How to do corporation taxes

how to do corporation taxes

Things You'll Need

Instructions

Compile financial records. Before you can complete your S corporation tax return, you need to have a listing of all of your business income and expenses.

Read the instructions for Form 1120S. The IRS tax return form for S corporations can be lengthy and complicated, and if you are not working with a tax adviser, it is imperative that you read and follow the IRS instructions for the form.

List your income on Form 1120S. Line 1c is for gross receipts from sales, less any returns. Cost of goods sold goes on line 2, after being computed on the worksheet on page 2. Calculate your gross profit by subtracting line 2 from line 1c. Gains or losses from any property sales must first be computed on Form 4797, then transferred to line 4 of Form 1120S. After adding in any other income, you can compute your

total income on line 6.

Enter your deductions. Allowable deductions for S corporations include bad debts, rents, taxes and license, depreciation not included elsewhere, depletion, advertising, pension and profit-sharing plans, employee benefit programs, salaries and wages, compensation of officers, repairs and maintenance, interest and other deductions. Ordinary business income appears on line 21. Compute this figure by subtracting your deductions from your total income.

Compute your tax. Based on your business income, Schedule D of Form 1120S will show your tentative tax. Excess net passive income and LIFO (last-in, first-out) recapture tax must be added to this amount. Subtract any previous year's overpayments or any estimated tax payments made. If necessary, follow the IRS instructions to compute any estimated tax penalty. The total of these amounts will be your tax liability or overpayment amount.

Sign your return. The IRS does not consider any return filed without a signature to be valid.

Source: ehow.com

Category: Taxes

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