Filing S Corporation Tax Return – CPA Services Online


Hi, this is Evan Hutcheson CPA. I do virtual accounting for individuals
and small businesses including helping people file their taxes online through screen
sharing. If you’re in the minority of wanting to file your own taxes or perhaps just don’t want to give away
your information like your social, are your bank accounts due to the fear of identity theft, I’m here to help. through screen sharing I can guide you along the complexities are your tax
return from start to finish. Now, when I want to do today is show you the S corporation tax return, it’s form
1120S. I’m going to guide you through this, how
to input the numbers, what the return looks like, what you need to do. One of the things I’m gonna do is
show you the financials, how to transfer financials from QuickBooks, or another financial system, to the tax return. But first I’m going to
just run through really quickly the return itself. You know of course there’s a lot of
pages involved behind the 1120S, but the form itself is about five
pages long. The first page has just some general info: your name, your E.I.N. The date that you formed the S Corporation and so forth. That’s the top of it. Then you get to the
income portion, and then the deduction portion. Now the deduction has a lot of the main expenses like compensation of officers, rents, taxes, depreciation, and so forth. And then you have another
deduction worksheet that just has some of the less common
expenses, but they’re still fairly common. Like accounting bank
charges dues and subscriptions and so forth. Now, you add up these other
deductions with the current deductions, you get total deductions of $281,000…or no, sorry, $484,000. Which, you subtract that from your income and you come up with their net income: $6,636. Then you scroll on down and you get to a lot of questions they ask. They ask your accounting method, your business activity. If anyone owns 20 percent or more, or if a corporation owns 20 percent or if anyone owns 50 percent or more. If you filed 1099s and so forth. Then you get to page three. This is a Schedule K. this is, the schedule K transfers over to the K-1. The k-1 is what you use to file your personal taxes. So after you file your S corp, same
thing for a partnership, if you filed a 1065, you’re income and some other information is gonna move
over to the Schedule K, which transfers to a K1 right here. And you’ll print this out
or send this to your CPA or whatever to input this on your personal tax return. So that’s this part right here. Then you get down to the balance sheets, which is, this won’t
affect your taxes at all. This is just kinda your bookkeeping balance sheets. It helps you…if you earn less than $250,000 or you have less than $250.000 of assets, you don’t necessarily have to file this.
I like to do it anyways because it just helps me kind of reconcile everything together. But this is your balance sheet, your beginning of the year, so that’s
pretty much last year’s balance sheet transferred over to the current year, and
the current year’s balance sheet. And then you have some schedules down below, M1 and M2. But what I want to do is kind of show you all right, how you get your financials that you get from QuickBooks and how you transfer them to the tax return. So we’ll start at the top. At income. And we’ll just take a quick look. Here’s your balance sheet. It’s got your assets and your liabilities and your equity. This
Excel I know, but I just exported it from QuickBooks. So you have your assets which is cash,
fixed assets, security deposits. Your liabilities which is line of credits, note payable and then your equity. Now this is somebody’s books who is not an account. So hopefully, this will help you
understand, certainly if you are not the best bookkeeper in the world and you have some mistakes, I’m going to look at these mistakes and I’m going to try to fix them as I transfer them to the tax
form. That’s your balance sheet, this is your P&L. It’s a cash basis, like we saw on the tax
return that was cash rather than accrual.
Here’s your income and here’s your expenses and then here’s your net income. So, what I do is I x-off what I’ve put on the tax return. So we’ll start from the top. Total income, $539,805. That number there should go right here, $539,805. And this other number right here, this $853, we’ll go over that in a minute. That’s a little more confusing and I’ll try to make
it as simple as possible. but the $539,805 is right there so we need to x that off. And we go to the next line item which is
shareholder compensation. Now what I did with this, here’s salary
and wages that aren’t shareholder and here’s shareholder. I look at the W3, which is a summary of the W2s, which has the total amount. Then I look at the shareholder amounts, shareholder W2, which was $137,605, I just subtracted that $137,605 from the W3 to get the other salaries instead of having to add up every little W2. So I did that. And that $137,605 plus the $485,277, equals $182,882. You see this payroll expense account right here? I take the difference of that and what
we just added up. I got $14,794, and I input that on the tax return under payroll taxes,
because that’s just kind of the plug number. That’s what’s left over from payroll
expenses, I’m putting it on our payroll taxes. Now, people do things differently. On some returns I like to to make sure everything’s good, so I’ll add up the 941, I mean I’ll look through the 941s and the unemployment, the quarterly payroll taxes, and I’ll
make sure that the payroll taxes equal the $14,794. but this is kind of a quick way to do it if
you think this payroll expense number is correct. it’s all the payroll expenses for the year,
then you can do it this way. Just take that, take this as the plug number and put that under payroll tax. I know we’re on cash basis. With payroll, sometimes you want to do payroll on an accrual basis, even though you doing cash basis. I
always do accrual. For instance, so this is 2014 taxes, the fourth quarter 2014 payroll taxes. You know Social Security, Medicare, listed with employment in this case. Whatever state you’re in, you might have that unemployment, and the federal unemployment, all for the fourth quarter, were paid in
January of 2015. So under cash basis, really that wouldn’t be included on here because you’re not including in until you pay it. But for payroll, just to keep it consistent, I use accrual basis. That way, the W 3 is reflective of accrual basis, because it shows the current taxes that are owed for the full year even though some
of those taxes were not paid until the fourth, until January 2015. And you know January 2014, there are some payments made for 2013 that aren’t going to be included on here. So 95 percent of the businesses I
do are cash basis. Most small businesses are cash basis. It’s just easier to do the bookkeeping for it and it’s, there’s usually more of a benefit tax-wise because you don’t have to include the
revenues that you’ve earned at the end of the year that you have not yet collected. Which is usually more than the payables that you have incurred but not
yet paid. So the taxes are usually going to be higher under an accrual basis. but like I said, I do payroll under accrual,
everything else under cash. But anyways, so we’re marking this one off, that’s on here. Uh, repairs and maintenance of $99.00, that’s down here, mark that off, click repairs. Taxes of $954.00 and $350.00. What does that equal, $1304? That would go hopefully on here, right here, $1304. Mark that off. See these taxes? when the IRS sees that, when you file the return, this smart worksheet she is not going to be on there so all you’re going to see
is line 12, $16,098. This is just the way that you kind of divi it out and make sure everything’s good. Like I looked at, I drilled down on that tax expense account on QuickBooks, and I saw that $954.00 was for state
unemployment tax, or not for state unemployment, state
franchise and excise tax. So I put that under this and then I put the remainder under other miscellaneous. Depreciation of $3,452. Now that is…we’ll go over that a little
bit more in depth here in a minute. It’s not on the profit/loss from QuickBooks. What I do, and what’s very important that you do when you export from QuickBooks or when you’re using QuickBooks you to reconcile to the tax return to make sure everything is
good. So here’s the bottom line for
QuickBooks $58,879. I’m adding these differences that are on
the tax return that are in QuickBooks right here in an ongoing all this come up with this number right here I’m So the depreciation was $3,452. It’s not on QuickBooks but it’s right
here. I’m putting it right here to make sure, when we’re all set and done, that this bottom line number:
matches up with what we think we should have, $56,636. It’s $56,638. It’s two dollars off, that’s fine. But we know we’re correct, we didn’t make any mistake anywhere because it matches up. O.K. now we go down to meals, $863.00. 50 percent of meals can be
written off, so really we’re only writing off $432.00, half of $863.00. So we’re going to the P&L, we’re finding and the $863.00, we’re check marking that off. That’s travel and entertainment. I drilled down on this travel and
entertainment, it’s all entertainment, it’s not travel. so it’s all meals, meals and
entertainment. So we mark this off. And then, like we said, we gotta write
this off of the tax return. Half of it’s not deductible, so we need to add half of it back, which is what I did right here. And then we go to the other deduction
worksheets. We have accounting of $1,000, bank
charges a $35.00, dues and subscriptions of $196.00. I’m trying to go through this a little quick because I know you’re…it’s a long video. So we have accounting of $1,000, dues and subscriptions at $196.00 and bank charges of $35.00. equipment rent of $108,529, insurance of $11,251 and miscellaneous expenses $608.00. so we have equipment rent of $108,529, insurance of $11,251 and miscellaneous expense of $608.00. contract labor 1000 oxide 230,000 434 I’m travel to Korea I’m travels 24 EA contract labor won 34-30
I’m Telephone expense of $15.53, supplies of $525.00 your telephone expands I’m 15 53 supplies I’m okay supplies kasich it’s all Evans
production there are no cost to get so there’s no
there’s no inventory of things being sold for this was misclassified this is
really supplies but 450 I’m and then from the balance sheets
there is a fixed asset up seventy five dollars that was in a fixed asset you know it I
seventy-five dollars usually pics at a time to be above you know five
hundred dollars for instance so we move this over to you now I’m sour adding at the supplies setup
putting is the fixed asset I’ll go over that a little more detail that seventy pappas
the 450 which is 525 I’m then we have I’m I O expensive 14,000 917 Iran all 10 some hot pot mileage
reimbursement 1000a I’m to go back here we see the mileage reimbursement 1000a I’m Iran altruism five on audio expense
reporting on so I’m so all these are checked our which is
good I’m this was the mills adjustment this was
the depreciation just here’s the supplies adjustment this bounce you just
move 853 that was on there too script errors I’m
gonna go over yet that was the income I’m ratting due to our first love AR
whatsoever or adding 853 dollars income I’m that’s fine this the positive these
expenses are negatives this expensive the positive because
we’re not taking a deduction for early docking happens at all I’m but as we saw earlier at all matched up
this place these amounts people this so we are good
there I’m and then what we do is we go to the balance sheets so here’s the piano go through all those questions their
schedule today there are getting to the mouse now the balance sheets I’m is I am it like a thoroughly earth not for tax
purposes we put it on here just as informational purposes so this que reporting the previous year I’m the current now what we do and like I said I think I said this
before work on QuickBooks from people that don’t use QuickBooks a
lot so there’s a lot of inaccuracies in this is where we kinda make the
adjustments because the problem last name is what it
is I’m theoretically this amount was spent on
insurance I mean we can almost feel down a mixture
but these amounts should be relatively
accurate the balance sheet on the other hand these amounts that doesn’t mean anything
right there -2005 impossible accounts receivable summer these amounts I’m are just off because profit loss statement it
starts to reach here you put the expense any but then commence their about she is caring caring for value
have all your assets or liabilities which can sometimes get outta hand if
you empower wrong stuff in QuickBooks so where gonna soon that the cash account has been
reconciled position always right and sarcastic now from so this 465 will go on the tax
returns for six I’m here cash I’m basically what we need to do I’m even if this was right we need to put it
on their correctly but I’m we’re not putting these numbers on
the return a really putting that difference between 2013 numbers in 2014
numbers so I kinda put 2013 numbers here I just
look at the older balanchine but the numbers here so the difference between this and this is
legit it is what it is there’s a reason there’s a difference
whatever you input during the year crated the difference in those numbers so that number should be accurate work
it might not be in the right spot but that number is a legit number and it should go on
the tax return somewhere now since this is a cash basis balance sheets we you know before we
exported that we may Charles past not a cruel because we’re doing the return on
a cash basis rather than a girl basis the accounts receivable and accounts
payable if you’re familiar QuickBooks you
probably know those are accrual basis the counseling to change the cash basis
there’s a little glitch in the system that sometimes parades these of a mouse that are def
going on backroom there’s no way there’s a negative 2008
accounts receivable Accounts Payable had nothing time so what we need to do to change its cash
basis is obviously not put this number in
there that’s in no way correct we look at the difference between 2013
and 2014 and we gotta think okay accounts
receivable gets the fact that the other side of the
entry every accounting entry is two-sided when
accounts receivable gets changed it’s a I’m the other side the entry is rapidly I’m
so here you’re purchasing something as a
receivable you are davening receivable and
crediting revenues I’m for not purchasing something if
you’re if you earning something I’m if you’re
increasing the rap when you when you click that was when
he’s have a receivable you’re collecting the revenue and with the pay both chiapas when you’re
collect when you’re crying payable I’m then thats crediting a
payable your debuting an expense now is is the most
confusing part of this video answer I’m sorry I’ll go over this on another video
and more doubt on our party on about 20 minutes so we can go over this to a strong girl
bore you guys but I’m basically I’m since we are from 2013 and 2014 we r decreasing AREC it’s being
decreased by a dinner fifty three dollars I’m to decrease in asset you credit sewer crediting it was credited 853
dollars I’m so we need to David back because
this is a cash basis tax return were not matter what they are
all sore on doing what was done to counter see
you cynthia was credited 853 dollars we needed David 853 dollars but we can’t just change one account we
have the do a journal entry we have to credit and
debit debits and credits have to be so since
we’re davening AR back to what it was we need the credit the other part that
account just sells and that’s why our crediting sells a
tener fifty three dollars and that’s why you saw it on on page one up at the top and other than just on the problem of
the time it’s right here pursing AR 853 dollars the I’m fixed assets I’m these are the amounts for 2014 these
were the announcer 2013 now remember this one this was the
equipment for seventy five dollars into difference in this as I seventy-five
dollars we’re not gonna put that as a fixed asset that’s just there’s no reason to do that was kinda
expensive and that’s why we put that on their supplies on a tax return we also
put it under the adjustments right near the
boundary adjustments right here see here’s the revenues here’s the
expense for adding on the bouncy I’m the other your mouth from a bouncy are on the
fixed assets this 9214 the seven thousand see a difference in this and there’s a
seven grand those are those are legit assets this was a camera for seven grand I’m so we go to the depreciation
schedule we can see in aspen tree over and see 300 seven thousand dollars and
then the GMC van for 9240 I’m now with the i cant im you can
completely right of its equipment you can write off at least
2014 the right of the 179 I’m the GMC van you can only run portion of it 3,000 burned 60 the
remaining amount can be the pre another forming out but part of it can be elite
apprec our site appreciate it and then they’re gonna be a leftover
meds I’m so this amount was 17 I’m so it’s free
for 60 full amount of sex on 7 I’m is 3460 close 7,000 from the can Bama which equals
10,000 460 this 179 deduction goes on Schedule K the regular depreciation that we saw
from that band I’m that was always on page 1 I’m right here 3452 over appreciation for to and that’s also the what we made the
adjustment PA announcement was originally honor sewn together balance sheet hopes we go to the tax amount: room we have the castle 465 we saw we don’t
have a are on here as caspase as we just made that
adjustment to the revenues however this time this is the fixed assets so we increased
the fixed assets by white 9000 to earn $14 plus than
7,000 so I’m not sixteen Graham we increased the I’m appreciation by about 14 grams I’m so we have leftover 2,302 which is the ha spaces left natural
appreciation so if you look at that a GMC van if you subtract out if you take the full
amount take out the 179 the current
appreciation you get this amount right here I’m which them out leftover that has not
been the preferred I’m and I go back to the balance sheet we see your deposit which was the same as 2013
I’m so that Cisco’s I mean that continues on your gonna keep at your I’m the liabilities and equity down here I’m this was the payable for some equipment that was fully paid off
I’m this is sales tax payable there was a 48
now I’m 32 at as of the end of the year so you know I’m it’s not a near-perfect as you can see always negative there’s
an early ever being negative on about to I mean muscle to contract pounds
which manatees are there’s no cable Balboa negative 3,995
in 2014 at the end of 2013 it was 14 593 to the difference between those is 18
589 I’m payments made the number and that’s why
we got rid of that pay awards be fully paid off sales tax payable I’m worsening is correct I’m twinks in 2013
it it was then put on the back burner was
848 and the I’m the 2014 a mouse 932 corporate 9:30
right here I’m for keeping the capital stock im and the same retain earnings you know
fixes itself depending on how much income in the system and that’s how the bouncy bounce is I’m now they go back this balanced coming
over work I’m the I’m we’ve made I’m this right here this line of credit this
is personal line of credit has it in his QuickBooks for whatever
reason so he doesn’t as you can see the only thing that is
reflected on this account for his payments that’s why it’s something she leaves a
negative so in 2013 yet and may have to put to learn
14020 14 getting a gift from 39,000 say they took
total payments 25,000 I’m that’s personal I’m is making personal
payments I’m on I’m inferior from a business account we’re
increasing this cloned a shareholder about 25 pounds I’m now we don’t want this to get too high
I’m because eventually is gonna have to pay
back now in the company has also heard if he sells it this is a reliability are sorry a real asset but personally
it’s like his liability it alone him he’s gonna have to pay it back
eventually so that’s a little bit troubling you know we could
put it as a dividend the pay taxes on it or try not to do that because as you might know if the corporation for
paying dividends you’re paying double taxes are paying for the business
and Peru um and personal for and try to pay this
back and what else do we have on your the other kinda weird thing on here was
the this $500.00, that’s no
longer a payable. I’m was a negative however payable I’m buddy they retained earnings I’m was also our so they cancel each other out so you
need to do is look at your previous years net income close retained
earnings make sure those equal your current year retained earnings. Because retained earnings is your previous retained earnings plus or minus your net income. so his previous retain earnings I’m clusters are 2013 net income people this amount which is five hundred
dollars more than the I’m so rock I’m and this is Byron dollars more than the business partner dollars less than the
so I look back a QuickBooks other than are trailing realize that there are the
five hundred dollar payment up entry made in the QuickBooks I’m after we pray now between 2013 balance
sheet so basically I’m and Mike June 2014 someone went back
the 2013 made an entry which is what you should never do you should never go make an entry way back then that’s was
gonna screw things up as you can see here but we just cancel both these out
within a make an adjustment to the Paypal right here you know I got here this foreseeable we
had the credit cells we would have had to credit supplies supplies expense for another expense
right here so the difference but we found it down here so we’re not gonna do that Skype fix itself so this has been 30 minutes it has been a thirty minute long video
set up sorry about that I hope this helps I’ll little I wanna go
over and I wanna go over the return self my mark
that but I know 30 minutes is a long time. Just real quickly, I’ll say some of these
expenses down here. Most of these are going to be “no.” You’re still going to have to read through them because there’s always a chance that it could be, “yes.” On this one right here, did you make payments that would required 1099s? The answer is, “yes.” Did we file them?
I sure hope we did, the answer is “yes.” With some these, this is at the end
of the tax year, did the corporation own directly an interest of 20% or more in another domestic partnership or a trust. So you just kind of have to read through these and make sure that that you’re good on these. It’s usually going to be “no,” but there are definitely occasions when the answer is “yes.” so just make sure you look for them
they’re not as daunting as they seem But you know after all is said and done,
like I said this $56,793 transfers over to the Schedule K, which is right here, along with the $179.00 that was So those two numbers are on the K-1, which is what you use to file your tax
return. So I hope that helps a little bit. I know it’s kind of confusing. I’ll try
to do another video explaining more of the accounting part of that balance sheet because I know that it can be really difficult to understand if you’re
just learning it. But anyways, like I said, if you have
any questions you know contact me. I’d be happy to work with you and either file your taxes for you are kinda train you as you go
through them. So I hope to talk to you soon. Thanks a lot, bye.

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