Income & Related Items

Facts

Enter the following information for a sample client:

Both officers are directors.

Force the optional officers compensation statement to print and view the results of the above entries on Form 1120S.

Program Considerations

Income

• Enter the gross receipts or sales from all business operations. The program carries this amount to Form 1120S, line 1a.

Cost of Goods Sold

• The entry for Beginning inventory prints on Form 1120S, Schedule A, Cost of Goods Sold, line 1 and carries to the respective line on the balance sheet. The entry for Ending inventory also carries to the balance sheet. The entries from the Balance Sheet input do not automatically carry amounts to Form 1120S, Schedule A.
• All other entries print on the respective lines on Schedule A, and amounts entered for Additional Section 263A costs and Other costs will be detailed on supporting statements.

Deductions

• Enter the deductions to print on Form 1120S, page 1, lines 7 through 20. Deductions that do not go on a specific line are totaled on line 19 and included on a supporting statement.
• For meals and entertainment, the expenses should be entered in full. The program limits the amount entered to 50% and includes the result on Form 1120S as an Other Deduction. The program carries the 50% disallowed amount to Schedule M-1, line 3b.
• The program carries the total officer compensation to Form 1120S, line7. The program excludes any compensation for officers who are marked as Director only. If the option for Optional Officers Compensation Statement is set to Yes, the program creates a statement listing the officers.

Income and Deductions (Schedule K)

• Entries in the Income section can be used to complete or adjust Form 1120S, pages 2 & 3, Schedule K, lines 1 through 6. Enter tax-exempt interest income and other tax-exempt income in Screen 31, Schedule M-1.
• Entries in the Deductions section can be used to complete Form 1120S, page 3, Schedule K, lines 7 through 10. Enter nondeductible expenses in Screen 31, Schedule M-1.
• The Section 179 Deduction section contains entries used to override the cost of section 179 property, the taxable income for the section 179 limitation on Form 4562, and adjust shareholder-employee compensation for the taxable income limitation for the section 179 expense. This section also provides an input field for section 179 carryover disallowed in prior years.

Rental Real Estate

• Enter the kind of property and its location. If you leave these fields blank, the program may incorrectly calculate and print Form 8825. These entries print on Form 8825, line 1, and the program uses them to identify supporting statements. You can check the box to indicate this is not a passive activity. The program uses this entry to print "Nonpass" on the shareholders' Schedule K-1 supporting statements. If you leave this field blank, the program assumes this rental relates to a passive activity. The program prints "Passive" on the shareholders' Schedule K-1 supporting statements

How?

To enter Income, Cost of Goods Sold, Deductions, Schedule K Income and Deductions, and Rental Real Estate Income:

1. Open the sample client.
2. Click the applicable screen from the Contents tab.
3. Enter the information from the tables above.

To print optional officer compensation statements for all clients:

1. On the Settings menu, click Options.
   
2. Click the Tax Return tab.
   
3. In the Federal Tax Options section, set the option for Optional Officers Compensation Statement to Yes.
4. Click OK.

Note: There is also a per-client override for this option in the Miscellaneous section of Screen 2, Officer Information .

Tips & Shortcuts

You can use [Ctrl]+[E] to enter income items if a detailed list is desired.

Review

You should have entered income and deductions for the sample return and produced the following results on Form 1120S:

Troubleshooting

Problem: Total income is not correct.

Solution: Total income is calculated as follows:

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