Topic 8 Project: Tax Return Check Figures

Topic 8 Project: Tax Return Check Figures

Form 1120S, Page 1

• Total income, Line 6: $1,011,000
• Other deductions, Line 20: $226,102
• You should have values on the following lines: 1a, 1b, 1c, 2, 3, 6, 7, 8, 9, 10, 11, 12, 13, 14, 16, 18, 19, 20 and 21.
• Be sure you are using Form 1120S and not 1120 or 1065.
• Remember to use 2018 tax forms. Points will be deducted for 2017 or 2019 forms. Forms can be found on the IRS website. Use the “find forms” or search feature. Depending on the time of year, the 2018 forms may be in the “prior year” section.

Form 1120S, Page 2, Schedule B

• Answer “no” to all items. If a field does not need to be completed, leave it blank. Points will be deducted for failing to complete this schedule.
• Answer Lines 1 and 2 based on the information provided in the problem.

Form 1120S, Page 3 (i.e., Schedule K)

• You should have amounts on the line numbers: 1, 4, 5a, 5b, 8a, 9, 12a, 12b, 12d (include type of item), 15a, 16a, 16c and 16d.
• Line 1 should be the same as line 21 from page 1.

Form 1120S, Page 4 (Schedules K [continued] and L)

• Line 17a should be the investment income items added together. Review the Schedule K from Page 3 to determine the amount. For Line 17b, the amount is provided in the textbook problem.
• Line 18 should be $122,733.
• Schedule L is the balance sheet copied directly from the case in the textbook. Remember the assets should equal the liabilities and capital. Complete the values for the beginning and end of the year.
  • Note: Use Column (a) for any items where you may have subtotals, such as net accounts receivable or plant assets. For example, Line 10a should be $374,600 in Column (a), and Line 10b should be $160,484 also in Column (a) with the net result reported on Line 10b in Column (b). The items from Column (b) are added together (or subtracted, as applicable) to get your total assets, liabilities, and equity.

Form 1120S, Page 5 (Schedules M-1 and M-2)

• Use the information from the problem to complete Schedule M-1. Line 8 should be the same net income you report on Page 3, Line 18. Line 4 should be $147,862.
• Schedule M-2 is optional. The information to complete is provided in the problem, such as book net income and distributions. If completed correctly, will result in “added” points, at the discretion of your instructor. Hint: ending balance on Line 8 is $312,533. In order to earn points back, you must show the correct calculation on how the ending value is obtained.

Form 1120S, Schedule D

Complete the Schedule D for form 1120S. Use the boxes on Line 10 to report the information applicable to the capital transaction.

Form 1120S, Form 1125-A

• You should have values on Lines 1, 2, 3, 5, 6, 7, and 8. Check the applicable boxes for Lines 9a, 9e, and 9f.
• The information to calculate cost of goods sold is found in the problem. Be sure not to double count any expenses you report on 1125-A on Page 1 of Form 1120S.

Form 1120S, Form 4797 –

• Use Line 2 to report the items associated with the sale of the business property, as provided in the problem.

Form 1120S, Schedule K-1

• You should have amounts in the same boxes as you reported on the Schedule K (Page 3 of Form 1120S).
• For Lines 12, 15, 16 and 17, be sure to include both the amounts and the applicable code. The codes are located on Page 2 of the Schedule K-1 form.
• For Line 17, use code T at $5,000 for the loan repayment to Herman.
• You are only required to prepare the Schedule K-1 for Herman. It is okay to ignore the second shareholder for purpose of this project.
• Herman is an individual. He has owned 50% of the s-corporation interest all year.

Below are check figures for the individual income tax return:

Form 1040

Taxable income, Line 10:               $194,667^a
Total tax due, Line 78                     $112,934 (use 2017 tax tables)^{b, c}

a: For purposes of this assignment, ignore the Qualified Business Income Deduction. It is a topic beyond the scope of this course and will be covered in the Corporation Taxation (ACC-668) course.
b: Ignore the 3.8% net investment income tax for high-wealth individuals.
c: Remember to take into consideration the items subject to the capital gain tax preference rate when calculating the total tax liability.

Schedule 1

• Line 22 should be $69,017

Schedule A –

• For Line 9, include the investment interest expense from the s-corporation.
• On Line 11, remember to include the cash contributions from the s-corporation.

Form 8949

• Line 2h (Part II), $14,000

Schedule D

• Line 15, $33,333