginning of tax year figures are the end of year figures from the prior tax year.)
Using the current balance sheet enter in the information into columns c and d. Ideally your balance sheet has the same accounts as the 1120 return. Using the figures from the prior year and a depreciation calculator spreadsheet or program, calculate the current year's depreciation, and add it to the accumulated depreciation total. Enter in amounts for Liabilities and Shareholders' Equity and remember that the Assets total should equal the total for Liabilities and Shareholders' Equity.
Reconcile Income according to books with Income according to return. Using Schedule M-1 fill in the Income based on the Profit and Loss statements versus the income on the tax return. There may be expenses that are on the statements that will not be deducted in the current tax year, it could be depreciation, charitable contributions or portions of travel and entertainment expenses that were not deductible. There may be income received on the books that are not included on the return, this would include only tax exempt income.