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Drake Software User`s Manual

1. If the explanation requires more than seven screens only the first 6 500 NOTE characters of the explanation are transmitted with an e filed Form 3115 There is no character limit for paper filed returns The ATT screen has a separate section to be used only for Part II line 10 The IRS requires that the attached statement in addition to providing an explanation include the taxpayer s name and ID number Enter the name and ID number and indicate if the ID number is an EIN in the applicable fields at the bottom of the ATT screen Figure 51 For STM 2 10 Part ll line 10 statement ONLY Hame ID number EIN Figure 51 Special section for entering taxpayer name and ID number for Part II line 10 located at bottom of the ATT screen Some Form 3115 items require the attachment of documents that cannot be created in Drake Software for example line 4d of Part II requires written consent from a direc tor You can however attach such a document to the form as a PDF Tax Year 2012 Drake Software User s Manual Form 3115 Application for Change in Accounting Method See the PDF screen for directions on generating and attaching PDFs Click the Screen Help button for directions on converting other types of documents into PDF Do not enter data on the PDF screen itself If using the directions pro vided on that screen skip Step 2 which instructs you to fill out the col NOTES umns at the bottom of the PDF scr
2. The trial balance template 1s displayed in Microsoft Excel Naming Whenever a new template is opened the tax software assigns it a default file location Convention and name Trial balance templates are saved in the TB folder of your Drake11 soft ware The file name consists of the client name as entered in Drake plus TB for trial balance plus the xls suffix assigned to all Excel files as shown in Figure 32 on page 48 Tax Year 2012 47 Importing Trial Balance Information Drake Software User s Manual NDrake12119 entityName rcs to 1 File location Name of Indicates Excel client trial extension balance file Figure 32 Fxample of trial balance template file name To change the name of a file in Excel select File 5 Save As in Microsoft Vista and Windows 7 click the Office button in the upper left corner and select Save As and assign the new name If saving a trial balance to a different location make a note of where NOTE youre storing it The program automatically looks in the default direc tory Template The trial balance template consists of three title rows and six columns The Entity Structure Name and Year End title rows can be edited double click a row to change the title Columns are described in Table 4 Table 4 Trial Balance Template Columns Column Description Account Title Title of account Debit Credit Debit and credit amounts Import to Screen and line in Drake to which the debit o
3. To reconcile the differences it is best to compare the corporation s beginning and ending balance sheet amounts for the tax year To deactivate the autobalance feature for a specific return go to the PRNT screen and select Turn off autobalance Schedules M 1 M 3 Reconciliation of Books Return Schedule M 1 is required if the balance sheet s total assets at the end of the year are greater than 250 000 Schedule M 3 is required if the balance sheet s total assets at the end of the year equal or exceed 10 million If the S corporation is filing Schedule M 3 and there are entries on the NOTE M1 screen it s best to delete the M1 screen To do so open the M1 Tax Year 2012 screen and press CTRL D 29 Schedules M 1 M 3 Reconciliation of Books Return Drake Software User s Manual Schedule M 1 Depreciation and Amortization Adjustments 30 Schedule M 1 shows all items of income and expense that are not subject to tax plus those accounting items that are not income tax items When required taxpayers must reconcile book income with taxable income Use the MI screen to enter book to tax difference for Schedule M 1 Book to tax dif ferences are classified as permanent or temporary and as favorable or unfavorable Examples of both kinds of differences are shown in Table 2 Table 2 Examples Book to Tax Differences for Schedule M 1 Permanent Book or tax items that will never be Meals amp entertainment limit
4. 12 d tand Overrides calculations from on the 4562 detail screen or the Subsidiary Schedule for the Balance Sheet SCH2 screen Overrides calculations from on the 4562 detail screen or the 13a a l aa pangpiga Subsidiary Schedule for the Balance Sheet SCH2 screen Overrides calculations from on the 4562 detail screen or the 13a c l m Mn add Subsidiary Schedule for the Balance Sheet SCH2 screen E Overrides calculations from on the 4562 detail screen or the 13b a Less accumulated a t Me um Overrides calculations from on the 4562 detail screen or the 13b c Less accumulated amortization Overrides Worksheet Override Location CC 9creen Line Field Name Location of Information Being Overridden 1120S Schedule M 1 Reconciliation of Income Loss per Books with Income per Return 3 Expenses recorded on books this year not included on Overrides the amounts carried from the Schedule K lines 1 12 schedule K line 1 12 and 141 or m and 141 or m Deductions included on Schedule K line 1 through 12 Overrides the amounts carried from the Schedule K lines 1 12 and 141 or m year chedule M 2 Analysis of Accumulated Adjustments Account 1 S Nensdividend distributions es the amount that flows from Schedule K screen 3 line chedule M 3 Net Income Loss Reconciliation CA 9n 92929m 2 Income statement period Overrides default calendar year dates or fiscal year dates Beginning
5. Schedule M 1 line 3a Schedule M 3 Part III line 24 as a negative amount Form 8916 A line 21 as a negative amount for assets selected on the 4562 detail screen for COGS If the tax depreciation amount is greater than the book depreciation amount the difference is carried to one of the following locations Schedule M 1 line 6a Schedule M 3 Part III line 24 as a positive amount Tax Year 2012 Drake Software User s Manual Schedule M 2 Analysis of Accounts Schedule M 3 Accessing the M3 Screens The SCH3 Screen Form 8916 A line 21 as a positive amount for assets selected on the 4562 detail screen for COGS Any domestic corporation or group of corporations that report on Schedule L of Form 1120S total assets at the end of the S corporation s tax year that equal or exceed S10 million must complete and file Schedule M 3 instead of Schedule M 1 If the S corpo ration is required to file or voluntarily files Schedule M 3 it must file Form 1120S and all attachments and schedules including Schedule M 3 The Schedule M 3 section of the Data Entry Menu provides direct access to the fol lowing screens e M3 M32 and M33 for Parts I IL and III of the Schedule M 3 e M3S for supplemental statements e SCH3 for subsidiary schedules for Schedule M 3 and Form 8916 A e 8916A for Form 8916 A Supplemental Attachment to Schedule M 3 Certain income deductions gains and
6. forcing the program to generate the item on a return e Shareholder s adjusted basis worksheet WK SBAS e K I codes page 2 of the Schedule K 1 The following K 1 items can be suppressed kept from being generated on a return e Related documents Schedule K 1 K 1 cover letter K1 ATT worksheet for K 1 statement overflow and shareholder s adjusted basis worksheet WK SBAS e Marking of Amended K 1 box on printed Schedule K 1 e KI DIST worksheet Overriding Other Setup Options Filing instructions and envelope coversheets can be either forced or suppressed from the PRNT screen to override the global setting in Setup The PRNT screen also includes options to disable autobalance see Autobalance on page 29 calculate the Form 2220 penalty and prepare an extension Form 7004 based on the data entered on screen 1 See Filing an Extension on page 17 Guide to Overrides and Adjustments Tax Year 2012 Appendix B Adjustment Worksheet and Appendix C Override Worksheet of this supplement are overrides and adjustments worksheets that allow preparers to see what data or calculations are being affected when an entry is made in an override or adjustment field These spreadsheets can provide a better understanding of how over rides and adjustments work in the software 39 Electronic Filing Drake Software User s Manual These worksheets are also available through the FAQ screen from a
7. Adjusts amounts flowing from K1P screen line 17 code C or 15c Depletion other than oil and gas alike lban code 15d Gross income from oil gas and geothermal Adjusts amounts flowing from K1P screen line 17 code D 15e Deductions from oil gas and geothermal Adjusts amounts flowing from K1P screen line 17 code E 15f Other AMT items attach schedule Adjusts amounts flowing from K1P screen line 17 code F and K1F screen line 12 codes and J i Gi 0 Post 1986 depreciation adjustment 15b Adjusted gain or loss Q D gt Oo gt ho Q o gt my O Adjusts amounts flowing from K1P screen line 18 code A and from the K1F screen line 14 code A Adjusts amounts flowing from the bottom of screen 3 line 16b and from K1P screen line 18 code B Adjusts amounts flowing from the bottom of screen 3 line 16c and from K1P screen line 18 code C Otficer ite insurance premiums Aust amounts flowing from the bottom of screen 3 line 16c 17a Investment income Adjusts amounts flowing from the K1P screen line 20 code A 17b Investment expenses Adjusts amounts flowing from the K1P screen line 20 code B 17d H Recapture of other credits Adjusts amounts flowing from the K1P screen line 20 code I Adjusts the amounts flowing from the WK 179 net gain or loss 17d K Dispositions of property with section 179 deductions on sale of an asset subject to section 179 and the K1P screen line 20 cod
8. General Complete all applicable fields in the General Information section Note that the information fields for business activity and tax year change are override fields Figure 44 Com plete these fields only if you want to override the equivalent information entered on screen 1 or screen K Form 3115 Application for Change in Accounting Method General Information Principal business activity code number Tax year c change begins ANJ Tax year of change ends 0 CC 7 Name of applicant if different from filer ID number of applicant if different from filer Name of contact persan Figure 44 Override fields in the General Information sections of the Parts I III screen Tax Year 2012 57 Form 3115 Application for Change in Accounting Method Drake Software User s Manual Part Not all applicants are eligible to use the automatic change request procedures After answering la 1b and 2 in Part I Information for Automatic Change Request click the blue Parts II IV tab at the top of the screen In the Part II Information for All Requests section of screen Parts II IV answer question 3 see Figure 45 If the answer is Yes you are stating that e The entity would be required to take the entire amount of the section 48 1 a adjustment into account in computing taxable income for the year of change e Section 4 02 8 of Rev Proc 2011 14 applies to the applicant s accounting method change request a
9. Support DrakeSoftware com gt 828 524 8020 Drake Software User s Manual Tax Year 2012 Supplement S Corporations 1120S Support DrakeSoftware com 828 524 8020 Copyright Trademarks Drake Software User s Manual Supplement S Corporations The 2012 Drake Software Manual Supplement S Corporations Drake Tax Software and any other related materials are copyrighted material All rights are reserved by Drake Enterprises LTD including all ownership rights This document associated software and related material are the property of Drake Enterprises LTD Drake Enterprises LTD hereby authorizes you to download display print and repro duce the material in this document in an unaltered form only for your personal non commercial use or for non commercial use within your organization Copyright trademark and other proprietary notices may not be removed O 2012 Drake Enterprises LTD All rights reserved While every attempt has been made to produce an accurate and complete manual there is no warranty expressed or implied to that effect Drake Enterprises LTD assumes no liability for damages or claims resulting from the use of the information contained herein The Drake Software Logo and Drake Tax are registered trademarks of Drake Enterprises LTD Other product names mentioned in this manual may be trademarks or registered trademarks of their respective companies Tax Year 2012 Drake Software User s Manu
10. Figure 40 Depreciable Assets 4562 Depreciation Detail Item B 4562 Part 1 T 4562 Parts 2 and 3 a 4562 Parts 4 5a and 6 4562 Parts 5b and 5c Additional Depreciation Elections Figure 40 Enter depreciable asset data on a 4562 detail screen or enter the total depreciation on the override screens screens 6 7 8 and 9 Figure is from 1120S data entry menu Entering the remainder of the depreciation on the trial balance work sheet helps ensure that the balance sheet balances and provides a way to check that the amount on line 1 of Schedule M 1 is correct Compare NOTE the calculated line 1 at the bottom of the trial balance to the equivalent line on Schedule M 1 of the calculated return If the depreciation amounts match but the line 1 amounts differ an M 1 adjustment could be required Rental The following information applies only to S corporations with multiple rental proper Expenses ties The S corporation trial balances include lines for rental income and expenses Both rental expense items require a trial balance detail worksheet Account Title pent cred mportto Reportedom Cash L line 1 cold Form 11205 Sch L line 1 cal d Trade and accounts receivable L line 2a cal c Form 11205 Sch L line 2a cal c Form 11205 Sch L line 2a cal c x d maikli a it Me nu N a J Allowance for bad debts L line 2b cal c ee a E GAN i M PF c wc RENE Low xw PEE pa 2t
11. amount is carried to Form 8825 lines 20a and 20b No entry is required on the 8825 screen Viewing Rental Activity Information Rental activity data is viewed on the 8825 forms and accompanying statements Tax Year 2012 35 Credits and Adjustments Drake Software User s Manual e 8825 Forms The two page Form 8825 can contain information for up to eight rental activities Each Form 8825 in View mode contains up to eight rental activities If more are entered a second Form 8825 is created 11205 PG2 11205 PG3 11205 PG4 Rental activities 41 8 Rental activities 3TATMENT starting at 9 WK M2 FOLDR FILEINST LETTER PRIYACY BILL SUMMARYS COMPARES LEE tf 00002 EEE Figure 19 Multiple 8825 pages are created 1f more than eight rental activities The Form 8825 in View mode consists of one or more pages depending on the number of rental activities listing up to four rental activities per page If more than four rental activities are entered scroll down to the second page of the Form 8825 when viewing e 825 Statements Statements are titled STM 8825 XX where XX equals the instance of the 8825 screen For example the statements for the first and second 8825 screens would be labeled STM 8825 01 and STM 8825 02 respectively There are also 8825 attachments 8825 ATT for other report ing information Credits and Adjustments Certain credits require an adjustment to either income or expenses The program car
12. code drop list Energy Credit Qualified microturbine property Basis of Overrides the cost entered on the 4562 detail screen as 12i determined by the code ED entered in the Investment credit property installed code drop list 179 expense ALLOWED this year Federal lt D ium Ss Q D n Lam si gt D O O n Fr D 5 mp D D Q O 2 ond 3 D n Qi o N Q D ccp B n O D D z D n TH jab Qualifying gasification project credit Basis of investment property not included in a above ar on C1 o O A CO Rehabilitation property Certified historic structures in vm the Gulf Opportunity Zone Form 6478 Alcohol and Cellulosic Biofuel Fuels Credit 2 Alcohol 190 proof or greater Overrides the default rates Refer to form instructions 38 Alcoholless than 190 proof Overrides the default rates Refer to form instructions 2 3 4 O lt D D o D 3 O c 2 e n A O 3 A Tl o O D D 2 5 D Co Q O Q D r Set Poneto eeuced ane DOO MSIE Overrides the default rates Refer to form instructions Form 8609 Low Income Housing Credit Allocation amp Certification Schedule A Annual Statement Override of computed rate 8845 Indian Employment Credit Form 8845 credits from pass through entities Schedule K 1 for 1065 K 1 P 2 Overrides computed rate on Form 8
13. i 3 Indirect labor X 4 Officers compensation not including selling activities E E RR NEHME Cc xl 5 Pension and oher related costs eee Fl 6 Employee benefits IA re I xl dE AM MU M eS gp ern err pong nag aom ls sno las N Figure 48 If any box is marked B click the D3 2 Attachment link to open the ATT screen and complete the fields for an attached statement Use screen 311E accessible from the Other Forms tab to complete Schedule E Change in Depreciation or Amortization If changing this method under the automatic change request proce NOTE dures see the List of Automatic Accounting Method Changes in the IRS Form 3115 instructions Unlike the other 3115 screens screen 311E contains two multi form code text boxes Multi form code for 3115 This box is applicable if the return contains more than one Form 3115 Enter the code for the instance of the 3115 screen with which this 311E screen should be associated Multi form code for Sch E This box is applicable if the return contains more than one Schedule E A separate 311E screen should be used for each property Assign each property a separate code in its Multi form code for Sch E This code enables you to associate any attachments with the correct Schedule E property See Attachments on page 63 If the return contains more than one Form 3115 and multiple instances of Schedule E both multi code fiel
14. ries the required adjustments to the appropriate line of the return and to either Sched ule M 1 or Schedule M 3 Manually reducing the expenses or deductions or increasing the income for these credits causes the return to be out of balance Adjustments are made to other income for the credit amounts for the following cred its e Form 6478 Alcohol and Cellulosic Biofuel Fuels Credit e Form 8864 Biodiesel and Renewable Diesel Fuels Credit e Form 8912 Credit to Holders of Tax Credit Bonds interest income Adjustments are made to the appropriate deduction or expense for the credit amounts for the following credits 36 Tax Year 2012 Drake Software User s Manual Elections Elections Form 5884 Work Opportunity Credit e Form 6765 Credit for Increasing Research Activities e Form 8820 Orphan Drug Credit e Form 8845 Indian Employment Credit Form 8846 Credit for Employer Social Security and Medicare Taxes Paid on Cer tain Employee Tips e Form 8881 Credit for Small Employer Pension Plan Startup Costs e Form 8844 Empowerment Zone and Renewal Community Credit e Form 8912 Credit to Holders of Tax Credit Bonds e Form 8932 Credit for Employer Differential Wage Payments e Form 8941 Credit for Small Employer Health Insurance Premiums The ability to make certain tax elections is included in the business packages Elec tions are selected from the Return Elections section of the ELEC screen Figure 20 Return Elec
15. 4 Use screen 8949 to enter capital gains and losses The net gain from screen 8949 is carried to lines 7 and 8 of Form 1120S page 3 Schedule K Use screen 8949 to enter data for Parts I and II of Schedule D Form 1120S Capital Gains and Losses and Built in Gains Use the DTAX screen for Part III Built in Gains of Schedule D Form 1120S For information on using the Schedule D import feature in Drake see Schedule D Imports in Chapter 5 of the Drake Software User s Manual Tax Year 2012 Estimated Tax The 1120S does not have a federal estimated tax voucher Estimated tax payments are required only in certain situations An S corporation must make electronic deposits of employment excise and corporate income taxes using the Electronic Federal Tax Payments System EFTPS Use the ES screen to enter federal and state estimated taxes paid in 2012 If the return was updated in Drake from 2011 this information 1s carried over Note that this infor mation will be overridden by any entry in the Current year estimated tax payments field on screen 4 Use the ES screen for 2013 estimated payments Future year amounts appear on the ES SUM worksheet generated with the return To enter the amount to be credited use the OP to 2013 field Note that this information will be overridden by any entry in the Amount to be credited to next year s estimated tax field on screen 4 Payments with Extensions To make a payment with an extensi
16. 7 ATT SSW literal on Form 1120S Repairs and Maintenance Bad Debts Rents Enter repair and maintenance costs on the DED screen An amount entered there is combined with the amount 1f any entered in the Repairs and maintenance field on screen F Use the Bad debts field on the DED screen to enter the total debts that became worth less in whole or in part during the year but only to the extent that such debts related to a trade or business activity Enter deductible non business bad debts as a short term capital loss on NOTES screen 8949 Sales and Other Disposition of Assets Cash method S corporations cannot take a bad debt as a deduction unless the amount was previously included in income Use the DED screen to enter rent paid on business property used for a trade or busi ness activity If the corporation rented or leased a vehicle enter the total annual rent or lease expense incurred in the trade or business activity of the entity and then complete Part V of the 4562 screens 8 and 9 NOTE The Rents field is an adjustment field An amount entered here is com bined with the amount if any entered in the Rent fields on screen F Taxes and Licenses Tax Year 2012 Enter tax and license amounts on the DED screen Amounts are combined and the sum generated on Form 1120S line 12 Taxes and licenses Note that credit from Form 8846 Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee T
17. Electronic Funds Withdrawal Schedule L Balance Sheet EE Options Overri L Assets L2 Liabilities and Capital SCH2 Balance Sheet Subsidiary Schedule FAQ Frequently Asked Questions PRINT Print Options Enter Screen State or City Code PDF Figure 25 Select PDF Attachments or type PDF into the selector field and press ENTER 2 Fill out the columns on the PDF Attachments screen See Table 3 for examples Table 3 PDF Attachment Window Columns Reference Source Name or number of regulation IRS Pub xxx 1 4 publication or form instruction that Form Instructions for 1120S makes attachments necessary Description Description of form or document to Title of house on Oak Street be attached Appraisal of Lot 1234 File name Distinctive easily recognizable file TitleHouseOakSt pdf name followed by pdf AppraisalLot1234 pdf 3 Exit the PDF Attachments window Because you ve indicated that a PDF document is attached the program generates an EF message page regarding the attachment when the return is calculated Attaching To attach a PDF file to a return Documents to the Return Tax Year 2012 43 Binary Attachments Drake Software User s Manual 1 From the return click View If anything was entered in the PDF Attachments window see Adding PDF Documents in Drake previously there will be two PDF related items in the View Print window e An EF Message item 1 in Figure 26 e An Attach
18. Enter the income totals on the trial balance sheet and the expense totals on the applicable detail sheets Figure 41 on page 54 3 Ensure that the balance sheet is in balance 4 Import the trial balance worksheet into the return The applicable screens in data entry now contain the figures entered on the trial balance worksheet 5 Enter the amounts on additional screens that require details For more informa tion on data that cannot be imported see Special Conditions on page 52 6 Compare the M 1 line 1 amount on the trial balance to the M 1 line 1 amount on the calculated return to ensure that they match If the amounts do not match review the imported amounts to ensure NOTE that all data was imported If the data appears to have imported cor rectly an M 1 adjustment could be necessary 7 Complete all 8825 or RENT screens in data entry as applicable for the individual rental properties or items 8 Delete the 8825 and RENT screens that were imported from the trial balance the screens reflecting the total rental expenses To delete a screen in data entry open the screen and press CTRL D If NOTE a multiple forms list appears ensure that the screen to delete is selected then click Delete Form 3115 Application for Change in Accounting Method Tax Year 2012 Form 3115 Application for Change in Accounting Method is an application to the IRS to change either an entity s overall accounting method or the accounting treat
19. Gross receipts or sales not reported on line Taw 1d Returns and allowances plus any cash back included on line 1a 2 LOS khit HA AA AA AA AA IA EAT E D TENER EHE EN M rs mmi LT nte E PUTET OSHHRLL LL PEPPER nt SAAN Figure 31 Example of an unnecessary detail worksheet Remove unnecessary detail worksheets prior to import See Detail Worksheets on page 49 for more information on using detail worksheets in the trial balance Preparing Financial Data for Import To prepare the financial data for importing into the return the data must be entered into Drake s specially designed trial balance template Once this information is entered and saved it can be imported into the return Openinga The first step in preparing financial data for importing is to open a trial balance tem Template plate for the return and enter the financial data To open a trial balance template for a return a 1 Open the return to the Data Entry Menu me 2 Click Import 5 Trial Balance Import in the menu toolbar The preliminary Trial Balance Import dialog box is opened 3 Click Create New or Open Existing If opening an existing file click Open after selecting the correct file 4 Ifa Security Warning box appears click Enable Macros In Microsoft Vista and Windows 7 you will see a Security Warning NOTE message with an Options button Click Options to open the Security Options dialog box then select Enable this content Click OK
20. PDF button on the toolbar item 2 in Figure 26 gu m Data Entry Print Setup Archive Email Refresh Basic View KI Expo Select Farms to Yiew Frint All Forms Sets 4 Federal worksheets NotesMessages Missouri North Carolina Ohio Pennsylvania I4 19 Federal a i MG 1120S U S Income Tax R D E Form i pp Do not file this form u il fad 11205EF P S kund ata Department of the Treasury MINH PA ss LL 11205 Internal Revenue Servic P See 5 EU WT 1 1 Ie SS NEL caldeniecip dues RR CEEE E pif tad Figure 26 The Message file and the Attach PDF button 2 Click the Message file to view EF messages including information on how to attach the required documents to the return 3 Click the Attach PDF button The EF PDF Attachments window displays the information entered on the PDF Attachments window in data entry A red X means the document has not yet been attached a green check mark indicates an attached document Drake 2011 EF PDF Attachments Required PDF Attachments The list below contains PDF Attachments that are required for electronic filing Select an item from the list and click Browse to locate the associated POF file Items with a green check mark already have the PDF file Items with a red 757 are missing the required PDF File Reference Description Required PDF FileM ame e Form 11205 Box G Form 2553 FORM 2553 PDF e 3115 Ill Line 20 Proposed Change Documents PROPOSEDCHANGEDOC
21. Screen 8949 has fields for Form 8949 Schedule D and Form 1099 B data Following Schedule D are some guidelines for data entry on this screen first for 1099 B information and Form 1099 B then for 8949 specific information e Date of Sale or Exchange If a single date does not apply type Bankrupt Worthlss or Expired as applicable Select S or L from the Type of gain or loss drop list to have it treated as short term or long term If Expired is entered the return must be paper filed e Date of Acquisition Enter the date acquired as an eight digit number using MMDDYYYY format This date is used to determine whether the sale is short term or long term Enter VARIOUS INHERIT or INH2010 as applicable Only Various Inherit and Inh2010 are acceptable for e filing Press 2 Tax Year 2012 Drake Software User s Manual What s New in Drake for S Corporations CTRL F to force the software to accept INH2010 Select S or L from the Type of gain or loss drop list to have it treated as short term or long term e Type of gain or loss Select from the drop list to describe the gain or loss as long term or short term e Stock or other symbol Enter the stock or other symbol for the security sold e Quantity Sold Enter the quantity of securities sold Proceeds from sale Enter the sale amount If only the gain amount is avail able enter the gain amount and leave the Cost or other basis field blan
22. Tax year of change begins Overrides entry made on screen 1 General Info Tax year of change ends Overrides entry made on screen 1 General Info Contact person s telephone number Overrides entry made on screen 1 General Info Parts Il IV Section Net Section 481 a adjustments for the year of change orm 7004 Application for Automatic Extension for Form 1120S i i m m 112 1 li 6 Tentative tax before credits Payments Credits UU ME amount CA CURE OHIO 0S page 1 line p m 112 1 li 7 Prot aene indere o the amount calculated on Fro OS page 1 line orm 8027 Employer s Annual Information Return of Tip Income and Allocated Tips WEN Overrides calculated amount for line 7 of form place x in line 6 7 Allocation of tips if using other than calendar year to activate this override AAR Form 8082 Notice of Inconsistent Treatment or Administrative Adjustment Request Corporation s tax year Overrides dates entered on screen 1 orm 8283 Noncash Charitable Contributions e Changes information on Form 8283 from section A to section B Restrictions Override section l or vise versa SS pp rf tl E TI Overrides amount carried from ES screen TH General Info am i Nr o1 Overrides amount flowing from Form 3115 section A line 1h TH Tl TH Form 8716 Other Than Required Tax Year Election oU Form 8822 Change of Ad
23. These fields should not be used if the entity is filing a full calendar year return If filing a short year return other than an initial or final return you will need to pro vide an explanation To do so go to the ELEC screen and select an explanation from the Other short year reason drop list The explanation will be displayed at the top of the first page of the tax return If you do not select an explanation an EF message will be generated with the return and the return will not be eligible for e file For more information on short year explanations see IRS Pub 4163 NOTES The program may not correctly calculate depreciation gains or losses for a short year return Depreciation for a short year return can be entered on screen 4562 and screens 6 7 8 and 9 Income and Deductions Drake Software User s Manual Boxes A through Enter most information for boxes A through I top of Form 1120S on screen 1 Note that boxes C M 3 attached and F Total assets are completed automatically by the program based on data entered elsewhere Other boxes are e Box A S election effective date e Box B Business activity code From screen 1 choose a code from the line B drop list or click in the line B field and press CTRL SHIFT S to search for a code Box D Employer Identification Number EIN program uses setup data as default e Box E Date incorporated e Item G Indicates first year as S corporati
24. Year 2012 Once a trial balance worksheet has been set up for a client in Drake the trial balance information can be imported into the program and calculated into the return Not all trial balance data can be imported directly into a return For information on program limitations see Special Conditions on NOTES page If you are already in the Trial Balance Import tool for the selected return go to the Trial Balance Import window in Drake and start at Step 3 of the following procedure To import a trial balance into a return 6 ba Open the return to which you will import the trial balance information Click Import 5 Trial Balance Import from the menu toolbar The preliminary Trial Balance Import dialog box is opened Click Next Enter or select the trial balance file to be imported If necessary click the button to the right of 1 Import File Name to browse to the proper folder By default each trial balance file is an Excel x1s file showing the client name and ending in TB for trial balance as shown in the example in Figure 37 See Naming Con vention on page 47 1 Import File Name C DRAKETIATBSPartnersInGrimeTB XLS a Figure 37 Selected file to import Select the Trial Balance Additional Import Options See Additional Import Options following this procedure Click Next and wait for the import to be completed Click Finish The program returns to the Data Entry Menu for the open return
25. all stock of the corporation Note that the field for line 17 is an adjustment field An amount entered in here adjusts the amount flowing to Form 1120S from Schedule F line 17 Other Deductions Enter all other deductions on the DED screen Drake incorporates the total into line 19 Other deductions on Form 1120S The following deductions credits adjustments and exclusions also flow to line 19 e Amortization from Form 4562 e Credit adjustment from Form 8820 Orphan Drug Credit e Exclusion from Form 8873 Extraterritorial Income Exclusion e Credit from Form 8941 Credit for Small Employer Health Insurance Premiums Tax and Payments Tax Year 2012 Screen 4 has fields for completing the Tax and Payments section of Form 1120S Note that some fields are overrides Press F1 to view more information on a field Tax and Payments Drake Software User s Manual Net Passive Income Schedule D Line 22a Excess net passive income or LIFO recapture tax could apply to an S cor poration if it was formerly a C corporation or if it engaged in a tax free reorganiza tion with a C corporation To determine if the corporation must pay the tax complete the worksheet fields on the lower half of screen 4 If completing the IRS worksheet enter the worksheet results on screen 4 Enter LIFO recapture directly on screen 4 NOTE To force the line 22a worksheet to be printed select the applicable box On screen
26. amounts flowing from the K1P screen line 16 code H Passive category Adjusts amounts flowing from the K1P screen line 16 code I General category Adjusts amounts flowing from the K1P screen line 16 code J Ohe Adjusts amounts flowing from the K1P screen line 16 code K Foreign taxes paid Adjusts amounts flowing from the K1P screen line 16 code L and the K1F screen code B Foreign taxes accrued Adjusts amounts flowing from the K1P screen line 16 code M Reduction in taxes available for credit Adjusts amounts flowing from the K1P screen line 16 code N O cop TJ D 14c 14d 14e 14f 14g 14h 14i 14j 14k 14l 14l 4m 1 Adjustments Worksheet Adjustment Location Screen Line Field Name Location of Information Being Adjusted 1120S 14n0 AA PAPA AA Adjusts amounts flowing from Form 8873 line 15 the K1P 9 99 p screen line 16 code O and the K1F screen line 14 code G TV Adjusts amounts flowing from form 8873 line 52 and the K1P 14n P Extraterritorial income exclusion l screen line 16 code P 14n Q Other foreign transactions Adjusts amounts flowing from the K1P screen line 16 code Q Adjusts the calculated difference between the current depreciation and AMT depreciation totals on the Federal Depreciation Listing amounts flowing from K1P screen line 17 CO _or the K1F screen line 12 co or G Adjusts amounts flowing from K1P screen line 17 code B or the K1F screen line 12 code C F
27. ane eases E 15 Underpayment of Estimated Tax 0 eee nnn nee e teenies 15 Direct Deposit of Refunds 2 0c ces 15 International ACH Transactions s2 lt e264ece02e65n4e hoes REG HP RU PER Ree PEERS SEL Fs 15 Tax Year 2012 ill Table of Contents Drake Software User s Manual Supplement S Corporations Electronic Funds Withdrawal Direct Debit 16 Program Defaulisand Overrides ILANG BAGA ensue eens UE nde DEDE PADA AKA ER ERE SS 16 Reguired Information serieseger 990 9 ees 93 1599 3 09 oq eU eS rea due Det qq UIS NG GAD ween 16 Withdrawal from Multiple Accounts 2222 GA 16 FIIO AN EKIGNSION Su AA AA Mo dou 17 Signing the Return ue he wew cess eee ee ober a eee PA ES 17 Amending Return a aa BAK RG KB BAG Cee REE ORE Ee ew eee ees 18 Additional Information 00000 cece ee eee hn 18 Schedule Ds a na Bos wen haw ee heed ERS SH ee bbs ee ede eee eee bese Bakes 18 pake ll MOON ur accent NANA Kaw d RP dade as we bn E AAO LENY H AG ae WED Bina 19 Other Information and Overrides aaa 21 Schedule K Shareholders Pro Rata Share Items 21 INGVIC AA Res 21 Schedule K 1 for 1120S Shareholder Information 22 Owner NONG ccesmomedesiu ESPERE SA ETAT EdqpeSUEVATEUqgS RESP dU SP Nd SPI Eu 22 IR CURE RII acne Sie AKA GA Gah ee NG DAA AD MGA GAL AA NANA NG eae ADA NA Nar 22 Myl ple Shareholders eer 4 ho nA nba NG BALA a eh KABAN
28. certification required by Rev Proc 2012 1 or its successor Specific statements must also be attached to the return if the applicant answers Yes for line 18 Is change request allowed under automatic change of Part III or No for line 22 All members of consolidated group use proposed method Press F1 in a specific field for more information on attachment requirements The method for attaching statements in Drake is covered in Attachments starting on page 63 Parts ll and In addition to the Multi form code text box the Parts IL IV screen consists of the IV Part II and Part IV sections used to complete the following sections of Form 3115 e Part II Information For All Requests e Part IV Section 481 a Adjustment 58 Tax Year 2012 Drake Software User s Manual Form 3115 Application for Change in Accounting Method Part Il Line 12 Schedules A B and C Applicants must complete both sections of this screen For more on each line includ ing instructions for required attachments press F1 in a specific field Note that there is no field on the Parts IL IV screen for Part II line 12 Fields for line 12 which should be completed 1f the applicant is changing only the accounting method for a particular item or items are located in the top half of ATT2 screen Use these fields to enter information on e The items being changed e The applicant s present and proposed methods for the items being changed
29. code if appropriate Fields Added to Name Address Information In Care Of and Doing Business As data have been given separate data entry fields in the business packages to allow this info to flow to state forms Figure 2 Name and Address Information Employer ID number Corporation s Legal Name n care TY ve PRETI E DBA Doing business asJ Address Suite Fc s U 5 ONLY Sate AP Couny Foreign ONLY Province State Country Postal Code esc alate Info Figure 2 C O and DBA lines split in business packages Changes in Reporting of Capital Assets Screen codes significant changes have been made to the way capital assets are to be reported In the 8949 D2 D past capital gains and losses from stocks bonds mutual funds and other investments were listed on Schedule D Capital Gains and Losses Now they are to be listed on the new Form 8949 Sales and Other Dispositions of Capital Assets and summarized on Schedule D Information for these forms is entered on screens 8949 and D These screens are available under the Assets Sales Recapture tab of the Data Entry Menu Form 1099 B Proceeds From Broker and Barter Exchange Transactions N DTE now reports individual transaction information and contains cost basis fields for brokers who are required to supply such information Enter 1099 B data on screen 8949 Form 8949
30. e The applicant s present overall method of accounting cash accrual or hybrid Note that the bottom half of the ATT2 screen is for completing Part III line 23b Only the top half for Part II line 12 needs to be completed for Part II line 12 Click the A B C link from screen 3115 to complete the following sections of Form 3115 e Schedule A Change in Overall Method of Accounting screen covers Part 1 Change in Overall Method e Schedule B Change to the Deferral Method for Advance Payments e Schedule C Changes Within the LIFO Inventory Method screen covers both Part I General LIFO Information and Part II Change in Pooling Inventories Schedule A Part II Change to the Cash Method for Advance Consent NOTE Request requires attachments and is not addressed on the A B C screen Schedule A This section is required for all applicants filing to change their overall method of accounting It requires the entry of amounts as they were at the close of the tax year preceding the year of the requested change Leave blank any lines that aren t required for the entity s application NOTE Exclude amounts not attributable to the change in method of account ing for example amounts that correct a math or posting error or that correct errors in calculating tax liability The IRS requires a worksheet for lines 1a 1c 1d le and 1f of Schedule A When you enter an amount on any of these lines in Drake a CTRL W worksheet
31. entered on screen 1 Overrides default calendar year dates or fiscal year dates 2 Income statement period Ending entered on screen 1 lectronic Funds Withdrawal Information Ro Overrides line 25 of Form 1120S or Form 7004 line 8 software Federal payment amount calculated ederal Requested Payment date Overrides federal return due date ederal daytime phone number Overrides phone number entered on screen 1 General Info KA An entry here overrides the selection on Setup 5 Options Optional Documents tab for printing the federal return and 141 or 14m not charged against book income this o 1 U m rint Options Print general filing instructions An entry here overrides the selection at on Setup gt Options Prin filing instruction TT int state filing Instructions Optional Documents tab for printing the state return An entry here overrides the option that was entered in on Setup Print S Corporation s envelope coversheet gt Options Optional Documents tab for the S corporation envelope coversheet An entry here overrides the option that was entered on Setup gt Print IRS envelope coversheet Options Optional Documents tab for the IRS envelope coversheet An entry here overrides the option that was entered on Setup gt Print state envelope coversheet Options Optional Documents tab for the state envelope coversheet An entry here overrides the option that was entered on Setup gt Print city
32. included in the e file data NOTE All EF messages must be cleared in order to e file an inactive return For detailed instructions on e filing returns in Drake see Drake Software User 5 Man ual Tax Year 2012 Common Error Codes If one or more of the following IRS error reject codes 1s generated when e filing an 1120S return the preparer must contact the IRS for further information The IRS e Help Desk telephone number 1s 866 255 0654 e Reject Code 239 Filer s TIN and Name Control in the Return Header must match data in the e File database unless Form 1120S Item H 2 Name Change box 1s marked e Reject Code 905 Electronic Filing Identification Number EFIN in the Return Header must be listed in the e file database and in accepted status If you get this reject code you must update your e file application to include the 1120S return type This should be done at the IRS website Review publication 3112 for details Binary Attachments Binary or PDF files can be attached to certain tax forms These attachments are gen erally signature or third party documents such as a copy of a signed lease or a signed appraisal statement In some instances the IRS requires that a document be attached to an e filed return in other instances a document can be attached voluntarily to sup port or explain an entry in the return In either case a document must be printed scanned into the computer or saved as a PDF do
33. losses flow from the 1120S to the M 3 in the program but all other M 3 data must be entered manually on the M3 screens Parts Il and Ill of Schedule M 3 reconcile financial statement net NOTE income loss for the U S tax return per Schedule M 3 Part line 11 to total income loss on Form 1120S page 3 Schedule K line 18 The SCH3 screen is similar to the SCH2 screen and is used to provide detailed infor mation for Schedule M 3 and Form 8916 A It can be used in place of the actual M3 and 8916A screens For more information on using this type of screen see The SCH2 Screen on page 28 Schedule M 2 Analysis of Accounts Tax Year 2012 NOTE On an 1120S return unlike an 1120 return Schedule M 2 is not a rec onciliation of retained earnings For an S corporation return Schedule M 2 is the analysis of the Accumulated Adjust ment Account Schedule M 2 information can be entered on the M2 screen and else where in the program but most information is carried to the M 2 automatically See Entering Distributions following Schedule M 2 represents a corporate picture of the income losses and distributions to shareholders and tracks tax free distributions and helps determine if excess distribu tions might be taxable to shareholders If a shareholder receives more in distributions than he or she has in basis the result might be taxable 3l Schedule M 2 Analysis of Accounts Drake Software User s Manual E
34. ment of any item Drake customers can fill out Form 3115 and related schedules and attachments for corporate returns This section provides instructions for completing this form and related schedules and attachments in Drake In some cases Form 3115 must still be paper filed See Parts and Ill starting on page 57 for details NOTES Applicants filing Form 3115 must refer to the Internal Revenue Bulletins available at www irs gov to determine if the IRS has published an accounting method revenue procedure revenue ruling notice regula tion or other guidance relating to the specific method to be changed See Pub 538 Accounting Periods and Methods 55 Form 3115 Application for Change in Accounting Method Drake Software User s Manual Accessing Screens for Changing Accounting Method Several screens may be required to complete Form 3115 These screens are accessible from the Change in Accounting Method box located under the Other Forms tab of the Data Entry Menu Figure 42 General Assets Sales Recapture Credits cn F Farm Income and Expense 70048 N Schedule M ma 8082 Schedule K 1 Received wa KIF Schedule K 1 from a Fiduciary 869 KIF Schedule K 1 from a Partnership 871 et 87520 RENT Rental Mon Real Estate 8821 554 Application for Employer ID 5522 982 Debt Discharge e 2220 Underpayment of Estimated Tax 8832 2553 Election as Small Business Corporation 2848 Power of Attorney 8873 88837
35. of statement produced by the program depends on the selected line and the IRS requirements If a line is required a statement labeled STATEMENT is pro duced and is e filed with the return If a line 1s not required a statement sheet STMT is produced and is not e filed with the return Note that an e fileable STATEMENT is referenced in the return as shown in the example of Figure 16 Line Number Cash Trade Notes and Accounts Receivable Allowance for Bad Debts Inventories U 5 Government Obligations Tax exempt Securities Other Current Asseta b STATEMENT Loans to Shareholders Mortgage and Real Estate Loans 9 Other Investments STATEMENT 10a Buildings and Other Depreciable Assets E Ob ER in IH eee x Bem ol MER abs ii di Bi RI E c fi CO ee Ch 4m 0 pe a n si CPP AA C i grum Wa mh e NK a moa a dna tones at umm aum um o UT 4 4 US government obligations 5 Tax exempt securities see instructions 6 Other current assets attach statement T Loans to shareholders nn MEG RA SA SIR ap T a Figure 16 Data entered on the Other current assets line will be attached as an e fileable statement and referenced on the applicable line of the return 28 Tax Year 2012 Drake Software User s Manual Schedules M 1 M 3 Reconciliation of Books Return SCH2 and Trial Balance Autobalance Typically one or mo
36. returns years fiscal vs calendar 7 taxes and licenses 11 termination of S election 8 trial balance import and depreciation 9 and Schedule L 27 29 instructions for using 45 55 U underpayment of estimated tax 15 undistributed taxable income previously taxed 33 updating an 11208 return 6 shareholder data annually 27 Index V Vista Windows operating system 46 vouchers 14 W wages 10 Drake Software User s Manual Supplement S Corporations Tax Year 2012
37. schedule SCH2 detail screen for Schedule L is required for an item marked does not carry on the trial balance Account Title a a Import to screen line Form Page Sch and or line Other Information L line 1 cold Form 1120 Sch L line 1 col d t hh te cadit At diii TOP am NPA addi Ab n o ons M 2 PELLEM LEN U S gramman ae uias alid uu 7 Uline 4 col d a5 Gai kad l o oo Tax exempt securities 0 ine alc orm D h L line Other current assets 0 Loans to shareholders 0 L line 7 col d Form 1120 Sch L line 7 col d Mortgage and real estate loans 0 L line 8 col d orm I hL line 8 cold Other investments s0 Buildings and other depreciable assets 0 L line 10a col c Form 1120 Sch L line 10a col c optional a a aE cada CRGO TQ era magama aa minahal ds qma darf LANG Ph Ghana LEAN 120 ScboL nigga Opo an ARN Figure 39 SCH2 screen required for do not carry items To complete an SCH2 detail screen in data entry 1 Open the SCH2 screen in the return 2 Select the line number from the SCH2 drop list 3 Enter the applicable item descriptions and beginning and end of year totals To enter details for additional lines of the Schedule L press PAGE DOWN and repeat steps 2 and 3 Data is saved automatically upon entry When the return is produced the Schedule L of the return reflects both the amounts imported from the trial balance worksheet and the
38. screen A items 9a through 9f are direct entry fields and follow the NOTE format of IRS Form 1125 A For more information on completing these fields press F1 or consult the IRS instructions Inventory Inventory amounts entered on lines 1 and 7 of screen A automatically flow to Sched ule L line 3 Inventories Note that the Inventories fields on screen L Assets Liabilities and Equity are overrides Anything entered there overrides the inventory data that flows from screen A Line 5 Other Line 5 of Form 1125 A is designated for any applicable costs not entered on the previ Costs ous lines In Drake two fields on screen A are provided for line 5 one for other costs excluding depreciation and one for depreciation Figure 6 Additional section 263A costs Other costs excluding depreciation Depreciation Inventory at end of year Figure 6 Other Costs and Depreciation In the Depreciation field enter any depreciation that relates to the cost of goods sold unless the amount is flowing from the 4562 Detail screen with COGS selected from the For drop list Note that this field on screen A is an override field an entry here overrides the calculations from the 4562 screen Amounts entered in this field auto matically adjust the total depreciation that 1s carried to page 1 of Form 11208 For Other costs excluding depreciation use a CTRL W worksheet The depreciation amou
39. tabs labeled 2 in Figure 35 Note that a detail tab the Other Income tab in Figure 35 might include one or more detail worksheets labeled 3 in Figure 35 Do not create detail worksheets in data entry if the trial balance work NOTE sheet does not provide an equivalent detail worksheet or the trial bal ance will not be imported correctly Totals Totals are displayed at the bottom of each worksheet If credit and debit columns are out of balance the worksheet highlights the out of balance amount Figure 36 te imc g umm owe emt o Aa Ng Totals OUT OF BALANCE PH SBS TB 7T 4 Figure 36 Out of balance amount is highlighted if columns are out of balance In addition to credit and debit totals the main trial balance worksheet shows the net income loss to be calculated for line 1 of Schedule M 1 after all entries and adjust ments are made in the software NOTE The data cannot be imported if the worksheet is out of balance 50 Tax Year 2012 Drake Software User s Manual Importing Trial Balance Information Saving a File To save a file click the Save icon or select File 5 Save from the menu bar In Microsoft Vista and Windows 7 click the Office button in the upper left corner and select Save To re name a file when saving select File 5 Save As For more informa tion on file names in the trial balance program see Naming Convention on page 47 Importing Data into a Return a Import Tax
40. that the Interest expense field is an adjustment field Any amount entered here is combined with the amount if any entered in the Interest fields on screen F Enter depreciation on the 4562 screen Select a form from the For drop list to associ ate the depreciable item with the correct form or activity Data from the 4562 screens is calculated and carried to Form 1120S and or to the selected schedules or forms For more information on depreciation and the 4562 screen in Drake see the Drake Software User 5 Manual Tax Year 2012 Line 14 of Form 1120S is reserved for depreciation that 1 is from Form 4562 and 2 is not claimed on Form 1125 A or elsewhere While the program pulls data from the 4562 screen for this line it also provides field 14b on the DED screen specifically for depreciation that is claimed elsewhere Both lines 14a and 14b on the DED screen are adjustment fields Line 14a See field level help for further instructions and information on how this field ties in to Form 4562 Line 14b Drake recommends entering depreciation on the 4562 screen and then selecting COGS from the For drop list at the top of the screen You can also use screen A rather than the DED screen to enter depreciation claimed on Form 1125 A An entry on screen A adjusts any entry on line 14b of the DED screen and is calculated into the total deductions for page 1 of Form 1120S If there is an entry on line 14b but not on screen A only the l
41. the balance due for an e filed return should be withdrawn direct debited from an account Program Defaults and Overrides By default the program indicates that the entire balance due the Amount owed sec tion of Form 1120S is to be withdrawn on the return due date To indicate otherwise complete the Requested payment date override field for the applicable payment If the return is e filed on or before the due date the requested payment date cannot be later than the due date If the return is transmitted after the due date the requested pay ment date cannot be later than the current date Required Information A Withdrawal selection item 1 in Figure 10 is required 1f the program is to direct tax authorities to withdraw funds from the taxpayer s account Federal Account and State if same as Federal 1 Withdrawal selection Federal selection State city selection x ame of financial institution RTN Account number Type of account 2 Checking Savings Repeat Account Information Checking Savings a dies ab Rate dae Federal Federal payment amount Requested payment date Daytime phone number Pamamishtt State State payment amount Requested payment date Daytime phone number NN Figure 10 Required fields on PMT screen withdrawal selection 1 account information 2 specified return 3 The name of the financial in
42. top of the window Navigation Press PAGE UP and PAGE DOWN to navigate back and forth between the two K screens e Shareholders Pro Rata Share Items Income and Deductions e Credits amp Credit Recapture amp Foreign Transactions The most commonly used Schedule K items can be answered on the p INC screen If these amounts are entered there they do not need to be entered on the K screens Because charitable contributions are separately stated to the share holders there is no Charitable Contributions line on the 1120S return NOTE Charitable contribution information belongs instead on the Schedule K Enter charitable contributions in the bottom section of the INC screen or in the line 12a Contributions fields of the K screens Any contribution limitation is made at the shareholder level Tax Year 2012 21 Schedule K 1 for 1120S Shareholder Information Drake Software User s Manual Schedule K 1 for 1120S Shareholder Information Use the KI screen to enter data for Schedule K 1 Shareholder s Share of Income Deductions Credits etc The program calculates percentage ownership based on the number of NOTE shares owned This amount can be overridden on line F of the K1 screen using the Shareholder s of stock ownership field how ever this not recommended Ownership Changes Printed Data Ownership changes are entered on the OWN screen which is accessible from the General tab of the Data Entry Menu To
43. use the OWN screen e Enter the date of ownership change at the top of the screen e Select the applicable shareholder from the drop list in the Change in Shares sec tion The drop list consists of the names and ID numbers entered on the K1 screens and 1s updated automatically e Enter the change in ownership as a positive amount for an increase and a negative amount for a decrease See field level help for more information e To enter additional ownership changes press PAGE DOWN NOTE See FAQ item P in the program for more information on entering own ership change information A Summary of Stock Ownership worksheet WK SOWN is generated listing all shareholders and the numbers of stocks owned along with the changes in ownership Because a shareholder s percentage ownership may change even if the shareholder s number of stocks owned does not all shareholders are listed on the worksheet IRS K 1 Codes 22 A code sheet can follow the printing of each Form 1120S K 1 to help interpret the var ious codes used on Schedule K 1 In Drake this is the 1120SK 1 PG3 sheet To have this sheet printed with all K 1 schedules from the Home window of Drake go to Setup gt Options gt Form amp Schedule Options tab and mark the Print Page 2 of Schedule K 1 check box The codes can also be printed for a specific return by mark ing the applicable box on the PRNT screen and are available from Tools 5 Blank Forms Codes sheets are
44. worksheet to the list on the EF message page All EF messages must be eliminated before the return is eligible for NOTE e file EF messages for Form 3115 attachments are eliminated when all required statements have been attached to the return Tax Year 2012 65 Form 3115 Application for Change in Accounting Method Drake Software User s Manual This page intentionally left blank 66 Tax Year 2012 Drake Software User s Manual Supplement S Corporations Appendix A Trial Balance Import Tax Year 2012 The trial balance import allows data to be imported into a corporation tax return from a trial balance worksheet Drake s specially designed trial balance template and importing function has the fol lowing benefits e Eliminates the need to duplicate entries e Eliminates data entry errors by automatically importing data to the correct fields e Allows preparers to merge basic accounting functions with tax preparation See next page for a flow chart describing the use of the trial balance import ARA PAANAN HPHP EYE AA AAP SPEY HVEN AA NAA ANA AA AA AA AA ANA AA AA AA AA AA AA AA AA AG AA AA Aa 990 990 EZ Or 990 PF return Prepare to use Trial Balance Import Enable Excel macros Disable autobalance Force Schedule L Delete unnecessary detail worksheets pun Populate Trial Balance Template Import Trial Balance Import direct entry data cells with so applicable detail work
45. 1s automatically opened allowing you to enter the descriptions and amounts of multiple items for the worksheet When you close a CTRL W worksheet the program returns to the original screen and displays the total in the field The field is shaded default is red to indicate that a CTRL W worksheet has been used NOTE If nothing is entered in a Schedule A field the program automatically displays the word NONE in the field on the generated form Schedule B This section has just two lines both referring to the request for deferral for advance Tax Year 2012 payments 59 Form 3115 Application for Change in Accounting Method Drake Software User s Manual Schedule C Schedule D Parts and II 60 Schedule D Part Schedule D Part Il Line 1 Request change to the deferral method for advance payments from sec tion 5 02 of Rev Proc 2004 34 Line 2 Request change to the deferral method for advance payments from sec tion 1 451 5 b 1 11 See IRS Form 3115 instructions for more information on making these requests This section has two parts e Part I General LIFO Information This section is made up of attachment links see Figure 50 on page 64 If any of the conditions on lines 1 6 match the entity s situation click the corresponding attachment link to access the ATT screen where you can complete the required statement Select the corresponding line code from the Schedule drop list on
46. 49 DALIN ENG chase cee eee KANA Sees Red ore ee eae eae ee ceed NOE eee HOLILOLEN AMANG 5 Importing Data into a Return eee s 5 Special ONGIVIONS sss scares nesses oeees oka PG RES AA 52 Form 3115 Application for Change in Accounting Method 55 Accessing Screens for Changing Accounting Method 0 0 0 cee eee ene 56 Lord LIO OCC NAA eee ot AABANG ee AN AES AGAD RI ESSERE eee Chee Pd RE E vr und 62 AUACHINGING E 42445 TTE TT E TEE TO T T t OU TETO TIT 0 TL TL TET TT 63 Appendix A Trial Balance Import lelen A 1 Appendix B Adjustment Worksheet eslelen B 1 Appendix C Override Worksheet 0 0 cee eee C 1 lor O vii Tax Year 2012 V Table of Contents Vi This page intentionally left blank Drake Software User s Manual Supplement S Corporations Tax Year 2012 S Corporations 1120S The basics of data entry for an S corporation 1120S return are the same as for a 1040 return Field and screen level help shortcut keys and navigation throughout data entry all function as they do in the 1040 See the Drake Software User s Manual Tax Year 2012 for the basics of using the program What s New in Drake for S Corporations Drake programs its tax software according to the latest IRS rules and regulations The 2012 program r
47. 609A Part Il line 2 Overrides Worksheet Override Location 9creen Line Field Name Location of Information Being Overridden 1120S For section 179 Use Only 2010 179 exp allowed Overrides the allowed amount calculated on the WK_S179L worksheet For section 179 Use Only 2009 179 exp allowed Overrides the allowed amount calculated on the WK_S179L worksheet Current year QRP 179 exp allowed Overrides calculated amount 4 Application for Employer Identification Number County amp state Overrides the county and state entered on screen 1 Date business started acquired Overrides the date entered on screen 1 orm 982 Reduction of Tax Attributes Due to Discharge of Indebtedness ous Overrides default calendar year dates or fiscal year dates Beginning of tax year entered on screen 1 Overrides default calendar year dates or fiscal year dates End of tax year entered on screen 1 State of Incorporation Overrides entry made on screen 1 General Info orm 2220 Underpayment of Estimated Tax Screen 1 of 2 OVERRIDE installment amounts required tor 1 or 2 10 a d orm 2553 Election by a Small Business Corporation Part Ill Qualified Subchapter S Trust QSST Election Overrides the entry made in Part line H Title on screen 2553 Officer title for signature section orm 3115 Change in Accounting Method General Information Principal business activity code l number Overrides entry made on screen 1
48. CAG eee Cowes ee Pha wee SK KANA eet 23 Override Fields lt 4 s d00s de ed4 685 ob 4564405 Ge bee eee bee eee eas de eee s de ARRIW ee GAW 23 F OUGIOM AGUUCSSES ques icet I eo eae ase deen hee ghee APANG one E bed d ep nee Geese 23 KA EXO TL ou eees NUNO ADDED ENDING NENG sa eekw NO SAANG ew Ramee wee 23 Supplemental NiO 3 eua erete kn Wap NG 0299 chase BAG NAK LAAN Ee DAAN S else Gh Nana bee 24 Domestic Production Activities cese s 24 KAKA Letts cs wae tn Sao hohe ee hes oe a AA 25 Shareholder s Adjusted Basis Worksheet 0 0 0 0 2 26 Schedule L Balance Sheet Per Books 27 Flow of Information a 27 The SCH2 Screen lecce eere s 28 Autobalance 0 ccc cc cc ec erre eere s 29 Schedules M 1 M 3 Reconciliation of Books Return 29 Schedule M 1 ccc ee cc cee eres 30 Schedule M 3 0 cc ccc ee cee cece eere een 31 Schedule M 2 Analysis of Accounts cc eee es 31 Entering Distributions ios xr RR RIA 405 6446 56 GANA bh ed be heehee LGA GNG NAG 22 Column A Accumulated Adjustments Account 2 a 32 Column B Other Adjustments Account 222 00 eee cece eee e ene 33 Column C Undistributed Taxable Income Previously Taxed 00 33 RENALAGIININES 3 566684444 oo OOO Kb SORES SES dea de ROE SRD RC OO AG dea 34 Line I4 DepteeldllOll ous aay 5 4 ea ae ioe Oe oh ie 9a SPAS An 34 Lane 15
49. Change in Accounting Method 8903 3115 Change in Accounting Method 8925 311E Schedule E 90 ATT Explanations and Attachments AljT2 Ptll Ln 12 amp Ptlll Ln 23b Attachment 4 quisi mre dia oily Bade fout a dier lUe FU sw e ier Figure 42 Screens for Form 3115 Application for Change in Accounting Method The screens accessible from the Change in Accounting Method section include Screen 3115 Change in Accounting Method Used to access fields for Form 3115 including Schedules A through D Screen 311E Schedule E Used to request a change in depreciation or amorti zation methods Screen ATT Explanations and Attachments Used to create and view cer tain attachments to be generated by the software Screen ATT2 Pt II Ln 12 amp Pt III Ln 23b Attachment Used to complete certain parts of Form 3115 that require specific attachments Multi form All 3115 and related screens contain a Multi form code text box shown in Figure 43 Codes on page 57 that allows you to link a screen or attachment to a particular Form 3115 If submitting more than one Form 3115 assign a multi form code to each new appli cation you create in Drake The first should be 1 the second 2 and so on When using other screens such as the 311E or ATT screens you can use those numbers to indi cate which instance of Form 3115 the 311E or ATT screen should be associated with see Screen 311E Multi form Codes on page 62 for more information NO
50. Entry Most cells in the trial balance worksheet are view only In a new template editable debit and credit cells are indicated by a dollar amount S0 and are not gray Detail Some cells require more detail than can be entered on a single line These cells are Worksheets indicated by buttons If these cells do not work you may need to enable them see the Note in Opening a Template on page 47 3 line 7 Form 1120 pt does nat Carry detail kanen detail require gp E requires detaj uires detai 1 Form 1120 Figure 34 Example of cells that require worksheets Click a worksheet button to open a worksheet in a new tab Figure 35 on page 50 shows an example of the Other Income worksheet Tax Year 2012 49 Importing Trial Balance Information Drake Software User s Manual Statement Required Other Income Form 11205 page 1 line 5 INC lines 1 7 Amount of credit for tax on fuels Form 4136 INC line 1 Interest income on receivables 5 ING line 2 nM L Recoveries of bad debts deducted in earlier years 1 INC line 3 Section 481 adjustments INC line 4 State tax refund cash basis 1 INC line5 f Taxable income from insurance proceeds 3 5 b gt C sBS T8 Other Income 4 4 Figure 35 Trial balance worksheet for Other Income To return to the previous worksheet click the TB tab labeled 1 in Figure 35 or click the Click to return to TB button above the worksheet
51. Note that all selected data from the trial balance worksheet has been imported into the return This can be seen both in the data entry screens and on the generated return If the program does not calculate the trial balance information as NOTE expected you can return to the trial balance worksheet make adjust ments and import the worksheet again 5 Importing Trial Balance Information Drake Software User s Manual Additional The program can import the following additional information when importing the trial Import balance data select the items to import or click Select All Options Buildings amp other depreciable assets Accumulated depreciation Land Goodwill amp other intangible assets Accumulated amortization 8825 Rent information Special Conditions Some items cannot be entered into the trial balance worksheet and must be typed directly into data entry Other items should be entered into the worksheet for balance purposes but are not imported to data entry these must be entered separately and the calculated results compared to the trial balance worksheet Details for Most items go directly to the location indicated in the program and on the return For Preparers example the amounts shown in Figure 38 go to Schedule L line 1 column d in the program and are shown on page 4 Schedule L line 1 column d of the 1120S return Figure 38 Indication of where an amount will go in Drake and on the return Not all figur
52. Other Expenses st a a db ege tenint Rep ond Retro AE EA VR A RES 35 Viewing Rental Activity Information eee hs 35 Credits and Adjustments 4 renes 36 ElectionS 0 022 ee hn n nn 37 Making an Election in Drake 24 iade ER oRECRR REGE RR GANA ANNA ALANO RR TREO EO 37 IV Tax Year 2012 Drake Software User s Manual Supplement S Corporations Table of Contents Election 5talemellis 2 252 54408 99 794 08D G06 5 GANA og bh haa ars Parece ds Peace does Na ades 38 Making Changes on the Fly leeren 38 Suppressine Forcing ems eu cuccucaws sod dor UR Ded on EUR nor Ve eed hed Sce Rub RORCR UR EUR E eR 38 Overriding Other Setup Options eee s 39 Guide to Overrides and Adjustments 2 39 EIECITOBIE FRE 6 244 doe eR RC CORR E ordeo eun Re RR a d oodd dod oA e 40 Additional Return Types eee s 40 Comimmom BIHAG MGC i42 es eod Pen AA AA Pg d quede 42 Binary AUACNMGNS sic uda dog ao o ee eee ee e COR need ea CR NAKA 42 The PDF Attachment Process uu iss tbc rmt tni AG AKDANG ADD NLANG ddr KA qai dede es 42 Printing Generated Documehnls 4s sersa kirsti a Rap EG ed BG KAKA GRADE KG RR RP dc Ped a 45 Importing Trial Balance Information Les 45 Preparing to Use Trial Balance Import 2 0 0 0 0 eee eee e eens 45 Preparing Financial Data for Import AA 47 Entering Financial Data x25 cadet oan KAG 3 RERO RES RESI EROR PARANG SES BEERS
53. S holder level Form W 2 wages on the 8903 screen refers to the corporation s W 2 wages paid that are applicable to the Domestic Production Activities Deduction K 1 Cover Letters K 1 cover letters can be produced to accompany each Schedule K 1 in a return You can set up the global option to produce K 1 cover letters for all returns containing K 1 schedules or you can choose the option on a per return basis Producing To have the K 1 cover letters produced automatically with a applicable returns from Letters for the Home window of Drake go to Setup gt Options Under the Optional Documents All Returns 7 tab mark the box labeled Include K 1 letter with returns The signature on the return can be indicated in one of two ways e By completing the Signature and Title fields on the PIN screen e By completing the Name and Title fields in the KIL screen available on the Miscellaneous tab Entries here override entries on the PIN screen Producing Ifno default has been set to produce K 1 cover letters with all returns you can take the Letters for following steps to generate letters for a single return Single Return 1 Open the return and go to screen KIL 2 At the bottom of the screen enter the name and title of the person who will be signing the K 1 cover letter Tax Year 2012 25 Schedule K 1 for 1120S Shareholder Information Drake Software User s Manual 3 optional Mark Do not print entity information at t
54. Shareholder s Share of Income Credits Deductions etc Amounts entered on the K1 screen override the amounts automatically calculated by the K screen Shareholder s Adjusted Basis Worksheet KA 5 AA AG AA AA Overrides the calculations from Schedule K or the overrides in Schedule K 1 Overrides the calculations from Schedule K or the overrides in Loans repaid by corporation during the year Schedule 4 a Allowed Decreases for Losses and Deductions Items a Overrides the calculations for column F of shareholder s basis p worksheet page 2 ETT T Overrides the calculations for column F of shareholder s basis worksheet page 2 Oil anduns depletion Overrides the calculations for column F of shareholder s basis worksheet page 2 Schedule L Balance Sheet Assets Cd 3 b Overrides entries from screen A Cost of Goods Sold line 1 Inventory at beginning of year 3 d Overrides entries from screen A Cost of Goods Sold line 7 Inventory at end of year Overrides calculations from on the 4562 detail screen or the 10a a Depreciable assets Overrides calculations from on the 4562 detail screen or the 10a c Depreciable assets Overrides calculations from on the 4562 detail screen or the 10b a Less accumulated depletion Overrides calculations from on the 4562 detail screen or the 10b c Less accumulated depletion 12 b Overrides calculations from on the 4562 detail screen or the Subsidiary Schedule for the Balance Sheet SCH2 screen
55. TE If only one Form 3115 is being submitted you do not need to enter any 56 thing in the Multi form code box Tax Year 2012 Drake Software User s Manual Form 3115 Application for Change in Accounting Method Form 3115 Screens When you open the 3115 screen from the Data Entry Menu the program displays the first of five 3115 screens These five screens are e Parts I III Form 3115 Parts I and IIT e Parts II IV Form 3115 Parts II and IV A B C Form 3115 Schedules A B and C e D LII Form 3115 Schedule D Parts I and IT e D III Form 3115 Schedule D Part III As shown in Figure 43 you can access these 3115 screens by clicking the links at the top of any 3115 screen Form 3115 Application for Change in Accounting Method E Multiorm code General Information Principal business activity code numlber 7 E WMV uM oy AP oe AA AA PP Mw PAP uu Figure 43 Tab links and Multi form code field on 3115 screen The next few sections of this document provide instructions for completing the vari ous screens for Form 3115 including Schedules A through D Parts and Ill Use the Parts I III screen to complete the following sections of Form 3115 e General Information e Part I Information For Automatic Change Request e Part III Information For Advance Consent Request NOTE Information should be entered in either the Part section or the Part Ill section but not both
56. UMENTS5 POF O Instructions Tax Form Selections TAs FORM SELECTION PDF O MO NAS MO NAS NONRESIDENT SHAREH MONRS PDF O MO NAS MO NAS NONRESIDENT SHAREH MONAS PDF Figure 27 The EF PDF Attachments window 4 Click the row of a document to attach on Click Browse 6 Browse to the proper folder select the PDF file to attach and click Open or dou ble click the file name Repeat for all documents with a red X When all documents have been attached to a completed return recalculate to clear the EF Message The return is now ready to be e filed 44 Tax Year 2012 Drake Software User s Manual Importing Trial Balance Information Printing Generated Documents In some instances Drake generates a document that must be printed signed and scanned back into the computer to be attached to the return For example 1f Form 2553 Election by a Small Business Corporation is present in an S corporation return message 1513 1s generated when the return is calculated 1513 ATTACH FORM 2553 The check box for Attaching Form 2553 as a PDF document on screen 1 has been marked but no Form 2553 has been attached Form 2553 must be prepared and attached before the return can be e filed To prepare Form 2553 for attachment Ensure that the 2553 screen has been completed in data entry Calculate the return In View Print mode select and print Form 2553 Have all shareholders sign the form i 0 NH To attach the signe
57. ached statements are required for many Form 3115 items Depending on the nature of the attachment you will attach statements to the form in one of two primary ways From data entry The ATT screen is the most common screen for attaching statements to Form 3115 The ATT2 screen is used for Part II line 12 and Part III line 23b See the Parts I and III on page 57 and Parts II and IV on page 58 sections for more information on completing the ATT2 screen for these items e From View mode Used for PDF attachments ATT Screen There are two ways to access the ATT screen in Drake Attachments From the Data Entry Menu In the Change in Accounting Method section of the Other Forms tab click ATT See Figure 42 on page 56 From the line that requires an attachment As shown in Figure 50 on page 64 some lines have attachment links Click an attachment link to open the ATT screen Tax Year 2012 63 Form 3115 Application for Change in Accounting Method Drake Software User s Manual Additional ATT Fields PDF Attachments 64 Schedule C Changes Within the LIFO Inventory Method Part ging within the LIFO inventory method i C1 a thru C1 h attachments Chal C 1 2 attachment If any present method or submethod is notthe same as indicated on Form s 970 C1 3 attachment If the proposed dhange is not requested for all the LIFO inventory C1 4 attachment Ifthe proposed dhange is not requeste
58. actual Form 3115 Sched ule D For information on completing individual lines see the Form 3115 instructions If the entity is unable to furnish a copy of Form 970 line 5a the attach ment must include the following statement N TE certify that to the best of my knowledge and belief name of applicant properly elected the LIFO inventory method by filing Form 970 with its return for the tax year s ended insert dates and otherwise complied with the provisions of section 472 d and Regulations section 1 472 3 Tax Year 2012 Drake Software User s Manual Form 3115 Application for Change in Accounting Method Schedule D Use the D III screen to complete Part III Method of Cost Allocation of Form 3115 Part Ill Schedule D Part III is required for any entity submitting either Part I or Part II Screen D III consists of the following sections e Section A Allocation and Capitalization Methods e Section B Direct and Indirect Costs Required to be Allocated e Section C Other Costs Not Required to be Allocated Section A Click the D3 1 Attachment link Figure 46 to attach a description of the present and proposed methods used to capitalize direct and indirect costs Section B Direct and Indirect Costs Required To Be Allocated 13 2 attachment Explanation for boxes that are not checked X Check B Blank No Selectio 1 Direct material Figure 46 Link to ATT screen for attaching statements Sections The
59. al Supplement S Corporations Table of Contents Table of Contents S Corporations 1120S 0 0 ee 1 What s New in Drake for S Corporations eller 1 Reguired AA 1 POTION SOS aa 5 handed BUG MAG KAIN EUR RUP UR EE IURE FUR EUR DA ee O39 ow aba ABA Gan NG 1 Fields Added to Name Address Information 22 00 ccc eee teen teens 2 Changes in Reporting of Capital Assets llli 2 5825 Rental Property Attachment dec KA has CREE aor sede LAKES SCR UROOK RR REE Oe AG 3 Merchant Card and Other Third Party Income Reporting 0 0 0 cece 5 Oualificd Real Proper AA AA 5 Bonus DCDICCIIHOH sy rasg no eee ADAN ees ens4 aes ba epatis SPEER EES NAGA ER T aes FU EE ees 5 Sula AA AA AA AA ee dE Rd Ren 6 Updating a Prior Y ear Return an Drake cea dos usd uenia Pu PE neki AD RARE NAG KAPRE es 6 Indicating an S Corporation sses uro 393 340 4a eG 8 ESTES bE KABABAAN NIT PRESET ESE Aus 6 Header Information uiua acd ido ad i a cade ed be NG O nce ween e boe eee 6 7 Name dud Address ees ate d ehm ERE ER ER SSIRURPAE NUR SINE Sd AN Pup Sd Pd RES 7 lC ed 7 Bos NIO BT oou es oe ene enero neds oon DEREN ALOK NAAN BORER SS RES SEE eee aes 8 Income and Deductions 5 26 icsndccccedcceerseredtndidbaiatacdctatiaws P Rd E 8 Gross REC aman ace oho eos R had oto ed whe ahha DAA ad he DA dans Been oe 8 Cost of Goods Sold Form 1125 A 0 ccc ccc cc eee eee eee nee nnneees 9 Ord
60. alance 29 B bad debts 10 11 bankruptcy 2 basis 26 27 see also adjusted basis worksheet binary PDF attachments 6 book to tax differences Schedule M 1 30 business activity codes 8 C calendar year returns 7 change of name or address 8 Tax Year 2012 Index charitable contributions 21 Client Communications Editor for letters 26 codes business activity 8 error reject 42 K 1 22 39 miscellaneous screen 1 21 multi form 34 56 62 64 compensation of shareholders 10 contact information for state returns 20 cost of goods sold see Schedule A Cost of Goods Sold cover letters K 1 25 coversheets 39 credits 36 Ctrl W detail worksheets 8 9 46 D data entry FAQ screen 40 for state information 19 importing trial balance into 45 55 dates of incorporation 8 payment changing 16 tax year 7 decrease to basis 27 deductions 10 13 depletion 13 depreciation 9 and auto balance errors 29 expense 12 for cost of goods sold Schedule A 9 of rentals 34 on short year returns 7 printing Form 4562 39 trial balance business returns only 53 detail Ctrl W worksheets 8 9 46 direct debit of balance due 16 direct deposit of refunds 15 distributions 32 domestic production activities deduction 24 due dates 16 E e filing Form 1120S 40 Vil Index PDF attachments 42 45 statements 28 electronic funds withdrawal 16 signatures PIN 17 employer identification number EIN 8 envelope coversheets 39 erro
61. ance in the Calculations and Other Options section of PRNT screen Force Schedule L By default the program does not display the balance sheet amounts on the return if the entity does not meet the filing requirement If this is the case you must override the default setting in order to have the amounts shown on Schedule L To force the Schedule L amounts to be printed go to the PRNT screen and select the Force print Schedules L and M 1 box Items to Print W Force print Schedules L and M 1 Print Form 4562 Print next year depreciation listing Print inactive return Figure 30 Force Schedule L box for 1120S package NOTE Wording of this option varies by return package The example above is of the Force print Schedules L and M 1 box for an 1120S return Check for Detail Worksheets The trial balance import allows only those detail worksheets required by the IRS Check updated returns for detail CTRL W worksheets that are not required For example the IRS does not require a detail worksheet for the Gross receipts field on the INC screen if a return has a detail worksheet for that field the trial balance will not be imported Tax Year 2012 Drake Software User s Manual Importing Trial Balance Information correctly into the return Detail worksheets are indicated by red shading as shown in Figure 31 Income and Common Schedule K Items Form 1120 5 Income ta Merchant card and third party payments NG 1b
62. ated Any depreciation information entered on the 4562 screen is carried to the correct Form 8825 based on the form and multi form code selections at the top of the 4562 detail screens When selecting a multi form code note that the code should refer to an 8825 screen not the 8825 form For example data from the second 8825 screen will be generated on the first Form 8825 IMPORTANT To associate an asset with that information you would enter a 2 for the screen not a 1 for the form in the Multi form code box For more information on Form 8825 see Viewing Rental Activity Information below Line 15 Other Expenses list Enter meals and entertainment subject to 50 limit in the appropriate field on line 15 of the 8825 screen To enter additional other expenses begin typing into the Addi tional other expenses field to open a Detail CTRL W Worksheet Enter descriptions and amounts on this worksheet A statement from each 8825 property is printed with the return and is submitted to the IRS when the return is transmitted Total expenses for each property Add lines 3 through 15 17 Income or Loss from each property Subtract line 16 from line 2 ABG ATO aros enis Alio erosseests fram line Sapon ni Rasan pee annt abl Figure 18 Other expenses are listed on accompanying statement in this instance STM 8825 02 Use the K1P screen to enter rental income the S corporation receives on a K 1 This
63. ations reported for book or tax purposes Penalties Tax exempt interest Temporary Items that will be reported for both Depreciation tax and book purposes but not dur Gains or losses on the sale of ing the same tax year depreciated assets Favorable Items that reduce taxable income Instances in which tax depreciation amount is greater than book depre ciation amount Unfavorable Items that increase taxable income Disallowed meals amp entertainment The program may make an adjustment for book to tax depreciation or amortization differences The calculation is done as described in the following steps This proce dure refers to depreciation throughout but it applies for either depreciation or amor tization 1 The amount reported on Schedule L Beginning of Year accumulated deprecia tion line 10b column a is subtracted from the End of Year accumulated depre ciation line 10b column c This is the book depreciation amount 2 This book depreciation amount is compared to the tax depreciation amount The tax depreciation amount is calculated from the Forms 4562 including any section 179 amounts 3 The difference between the book and tax depreciation amounts is carried to the appropriate form and line If the book depreciation amount is greater than the tax depreciation amount the difference is carried to one of the following locations
64. ch Activities Pass through research credits Adjusts amounts from K1P screen line 15 code M and K1F screen line 13 code l orm 8820 Orphan Drug Credit Orphan drug credit s from pass through entities Adjusts amounts from K1F screen line 13 code M orm 8826 Disabled Access Credit Disabled access credits from pass through entities Adjusts amounts from K1P screen line 15 code K orm 8844 Empowerment Zone Employment Credit Form 8844 credits from pass through entities Adjusts amounts from K1P screen line 15 code L and K1F screen line 13 code K orm 8846 Credit for Employer SS and Medicare Taxes Paid on Certain Employee Tips Form 8846 credits from pass through entities Adjusts amounts from K1P screen line 15 code N orm 8864 Biodiesel Fuels Credit a Biodiesel and renewable diesel fuels credit from pass Adjusts amounts from KIF screen line 13 code O through entities 882 Credit for Employer Provided Childcare Facilities and Services Adjusts amounts from KIF screen line 13 code N orm 8907 Nonconventional Source Fuel Credit vonconventiona source tuel from partnerships SS Adjusts amounts from K1F screen line 13 code P corporations estates and trusts orm 8909 Energy Efficient Appliance Credit Energy efficient appliance credit from partnerships S An entry here adjusts amounts being carried from 24 corporations estates trusts and cooperatives the K1F screen line 13 code S chedule F Farm In
65. ck the screen 2 link from the States tab or enter 2 in the selector field and press ENTER Company information includes the type of return that applies for state purposes con solidated composite controlled group multi state and state specific dates and num bers for identification Other States Data for other states must be entered manually in state data entry To access state data entry select the States tab from the return menu and choose a state Multi State Enter sales payroll and property factors on the APPT Multi State Apportionment Appor screen Figure 11 This screen provides one central location for entering all state tionment apportionment information instead of having to open each needed state s screen In addition to making data input faster and easier this feature provides two work sheets a summary worksheet SA SUM that can be used for verifying input and a reconciliation worksheet SA REC that ties the total of the state amounts to the fed eral return figures These worksheets are available in View mode The individual state apportionment screens will continue to be available in Drake12 but will be used to override data entered on the APPT screen No state apportionment related screens will be updated from Drakell to Drake12 Drake 2012 Data Entry 112011205 ABC Corporation Sales Payroll Property Additional Praperty State Apportionment Sales Factor State Selection Required fie
66. come Informational Purposes Only Adjusts amount being carried from screen 9 calculations for 10 Car and truck expenses automobile expenses Amount is carried from Form 4562 calculations RENT Rental Other than Real Estate Tl TI TI TI T1 Tl Tl TI Qo TI TI o Adjustments Worksheet Field Name Location of Information Being Adjusted 1120S WT Adjusts depreciation amounts calculated by the program from 15 Depreciation entries on the 4562 screens Form 8825 Rental Real Estate Adjusts the depreciation calculated from the 4562 screens Form 8903 Domestic Production Activities Deduction 7 Qualified production activities income from pass Adjusts amounts from K1P screen line 13 code U and K1F through entities screen line 14 code C Form W 2 wages from pass through entities Adjusts amounts from K1P screen line 13 code V and K1F screen line 14 code D Drake Software User s Manual Supplement S Corporations Appendix C Override Worksheet Tax Year 2012 The Override Worksheet is updated each year to help you understand what happens in the return when certain data is changed through the use of override fields The follow ing pages contain the 2012 Override worksheet These worksheets are also available through the FAQ screen To access them open the FAQ screen click the Screen Help button or press CTRL ALT and c
67. cument and attached to the return in order to be e filed with the return You can attach PDF files to federal S corporation 1120S returns for e filing The PDF Attachments screen is accessible from the Data Entry Menu The PDF Attachment Process Three main steps are involved in the PDF attachment process in Drake 1 Creating a PDF document to be attached 2 Informing the program that a PDF document will be sent with the return 3 Attaching the PDF document for e filing These steps are described in the following sections Creating a To create a PDF file PDF File 42 Tax Year 2012 Drake Software User s Manual Binary Attachments 1 Scan the document to be attached to the return TIP Its a good idea to use the DDM scanning feature for this step 2 Save the document to your client s DDM file your computer s desktop or any where you can readily find it Many types of documents for instance documents created in Microsoft NOTE Word can be printed or saved as PDF documents if you have a PDF printer such as Adobe Reader installed Adding PDF To indicate in the software that a PDF document will be sent with the return Documents in Drake 1 Open the return in Drake From the Data Entry Menu click PDF Attachments or type PDF in the selector field and press ENTER See Figure 25 UK1 7 Sthewiile Ki Shareholder Information BIN e Pw zidralug ee KIG Global Supplemental Information DD Direct Deposit PMT
68. d Form 2553 to the return 1 Scan the signed form and save it as a PDF document 2 Go to View mode of the return 3 Attach the scanned PDF document to the return using the PDF icon at the top of the screen For detailed instructions on attaching this form to a return go to the FAQ screen and click Attaching Form 2553 as a PDF Document N na feme tite PA MM ie SON tif E OP a nhe san eN rn mt T amnis as ftt aat pee Figure 28 EF message page As shown in Figure 28 the EF Message states that attachments are required You would then need to obtain or complete the statements scan them into the computer save them as PDF documents and attach them to the return Importing Trial Balance Information Drake s trial balance import feature allows data to be imported into an 11208 return from a trial balance worksheet The trial balance template and importing function has the following benefits e Eliminates the need to duplicate entries e Reduces data entry errors by automatically importing data to the correct fields e Allows preparers to merge basic accounting functions with tax preparation NOTE A flow chart of the trial balance importing process is available as an appendix at the end of this manual Preparing to Use Trial Balance Import If you haven t already create a client file in Drake or update an existing client file from the prior year Like several other functions of the tax software this new feature requires M
69. d for all the LIFO pools 1 5 attachment LIFO inventory valued on method other than cost ce t E LO NI ma C1 6 attachment If changing to th IPIC method Part Il NT 3 e lh A ee O O AA apos ail amc mile d pe TT Figure 50 Attachment links from Schedule C screen A B C Not all lines that require statements include a link to the ATT screen NOTE Always check the field level help press F1 in a field to determine if a statement is required The program produces an EF message if any required statements are missing Complete the following ATT fields as applicable for all ATT screen attachments e Multi form codes Use these boxes to associate the attachment with an instance of Form 3115 1f the return contains more than one a particular Sched ule E property 1f the return contains more than one Schedule F or both See Multi form Codes on page 56 for more information on multi form codes e Schedule Select the line of the form or schedule with which the attachment is to be associated If an item begins with a number it refers to the part of Form 3115 for example 2 4e refers to Part II line 4e If it begins with a letter it refers to a particular Form 3115 schedule for example C2 b refers to Schedule C line 2b C2 5 refers to Schedule C Part 2 line 5 e Explanation Enter the statement explanation If the explanation requires more than 900 characters press PAGE DOWN for a second screen
70. d on a form Data from all 8825 screens are transmitted to the IRS when the return is e filed NOTE Special steps are required if using the trial balance worksheet for multi ple rentals See Rental Expenses on page 54 Line 14 Depreciation Carrying Information to Form 8825 34 If the program is calculating depreciation entered on the 4562 screen for the property listed on Form 8825 do not enter the depreciation on the 8825 screen Depreciation should be entered only if it is figured outside of the Drake program and then the net results should be entered on screen 8825 The amount entered on line 14 is added to the depreciation calculated from the 4562 screens NOTE Form 4562 is required for assets placed in service during the year To indicate that the information should be carried to Form 8825 select 8825 from the For drop list on screen 4562 see Figure 17 on page 35 If there are multiple 8825 screens use the Multi form code box For information on using the Multi form code box see the Drake Software User s Manual Tax Year 2012 Tax Year 2012 Drake Software User s Manual Rental Activities Form 4562 11205 COGS 8825 RENT F 1 999 1 is assumed if left blank Date Description Acquired Cost Basis rental units 01 0 1 2010 5544133 hs ni iil 7 be tI ade leds alio m Egal calme Me d mea gi oer Figure 17 In this example the program will carry the 4562 information to the second 8825 screen cre
71. debts e Section 481 adjustments e State tax refund e Income from insurance proceeds To enter income or loss from a partnership estate or trust use screen KIP or KIF Click the screen links on the INC screen or access them from the Other Forms tab To enter additional sources of income not shown create a CTRL W worksheet using the Other Income itemize field on the INC screen Compensation and Wages Enter shareholder compensation and employee wages on the DED screen Drake has two fields each for officer compensation and employee salaries wages one for non shareholders and one for shareholders The Salaries and wages to non shareholders field is an adjustment field An amount entered here is combined with any amount entered in NOTES the Labor hired field on screen F The shareholder fields are used for calculating section 179 income limi tations see the WK S179L worksheet in View mode Credit A credit adjustment is made for the following forms Adjustments e Form 5884 Work Opportunity Credit Form 8844 Empowerment Zone and Renewal Community Employment Credit e Form 8845 Indian Employment Credit The adjustment is indicated on Form 1120S with the ATT SSW literal Figure 7 on page 11 Actual adjustments are shown on the ATT SSW worksheet in View mode 10 Tax Year 2012 Drake Software User s Manual Income and Deductions wpe an AA Ang a a ER itan CC Total income loss Add lines 3 through 5 a Figure
72. dit to Holders of Tax Bonds 36 Form 8912 Credit to Holders of Tax Credit Bonds 37 Vill Drake Software User s Manual Supplement S Corporations Form 8916 A Supplemental Attachment to Schedule M 3 30 Form 8932 Credit for Employer Differential Wage Pay ments 37 Form 8941 Credit for Small Employer Health Insurance Premiums 37 Form 8941 Credit for Small Employer Health Insurance Premiums 13 Form T Forest Activities Schedules 13 G gains and losses 9 gross receipts 8 H header information 7 import trial balance 45 55 importing Schedule D data 2 inactive returns 39 41 income 8 10 increase to basis 27 instructions for filing 39 insurance proceeds income from 10 interest expense 12 income 10 inventory 9 K K 1 Schedule for 1120S 22 27 L labor 10 letters K 1 25 maintenance costs 11 Multi State Apportionment 19 N name change 8 net operating losses NOL 34 next year depreciation listing 39 number of shareholders 8 Tax Year 2012 Drake Software User s Manual Supplement S Corporations O ordinary gains and losses 9 other adjustments account 33 costs Schedule A 9 income loss 10 overrides 39 P passive income 14 PDF binary attachments 6 42 45 PIN electronic signatures 17 printing cover letter for K 1 26 K 1 items 23 line 22a worksheet 14 statements for Schedule L 28 suppressing forcing documents 38 R real estate 53 receipts 8 references to for
73. dress DSSS SS ea 6 New mailing address Overrides information entered on screen 1 V2 8 Daytime phone number jOverrides information entered on screen 1 Cd Form 8873 Extraterritorial Income Exclusion MEME Form 8925 Report of Employer Owned Life Insurance Contracts 6c Type of business Overrides information entered on screen 1 Cd Client Bill Adjustments and Payments KC EN c Billing option overrides what is set up in options Override the option selected in Setup 5 Options Billing tab pl e ai i i Override the option selected in Setup gt Options Billing tab Date to be printed on bill Overrides current date Drake Software User s Manual Supplement Tax Year 2012 Drake Software User s Manual Supplement S Corporations Index Numerics 52 53 week year returns 40 A accounting method changing 55 65 entering 8 accumulated adjustments account Schedule M 2 32 address change of 8 e mail 20 entering on Form 1120S 7 foreign 23 on K 1 letter heading 26 out of state 21 adjusted basis worksheet 26 39 adjustment fields 39 adjustments depreciation 30 section 481 10 to income and expenses 36 advertising expenses 13 amended 1120S returns 8 18 K 1 letters 26 amortization 13 28 analysis of accounts Schedule M 2 31 34 asterisks on K 1 codes 22 attachments binary PDF 42 45 Form 8825 statements 36 auto b
74. ds should contain numbers Figure 49 on page 63 shows that the third instance of a Schedule E is to be associated with the second Form 3115 in the return Tax Year 2012 Drake Software User s Manual Form 3115 Application for Change in Accounting Method Form 3115 Application for Change in Accounting Method Schedule E Change in Depreciation or Amortization 4 Schedule E Line 4a nabi nee eeu E Year property was placed in service E Property s use in trade or business ar income A Nt BUG BATA ain ee ee ae AC mall m a m Figure 49 Example of third instance of a Schedule E to be associated with the second instance of a Form 3115 Completing The 311E screen consists of four sections Schedule E e Schedule E Line 4a Enter information on the type of property the year it was placed in service and the property s use e Schedule E Change in Depreciation or Amortization This section covers all Schedule E items other than lines 4a and 7 Note that lines 5 and 6 are links to required attachments e Schedule E Line 7 Present Method and Schedule E Line 7 Proposed Method For the line 7 sections enter information on the Present Method and Proposed Method in the supplied text boxes and choose the applicable conven tion from the Applicable Convention drop list Options are as follows e HY Half Year e MM Mid month e MQ Mid quarter e S L Straight line Attachments Att
75. e L 17d L Recapture of section 179 deduction Adjusts amounts flowing from Form 4797 line 35 and K1P screen line 20 code M 17d M Section 453 l 3 information Adjusts amounts flowing from the K1P screen line 20 code O 1 a 16b 6c 16c 3 17d N Adjusts amounts flowing from the K1P screen line 20 code P 17d O Adjusts amounts flowing from the K1P screen line 20 code Q 17d P Adjusts amounts flowing from the K1P screen line 20 code R 17d Q Adjusts amounts flowing from the K1P screen line 20 code S hareholder s Adjusted Basis Worksheet 7a Nondeductible expenses and credit adjustments Soe eee om ie MOERORE current year losses and deductions line 7a chedule M 1 Reconciliation of Income Loss per Books with Income per Return 2 Income recorded on Sch K lines 1 2 3c 4 5a 6 7 8a 9 Adjust the amounts coming from Forms 6478 and 8864 and 10 not on books i o Adjustments Worksheet Screen Line Field Name Location of Information Being Adjusted 1120S Adjust amounts credit adjustments made from Forms 5884 6765 8820 8844 8845 8846 8881 nondeductible expenses entered on the bottom of screen 3 for line 16c and amounts entered on K3 screen for line 16c for nondeductible expenses and officer life insurance premiums Expenses recorded on books this year not included on Schedule K lines 1 through 12 and 141 or 14m Other Income recorded on books not included on Schedule Adjust the amount
76. ect to 28 rate e State Use Only Check with your state for required codes 8825 Rental Property Attachment Tax Year 2012 Because the IRS is requiring preparers to provide taxpayers with more detail about income from rental property Drake now generates attachment K1 8825 explaining the Net rental real estate income loss as it appears on line 2 of each shareholder s Schedule K 1 Figure 3 on page 4 What s New in Drake for S Corporations Drake Software User s Manual Final K 1 Amended K 1 f Shareholder s Share of Current Deductions Credits and Othex Ordinary business income loss 13 Credi P PAS plar 4 _ Metrental real estate income oss 1 4 Interest income ali h dms AL rmm sull an il Figure 3 Line 2 Net rental real estate income loss of Schedule K 1 The amount on line 2 of Schedules K 1 is the shareholder s pro rated share of the totals from line 210f Form 8825 Rental Real Estate Income and Expenses of a Part nership or an S Corporation The resulting attachment K 1 Rental Real Estate Activ ity listed as KI 8825 in View mode includes the shareholder s name ownership percentage address of the property the property type as selected from the Type of Property drop list on screen 8825 in Drake see Figure 4 and the total from line 17 of Form 8825 the resulting net income or loss Form 8825 Rental Real Estate Property Information Descipti
77. ed returns If e filing a return com plete all fields on the PIN screen A return cannot be e filed if the PIN screen is not completed including the title and signature name of the officer signing the return An 1120S return must be signed and dated by one of the following individuals e The corporation s president vice president treasurer assistant treasurer or chief accounting officer e Any other corporate officer such as a tax officer who is authorized to sign If the return is prepared by a paid preparer the preparer must complete the required information and sign the return in the space provided If it is prepared by an employee or officer of the corporation select NONE in the Firm and Preparer fields on screen 1 To have the preparer s name and address information displayed on the printed return e Ifthe return preparer and ERO entered in Setup gt ERO are the same Go to Setup gt Preparer s and ensure that the Alternative Electronic Sig nature box is marked for the preparer Complete the PIN screen for the return e Ifthe return preparer and ERO are not the same Goto the PRNT screen for the return and complete the field labeled PIN for preparer s alternative electronic signature The PIN entered should match the one entered for the preparer in Setup gt Preparer s For more informa tion press F1 in this field NOTE Setup gt ERO must still be completed for e filing See the IRS inst
78. een A PDF document may be attached using any filename When you attach the document the program automatically assigns it the filename required by the IRS When the return is generated an EF Attachments worksheet is produced See Figure 52 This worksheet shows in table format the Reference section of Form 3115 the Description and the IRS required Filename of each required PDF docu ment This worksheet is displayed as EF PDF in View mode KEEP FOR YOUR RECORDS 1 EF PDF EF Attachments Name of corporation j EssBeeEss Filename 3115 III Line 20 Proposed Change Documents ProposedChangeDocuments pdt 3115 II Line 4d Consents From Operation Div Dir ConsentsFromOperatinglDivisionDirector pdtf alit NW emm on IT XX RO FA YA YY T oa scm PM ZEN m LL Figure 52 Example of an EF Attachments worksheet Notices of Inaddition to Form 3115 and related schedules and statements the program produces Missing EF messages as applicable when the return is calculated All forms schedules EF Attachments messages and worksheets are accessible from View mode EF messages for Form 3115 provide information about required attachments includ ing PDF attachments that are missing from the return Some messages list all state ments required for a particular section but do not indicate which statements specifically are missing To best understand which attachments are still required compare the ATT screen and the EF PDF
79. eflects all changes to credits and deductions including discontinua tions For details on the new regulations for the 2012 tax year see the IRS instructions for Form 1120S Required Fields Fields that require completion before a return is eligible for e file are highlighted in blue item 1 in Figure 1 You can change the colors at Setup 5 Colors and turn off the warnings at Setup gt Options gt Data Entry tab Name and Address Information Employer ID numbee s 11 1223456 Corporation s Legal Name EssBeeEss Corporation M CNDBODE o AAT cat IE SC EUN ME DBA Doing business as Address Suite Figure 1 Required fields item 1 and foreign address fields item 2 Foreign Addresses For 2012 Drake has increased support for foreign addresses with new Foreign Only fields on multiple screens in all packages These fields are locked to keep incorrect Tax Year 2012 What s New in Drake for S Corporations Drake Software User s Manual data from being entered and must be clicked once to unlock them item 72 in Figure 1 on page 1 Click the field to unlock foreign address fields throughout the return Close the return and re open it to re engage the lock for unused screens To use the foreign address fields click in the first field and then enter the name of the foreign province or state as appropriate Select the appropriate foreign country from the drop list and then enter the postal
80. ems Access screen 2 from the States tab or by entering 2 in the selector field and pressing ENTER Officer Screen E Officer Information is for state purposes only Nothing entered on this Information screen is carried to the federal return The link to this screen is on the States tab or you can enter either E or OFF in the selector field and press ENTER Other Information and Overrides Use screen 1 to enter the following additional information e Resident State If the corporation has a mailing address in one state but does business in another select the state in which the corporation does business from the Resident State drop list e Drake Codes and Overrides Information on miscellaneous codes invoice numbers and override fields is covered in the Drake Software User s Manual Tax Year 2012 Schedule K Shareholders Pro Rata Share Items Screen K which consists of two screens can be used to enter data for Schedule K Shareholders Pro Rata Share Items Note that the K fields are primarily adjustment fields Press F1 or use the right click menu to see what amounts are adjusted from elsewhere in the program You can find information on adjustment and override fields in Appendix B Adjustment Worksheet and Appendix C Override Worksheet of NOTE this manual These worksheets are also available through the FAQ screen Open the FAQ screen click the Screen Help button or press CTRL ALT 7 and click the links at the
81. ental information for all K 15 on the K1G screen Enter specific information for a single K 1 here This information is added to the global supplemental information entered on the K1G screen Shareholder s rental property income From 4797 Land 9876 West Avenue Type 5 Total profit 12 345 From K1 P Multi fam 565 West Rd Type 2 Total Profit 533 333 From KI F Self Rental Siler St Type 7 Total Profit 544 444 Y Hid m um o oom niim mc TNI a e ee n ti BA T em ah ail i ae Figure 5 Supply details to shareholders on Supplemental Info tab The K 1 Rental Real Estate Activity attachment K1 8825 is IMPORTANT not transmitted when the return in e filed Preparers should present this attachment to each shareholder who receives Sched ule K 1 Merchant Card and Other Third Party Income Reporting Last year the IRS introduced Form 1099 K for merchant card and other third party income reporting and added a line to the Income section of the 1120S return for reporting this income Drake incorporated a data entry field in the Income INC screens of the S corporation package in anticipation that this field would be used however because the IRS required that a zero 0 be entered in this field for tax year 2011 the field was inactive grayed out in Drake This year the IRS reversed itself and removed this line from the Income section of the 1120S return and Drake removed the Merc
82. envelope coversheet Options Optional Documents tab for the city envelope coversheet Date to print on returns Overrides the default date on the Paid Preparer line at the p bottom of the 1120 page 1 Due date to print on letter and filing instructions A eins default due date that is printed on letters and filing Total assets on Form 1120S page 1 line F Overrides the calculated amount on Form 1120 page 1 line F IRS Center Overrides the IRS Center address generated from screen 1 TI U N dem oO O 2 Notice to Shareholder of Undistributed Long Term Capital Gains Federal ID number Overrides entry on screen 1 Regulated investment company s name in care of aan GERA name if needed address city state and ZIP code y i l mE Overrides default calendar year dates or fiscal year dates Fiscal Year beginning ending entered on screen 1 Shareholder s name in care of name if needed address city state and ZIP code Overrides entries on the K1 Shareholder Information screen Overrides the system calculation for the Current depr column of the Depreciation Detail Listing Override regular depreciation AMT if different usd D for the AMT Current column Override regular depreciation Book if different Overrides the calculated book amount izo enerne elected this vear Federal Overrides Form 4562 Part line 6 column c and the amount p dinh for the WK S179L 179 expense elected this year Book if different g
83. es are imported directly however and some amounts are optional Use the Other Information column to indicate special conditions and additional informa tion regarding certain rows Table 5 describes the most common notes in this column Table 5 Other Information Column Notes Note Description not included in totals The amount is required for importing purposes only but is not included in the totals shown on the trial balance does not carry Information cannot be imported and must be entered on the appropriate screen in Drake Screen is specified in column to the left of Other Information optional Amount is optional not required for import but could require direct entry in the software enter as negative number Some deficits must be entered as negative numbers import includes the calculated Used for total purchases when calculating cost of goods change in inventory sold COGS in the return the program takes the change in inventory into account for the Form 1125 A calculation Form or Schedule may be Non financial information must be completed in Drake in required addition to the financial data entered in the worksheet 52 Tax Year 2012 Drake Software User s Manual Importing Trial Balance Information All does not carry notes are accompanied by further instructions in the column to the left of the Other Information column as shown in Figure 39 SCH2 Detail Typically a balance sheet subsidiary
84. f gross receipts entered on 1 Gross receipts for the tax year screen 3 and Schedule F ad l Adjusts amounts entered on Schedule K for royalties rents 2 Passive investment income MN dividends interest annuities 5 Deductions directly connected with passive income on Adjust amounts calculated from entries on Schedule K for line line 2 12b and for line 12d codes K and L orm 1125 A Cost of Goods Sold 1 Inventory at beginning of year Adjusts amount coming from Schedule F line 46 2 Purchases ss Adjsts amount coming from Schedule F line 47 7 Inventory at end of year Adjusts amount coming from Schedule F line 49 chedule K Shareholders Pro Rata Share Items Screen 1 of 2 Adjusts interest income flowing from the income and deductions 4 Interest income screen screen 3 Form 6252 screen K1P line 5 and screen KIF line 1 5a Total nand nend Adjusts ordinary dividends flowing from screen 3 the K1P screen line 6a and from the K1F screen line 2a Adjusts qualified dividends flowing from screen 3 the K1P eae NIHU screen line 6b and from the K1F screen line 2b 6 Royalty Income Adjusts amounts entered on K1P screen line 7 l Adjusts amounts flowing from the K1P screen line 9b and the Il les 28 Collectibles 28 gain loss KIF screen line db Other portfolio Adjusts amounts flowing from the K1P screen line 11 code A and the K1F screen line 5 10B Involuntary conversions Adjusts amounts flowing f
85. formation Many of the entries made elsewhere on the return flow automatically to the generated Schedule L for example inventory information from Form 1125 A Depreciable Tax Year 2012 27 Schedule L Balance Sheet Per Books Drake Software User s Manual asset information from the 4562 screen and intangible assets and amortization also flow to Schedule L The SCH2 Screen The SCH2 screen is used to provide detailed information required by the IRS for cer tain lines on Schedule L This screen can be used in place of the actual L screen in Drake In other words if you use this screen for all applicable lines on Schedule L you do not need to make any entries on the L screen All line selections are carried to the SCH2 screen in next year s pro gram when the returns are updated Line descriptions are updated with NOTES the year end amounts carried to the beginning of year column To access the SCH2 screen from the L screen click one of the SCH2 Screen links To create a statement for a line select a line from the drop list and enter descriptions and their corresponding amounts Once the information is entered or if additional descriptions are required for the line press PAGE DOWN to access a new screen Statements The total amounts entered on the SCH2 screen do not show up on the actual L screen in the program They are however printed on the return as applicable with references to the corresponding statements The type
86. hant Card and third party payments from Form 1099 K line from the INC screens of the S Corporation package No special reporting of this income is necessary Qualified Real Property The provision of the Small Business Jobs Act of 2010 under which taxpayers could expense up to 250 000 of the cost of qualifying real property QRP placed in service during tax years 2010 and 2011 rather than recovering that cost through depreciation deductions was set to expire at the end of 2012 but through the American Taxpayer Relief Act of 2012 been extended for the 2012 and 2013 tax years Bonus Depreciation For the 2012 tax year e Assets placed in service in 2012 50 bonus depreciation e Assets placed in service in 2013 50 bonus depreciation Tax Year 2012 5 Before You Start Drake Software User s Manual Before You Start Actions you might need to take before starting an 1120S return in Drake include Updating a prior year return if you prepared the tax return last year Electing as an S corporation if the corporation was not an S corporation last year Updating a Prior Year Return in Drake A prior year return can be updated in three ways As a single return updated one at a time using Last Year Data gt Update Cli ents 2011 to 2012 recommended When you open the return for the first time in the 2012 program and are prompted to update it With all other returns in the program using Last Year Data gt Upda
87. he bottom of the screen in order to prevent the corporation s name and address from being generated in the header of the K 1 letter To have the corporation s name and address generated for K 1 letters NOTE go to Setup gt Letters gt Setup gt Letterhead and Margins and select Use Firm Info on Letters Once the required signing information has been entered a K 1 cover letter will be generated for each shareholder receiving a K 1 Editing the As with other letters provided by the program you can edit the text to suit your office K 1 Letter needs and style Review the following sections of the Drake Software User s Manual Tip Tax Year 2012 before making changes to letter templates Introduction to Letters in Drake in Chapter 2 Installation amp Setup he Letter Keywords section of Appendix C Keywords To edit the text of the K 1 letter 1 From the Home window select Setup 5 Letters The Client Communications Editor is displayed 2 Select Open gt S Corporation gt Sub S K 1 Cover to view the template of the S corporation K 1 letter od Make any desired changes to the template 4 Click Save For an amended return the K 1 letter automatically refers to the NOTE amended K 1 To edit the letter for an amended K 1 select Open gt S Corporation gt Sub S K1 Amended and follow steps 3 and 4 of the previous procedure Shareholder s Adjusted Basis Worksheet 26 Basis information for individual shareh
88. he code entered in the Investment credit code drop list Overrides the cost entered on the 4562 detail screen as Rehabilitati Pre 1 ildings in th If ue Poet E a AE a determined by the code RA entered in the Investment credit Opportunity Zone code drop list Overrides the cost entered on the 4562 detail screen as 11g Rehabilitation property Other pre 1936 buildings determined by the code RB entered in the Investment credit code drop list Overrides the cost entered on the 4562 detail screen as determined by the code RC entered in the Investment credit code drop list Rehabilitation property Other certified historic Overrides the cost entered on the 4562 detail screen as J structures determined by the code RD entered in the Investment credit code drop list Overrides the cost entered on the 4562 detail screen as 12a Energy Credit Basis of property using geothermal determined bith de TEA enteredinthel t t credit energy placed in service during 2009 etermined by the code EA entered in the Investment credi code drop list E 4 IOverrides the cost entered on the 4562 detail screen as 12b eec ape JANG aman determined by the code EB entered in the Investment credit or energy placed in service during 2009 vy code drop list Energy Credit Qualified fuel cell property Basis of Overrides the cost entered on the 4562 detail screen as 12c determined by the code EC entered in the Investment credit property installed
89. hia calculated book amount and the amount for the 562 Detail Override regular depreciation Federal Overrides Worksheet Override Location IEEE REEF Pocreen Line J Fie Name Location of Information Being Overridden 77 1120S Overrides Form 4562 line 12 If Method M is chosen there must be an entry made on line 179 expense elected this year or Method EXP must be used Overrides amount calculated for WK S179L convention in service during the year nie Overrides how the system calculates depreciation for the Life MACRS 9e Placed in Service and Like Kind Exchange Info h BO KASO tables and Method columns of the Depreciation Detail Listing 4562 Parti i ni the maximum of 179 expense for 2011 of 500 000 on ine 1 of Form 4562 5 Overrides the software calculated amount of section 179 current year property placed in service during the tax year 19 Overrides line 5 on WK s179L orm 3468 Computation of Investment Credit Qualifying advanced coal project credit Basis of investment in gasification for section determined by the code CA entered in the Investment credit 49A d S B i projects code drop list Qualifying advanced coal project credit Basis of Overrides the cost entered on the 4562 detail screen as investment in coal based generation for section determined by the code entered in the Investment credit code A 3 B ii projects drop list Overrides the cost entered on the 4562 detail screen as determined by t
90. icrosoft Excel version 2000 or later Tax Year 2012 45 Importing Trial Balance Information 46 Drake Software User s Manual In addition take these actions to ensure the trial balance import works properly Enable Macros The trial balance import function uses macros in Microsoft Excel Check your Excel settings to ensure that macros are activated and that macro security is set to medium To do so go to Tools 5 Options in Excel and select the Security tab Click Macro Security and select Medium then click OK In Windows 7 and in Microsoft Vista click the Office button in the upper left and then click the Excel Options button at the bottom of the win NOTE dow Next select Trust Center from the list at left then click the Trust Center Settings button Select Macro Settings from the list on the left then choose Disable all macros with notification Click OK Disable Autobalance optional When autobalance is disabled the program is prevented from automatically adjusting the year end retained earnings or capital amounts thus allowing you to see any discrepancies in the balance sheet To dis able autobalance go to the PRNT screen and select Turn off autobalance Calculations and Other Options if Turn off autobalance Calculate Form 2220 penalty Prepare Form 7004 based on screen 1 data For an extension to include payment information screen 4 may also need to be completed Figure 29 Disable autobal
91. ific information for a single K 1 here This information is added to the global supplemental information entered on the K1G screen ECCE Note the following information fon Amelia Carter E OW NM T CL PT MN P p OM Ta mo Figure 13 In this example the information entered on the K1S screen will appear only on the individual shareholder s K 1 Domestic Production Activities 24 An S corporation does not take the deduction for Form 8903 Domestic Production Activities Deduction Because the deduction is subject to income limitations this information must be reported on shareholders individual returns Shareholders use the pass through amounts to calculate their eligibility for the deduction Tax Year 2012 Drake Software User s Manual Schedule K 1 for 1120S Shareholder Information On the 8903 screen 1f the Print K1 8903 for each shareholder box is not selected the amounts flow to the K 1 box 12 with codes Q and R When this box is selected the information flows to attachment K 1 8903 Figure 14 instead of box 12 on the K 1 Attachment KI 8903 is referenced on a statement Code P is printed on box 12 of Form K 1 which refers to domestic production activities information All Forms Sets EF Federal Worksheets Notes Messages North Carolina K1 8903 A a K1_8825 Form 8903 Shareholder Amelia Carter Domestic Production Activities Deduction OM No 1545 1984 Rev December 2010
92. inary Gains and Losses 1 eee rrr 9 Other Income 19088 bu qactor Fact oho hd OS EOS SA Od d TRS NG EWES Aha DALANG 10 Compensation and Wages sack xo oes E PANG PREG ARE EE HERG eG AGING NALNG GSE RE ES PAKI HETERO 10 Re pairs and Maintenance c aaa 4404664 MA DALAWA RAE 3 Reh Kee S q AGUA RU Rd rq du ie dete 11 PANDO akan AA 6 Gn a KG aS ee be GUGMA sg aha amma KAG Ada AA 11 in r 11 Ldxes dna LIN Ena uses r adopter uda Tha NUNG eee EARN oe eee TALA P E EA DAAN Ed EON 11 lucc AN a mm 12 De pie ClallOn PCPE m 12 Bg MMERMCTT 13 PRON GIS UNS MRNPECRPETRRTTTPEE 13 Pension and Proftt SBattllgi e owen ote cea bake cee eR dew ea CR dene VOR De dot heed ee UB MAA 13 Pmplovee Benefits Progra AA dang 13 Other Deductions see asea ood MON ee reer as Ser denar e AEROS ee DE bare f eod a ban ee Sed 13 Tax and Payments 0 0 cc ees 13 Net Passive lt lt 4446 19x ETS keno ss TRU AA ye RES 14 vunildgsMEE UFIOU CC Dn 14 PU Lax PR 14 Payments with Extensions a 14 Wax PANO WVCIS 355 ke cere KALAN eee eeu eee oes BREE HOKE eT per eee
93. ine 14b amount will be calculated into total deductions Tax Year 2012 Drake Software User s Manual Tax and Payments Depletion Advertising Enter depletion amounts on the DED screen Omit timber use Form T Forest Activi ties Schedules and oil and gas properties Each shareholder should figure depletion Enter advertising expenses on the DED screen Pension and Profit Sharing Enter pension and profit sharing expenses on the DED screen Press F1 for informa tion on what expenses to enter The software reduces the expense based on the credit amount calculated from Form 8881 Credit for Small Employer Pension Plan Startup Costs Note that this is an adjustment field the software uses any amount entered here to adjust the amount flowing from Schedule F to the 1120S Employee Benefits Program Enter on the DED screen amounts for fringe benefits paid or incurred on behalf of employees owning 2 or less of the corporation s stock Do not deduct amounts that are an incidental part of a pension profit sharing etc plan included on line 17 or amounts reported elsewhere on the return Report amounts paid on behalf of more than 2 shareholders on line 7 or 8 which ever applies A shareholder is considered to own more than 2 of the corporation s stock if that person owns on any day during the tax year more than 2 of the out standing stock of the corporation or stock possessing more than 2 of the combined voting power of
94. ips should be entered on screen 8846 which is accessible via a link from the DED screen These amounts also appear on the Taxes and Licenses Attachment referred to on line 12 with the printed ATT STL reference Figure 8 on page 12 11 Income and Deductions Interest Depreciation Line 14 Depreciation 12 Drake Software User s Manual 7 s Regnis Sr eam ECE a ui oeste e PT TT eme eT PAT ga PATA 4B Geddebe 2222 524 ct bese ease cine e a mmm BR RB dee An a WH Pem 66 6464 68 HERBS RRR REESE Mee ADRES re 42 Tares and licenses 2 2 naneco rooe a 11 457 13 hiewe _ 4 4 AA ksu nka ee 44 Depreciation not claimed on Form 1125 or elsewhere on return attach Form 4532 a 45 Depletion Do not deduct nil and gas depletion ee eee ee anh agitate es Mb Figure 8 Notification on line 12 of the 1120S return that the Taxes and Licenses Attachment has been produced with the return To keep the notification from appearing on line 12 of the return go to the PRNT screen and select Suppress printing of form and attachment references State tax amounts income tax and franchise tax entered on the ES Estimated Taxes screen are carried to the tax computation ATT TAX worksheet The state tax amount carried from the ES screen may differ depending on which method of accounting cash or accrual is used Using the 1120S instruction guidelines enter interest expense on the DED screen Note
95. k e Check if loss Mark this check box if a loss based on the amount in the Pro ceeds from sale field 1s not allowed e Cost or other basis Enter the cost or basis If only the loss amount is available enter the loss amount and leave the Proceeds from sale field blank e Federal tax withheld Enter the amount of federal tax withheld from the pro ceeds of a sale e Wash sale loss disallowed Enter amount of wash sale loss that is disallowed e Description Enter a description of a capital gain or loss item using stock ticker symbols or abbreviations In the past Drake supported 32 characters but only the first 15 were transmitted with an e filed return By default the first 15 characters were displayed in black text on the screen additional characters were displayed in red With Modernize e File MeF all characters are now transmitted and all char acters are displayed in black text on the screen e Basis not reported If the asset being entered is not being taken from a Form 1099 B indicate why by selecting an option from the drop list e Adjustments Up to three adjustments per screen are permitted For each adjustment select the applicable code from the drop list and enter the amount of adjustment and AMT adjustment 1f applicable to the gain or loss AMT Several AMT related fields are included on screen 8949 Amount of gain loss subject Enter amount of gain or loss subj
96. l Property Select additional apportionment factors from drop lists The Ending amount entered on the Property and Addition Property NOTE screens in Drake12 will become the Beginning amount for property on the APPT screen when the client s return is updated next year in Drake13 You may enter up to four states on one APPT screen If you need more than four states press PAGE DOWN for a new APPT screen The same state can be entered more than once when additional fields are needed Select OT Other Reconciliation from the State Selection drop list when using the reconciliation worksheet Not every item appearing on the federal return may be sub ject to multi state apportionment When you select OT the data entered becomes a reconciling adjustment amount to aid in tying to the federal return Enter as much or as little detail as the states require If a state does not require any information to be entered no information will flow to that state s return If certain contact information required for state purposes is different from that entered on screen 1 use screen 2 for the alternative data for any of the following entities Registered office e Principal place of business e Books in care of information Screen 2 also has fields for the name title e mail address ID number and telephone number of the S corporation s contact person Tax Year 2012 Drake Software User s Manual Schedule K Shareholders Pro Rata Share It
97. ld Zero Apportionment No Activity in State Sales Outside stat State drop lists pk Within state Juan ma na Within state to U S Government Throwback nontaxable jurisdiction Returns and Allowances i Quisidetowilhin 7654 2222 Wahaha 2 7 TU xr aa n dii E s it ii Y XP Dee als m ajam E um Fw po mpa sli m Figure 11 APPT Multi State Apportionment screens Tax Year 2012 19 Additional Information Drake Software User s Manual APPT Screens 20 Contact Information NEW FOR Mark the Zero Apportionment check box Figure 11 on page 19 to add a state but not include any apportionment data This will include the 2017 state on the apportionment summary worksheet SAC SUM avail able through View mode The APPT screen is opened to the Sales tab Links at the top of this screen take you to the Payroll Property and Additional Property information tabs for each state selected Figure 11 on page 19 These screens and their uses are listed in Table 1 Table 1 APPT Screens Screen Information Sales Select state enter sales returns and allowance and other income related information for each selected state Payroll Enter salary wage commission and labor amounts for each selected state Property Enter beginning and ending amounts of common apportion ment factors plus select additional apportionment factors from drop lists Additiona
98. lder To override cal culated data it is necessary to override the calculated amount on all K 1 schedules MBERTANT Shareholder overrides should not be done for an S corporation except in certain circumstances such as ownership changes Foreign Addresses If the shareholder has a foreign address enter Province state country postal code information on the Foreign address line of the Shareholder Name and Address Information section along with the street address and city in the Address and City fields Do not enter anything in the U S State or ZIP fields Conversely for a U S address do not enter anything into the foreign address fields NEW FOR The Foreign fields are locked when a return is opened Click in one of 20172 the fields to unlock them throughout the return To relock the unused Foreign fields close and then reopen the return K 1 Export Take the following steps to export a K 1 from an 1120S return into a 1040 return 1 Ensure that K 1 data is entered in the 1120S and that the 1040 has been created The KIS screen in the 1040 does not have to be created beforehand Tax Year 2012 23 Schedule K 1 for 1120S Shareholder Information Drake Software User s Manual 2 In the 1120S return go to View mode 3 Click K1 Export in the View mode toolbar If any K 1s are not eligible to be exported that list appears Click Next to continue otherwise the Export K1s window is opened containing a list of K 1s eligible fo
99. lick the links at the top of the window C 1 Overrides Worksheet J Qverride Location Oy J J O 9creen Line Field Name Location of Information Being Overridden 1120S 1 S Corporation General Information screen cc CU Number of shareholders at tax year end Overrides number of K1 screens in return Preparerfee 1 jOverrdesthe system s fee calculation jFm Overrides the program default setting 1 Data entry op Overrides the login name MEM ERO number Overrides the selection made from the ERO SSN Indicator drop list at Setup Options EF tab DED Deductions O O Overrides the other insurance amounts below EI KATA Overrides state income taxes calculated from information entered on ES screen using code IN Overrides state franchise taxes calculated from information 2 State franchise taxes entered on ES screen using code FR Tax amp Payments bottom of page 1 of Form 1120S CG AY Current year estimated tax payments Overrides payments made as entered on ES screen 23b Tax deposited with Form 7004 ndo amount entered on 7004 screen Amount paid with Amount to be credited to next year s estimated tax Overrides overpayment amount as entered on ES screen Form 1125 A Cost of Goods Sold D S S M 9252 5 o0 DO ZZ1ALOIO Overrides calculated amount for entries on 4562 detail screen directed to the COGS in the Form selection box Schedule K 1
100. ms and worksheets 39 refunds direct deposit of 15 state tax 10 reject codes 42 rent paid on business property 11 rental activities 34 36 repair costs 11 retained earnings reconciliation worksheet 39 returns 52 53 week year 40 amended 18 bankruptcy 40 extensions for 14 17 fiscal and calendar year 7 inactive 41 short year 7 signing 17 tax exempt organizations 990 42 45 updating prior year 6 revocation of S election 8 S S corporation changing to 6 electing as 6 termination of 8 scanning PDFs for e filing 42 SCH2 screen for Schedule L 28 Tax Year 2012 Index Schedule B Other Information 18 Schedule D Capital Gains and Losses and Built In Gains Parts I IIL and III 14 Schedule D Capital Gains and Losses entering data for 2 Schedule E Officer Information 21 Schedule K Shareholders Pro Rata Share Items 21 Schedule K 1 Shareholder Information 22 27 Schedule L Balance Sheet per Books 27 29 39 Schedule M 1 29 39 Schedule M 2 31 34 Schedule M 3 31 schedules on Form 3115 59 63 section 179 income limitations 10 481 adjustments 10 481 a adjustments 58 shareholders adjusted basis worksheet 26 27 compensation of 10 foreign addresses for 23 multiple 23 number of 8 Schedule K 1 22 updating data annually 27 short year returns 7 signatures electronic 17 state address 21 specific information 19 tax refunds 10 15 tax and payments 13 15 on fuels credit for 10 returns see
101. n that is printed in the top section of page 1 of Form 1120S Name and Address Tax Year Fiscal and Calendar Years Short Year Returns Tax Year 2012 Use screen 1 to complete the corporation name and address section of Form 1120S For state purposes only 1f the corporation has an alternate address such as a P O box you can enter that address on screen 2 in the Address Line 2 field at the bottom of the screen Access screen 2 from the States tab or enter 2 in the selector field and press ENTER The software uses the calendar year as the default period for all corporate returns no date entries are required on screen 1 for a December 31 tax year end The program adjusts calculations for depreciation and for gains and NOTES losses on sales of assets based on the entity s tax year For information on filing with a 52 53 week year see Electing a 52 53 Week Year Initial Return on page 40 If the S corporation uses a fiscal year where the year begins in the current calendar year and ends in the next specify the beginning and ending dates in the If not calen dar year section of screen 1 An entity may have a short year return if changing accounting periods with IRS approval Form 3115 or if this is its first or last year in business and the tax year is not a full year To indicate a short year return use the fiscal year date fields on screen 1 to indicate the beginning and ending dates for the current year
102. ncluding selling adivities equires d 5 Pension and other related costs 2 stateme nt Be Oe de tet be du dci 6 Employee benefits AG T Indirect materials and supplies Nota p plica ble a Purchasing costs aooo a a to this retu m Looe 9 Handling processing assembly and repadagin AG yc Offsite storage and warehousin bp are a ERN APT caen baa M a m Ww M noun TT NE NT LL Figure 47 X was selected for column 1 lines 1 3 B was selected for column 1 line 4 nothing has yet been selected for any other line See also Figure 48 on page 62 Tax Year 2012 61 Form 3115 Application for Change in Accounting Method Drake Software User s Manual Schedule E Screen 311E Multi form Codes 62 To attach a statement for section B or C click the D3 2 Attachment link at the top of Section B See Figure 48 A single statement may contain all necessary explanations for sections B and C Parts Il Parts II IV A B C D Parts I D Part Ill Form 3115 Schedule D Part Ill Method of Cost Allocation Multiformcode Section A Allocation and Capitalization Methods 13 1 attachment Allocation and capitalization methods detail Section B Direct and Indirect Costs Required To Be Allocated D3 2 attachment YExplanation for boxes that are not checked X Check B Blank No Selection N A T T Oneca e es LL UM E 2 Direct labor DAPAT AA AA PC eS a
103. nd AAA is decreased by ordinary distributions but not below zero before the net negative adjustment for lines 2 through 5 sch M 2 Item Amount Line 1 Balance at beginning of tax year 11 786 Line 6 Net negative adjustment lines 2 5 57 951 Line 7 Distributions total 60 000 11 785 Line 5 Balance at end of tax year 557 951 A corporation can make distributions greater than the amount on line 6 of the M 2 but those distributions could be taxable to the shareholders Enter distributions on the DIST screen this way the amounts flow automatically to Schedules M 2 and K 1 but are limited based on the rules described previously For more information on the DIST screen see Entering Distributions on page 32 Line 7 1s limited to the lesser of the amount for line 7 or the positive amount from line 6 If line 6 is negative line 7 is then limited to the positive amount on line 1 If line 1 and line 6 are both negative line 7 is completely disallowed on the Schedule M 2 Distributions are entered on the DIST screen to be reported to the shareholders regardless of the Schedule M 2 limitation The AAA cannot be negative as a result of distributions but it can be negative if it arises from losses Column B Other Adjustments Account Use column b Other Adjustments Account to enter any amounts you want printed in the corresponding column in the printed return Officer life insurance and applica ble tax exempt income flows to Sched
104. nd the applicant is therefore not eligible for a change under automatic change request procedures See IRS Form 3115 instructions for details Parts I lll Parts Il IV ABC D Parts Il D Part Ill 4 Form 3115 Application for Change in Accounting Method Multi form code i All applicants must complete Parts Il and IV Part ll Information for All Requests ab a Ho f Gpo or will the applicant cease to engage in trade or business to which requested change relates Po E 4 i Beginning Date Ending Date P aada Are any federal returns under examination Ac once lb ahaaa i gh aon A ri Figure 45 Automatic Change Request information Part IIl Ifthe Part III section of the Parts I III screen is filled out Form 3115 cannot be e filed with the return It must instead be paper filed before submitting the return A user fee a check or money order payable to the IRS must be included with the paper filed form See Appendix A of Rev Proc 20012 1 for more information For more on applicants who must apply for advance consent see the IRS Form N TES 3115 instructions Taxpayers filing under an automatic change request procedure do not pay a user fee If the applicant qualifies for a reduced user fee put a check mark in the box on line 23b and go to screen ATT2 to complete the attachment information in the Part III line 23b section located in the bottom half of the screen Include the necessary infor mation or
105. ng Adjusted E N o NC Income and Common Schedule K Items 4 Schedule K Most Common Items Interest income Adjusts the amount that flows from Form 6252 Se ee ule MOSESOIMONENS NENGEAULIIG Adjusts the calculated nondeductible expenses and limitations expenses other DED Deductions 14a maala Oo O Depreciation Adjusts the amount that flows from Form 4562 calculations Depreciation claimed elsewhere on return Other than Adjust the amounts carried to or entered elsewhere in the Schedule A return such as the Schedule A line 5 1 O1 Depletion do not deduct oil and gas depletion Adjusts the amount entered on the K1F screen line 9 code B Adjusts the amount that flows from Schedule F line 17 to this line Adjusts the amount that flows from Schedule F lines 23 a and 23 b Adjusts the amount that flows from Schedule F line 25 mah 8 Employee benefit programs mama DA N O 3 Interest expense 1 Pension profit sharing and other plans Repairs and maintenance Adjusts the amount that flows from Schedule F line 27 Adjusts the amount that flows from Schedule F lines 26 a and 26 b Adjusts the amount that flows from Schedule F line 24 11 Rents Salaries and wages paid to non shareholder employees 11 Other miscellaneous taxes Adjusts the amount that flows from Schedule F line 31 j ax amp Payments Worksheet for Line 22a Adjusts the combined amounts o
106. not displayed in View mode If the 1120S K 1 is NOTE selected for printing it is printed first followed by the statements per taining to that 1120S K 1 These are followed by the code sheets The generated Schedule K 1 may include asterisks with letter codes e An asterisk with a letter code indicates that multiple items have that code Tax Year 2012 Drake Software User s Manual Schedule K 1 for 1120S Shareholder Information e Anasterisk at the bottom of a group indicates that there are more items than can fit in the space provided for that group and that a statement is attached or that the statement is required as in the case of other amounts Multiple Shareholders For returns with a large number of shareholders you have the option to deactivate cal culation and printing of the K 1s while working on the Form 1120S This option which eases the process of reconciling the 1120S is available by going to the PRNT screen and marking the box under K 1 Items to Suppress Figure 12 K 1 Items to Suppress I Suppress Sch K 1 K 1 letter K 71 ATT and VK SBAS Do NOT check amended box on Sch K 1 from Screen 1 Suppress KI DIST Figure 12 Check box for suppressing K 1 items located on PRNT screen When the return is ready to be filed return to the PRNT screen and remove this check mark before calculating the return Override Fields It is not possible to override the calculations for a single shareho
107. nt is included on the statement for other costs and should not be included in the Other Costs worksheet NOTE Line 14b on the DED screen is for Form 4562 depreciation that is not entered on screen A or elsewhere on the return Importing Ifusing the trial balance import feature see Importing Trial Balance Information on Trial Balance page 45 enter depreciation amounts directly into the appropriate fields on the trial to Form balance worksheet not into the fields in data entry When the trial balance 1s imported 1125 A the COGS depreciation expense amount flows directly to the appropriate line of Form 1125 A and is calculated accordingly Ordinary Gains and Losses The amount on line 4 Net gain loss from Form 4797 Part II line 17 of Form 1120S flows from Form 4797 Amounts can also flow from screen 4562 but only if that screen shows assets sold and property type Tax Year 2012 9 Income and Deductions Drake Software User s Manual Other Income Loss Enter all amounts for line 5 Other income loss on the INC screen INC screen data is displayed on attached statements in View mode Amounts from the following screens also flow automatically to line 5 e 6478 Form 6478 Alcohol and Cellulosic Biofuel Fuels Credit e 8864 Form 8864 Biodiesel and Renewable Diesel Fuels Credit Additional fields on the INC screen include e Amount of credit for tax on fuels e Interest income on receivables e Recoveries of bad
108. ntering Distributions Code Section 6037 states that an S corporation return must report the amount and date of distributions made to each shareholder The DIST screen is used for entering date and distribution amounts for Schedule K line 16d Distributions In addition to line 16d the total from the DIST screen may flow to Schedule M 2 line 7 subject to lim itations and to the Schedules K 1 based on the shareholder s ownership percentage Schedule K 1 distribution information is displayed on the KI DIST worksheet pro duced with the return Column A Accumulated Adjustments Account The Accumulated adjustments account column of Schedule M 2 generally reflects the S corporation s accumulated undistributed net income after 1982 Non dividend distributions flow to Schedule M 2 from Schedule K line 16d An entry in the Non dividend distributions field line 7 of the M2 screen adjusts the amount from the K screen subject to limitations see balance sheet examples on the following page Distributions reported on line 7 flow differently from the amount entered on the DIST screen See the previous section Entering Distributions The distributions are lim ited following the ordering rules under Reg 1 1368 2 Ip See Form 1120S instructions for more details and examples These rules are for Schedule M 2 column a e Line 1 balance The balance at the beginning of tax year line 1 is either zero or the balance carried fo
109. ny Data Entry Menu Click the Screen Help button at the top of the FAQ screen then click the link for the desired worksheet and wait for the worksheet to be displayed as a PDF file An Internet connection and NOTES Adobe Reader are required in order to view the worksheets Much of the information contained in the worksheets is also available from the field level helps within the program To access a field level help click inside a field and press F1 or right click in a field and select View Help Electronic Filing Steps for e filing Form 1120S are the same as for e filing Form 1040 with the excep tion of bankruptcy returns which must be paper filed S corporations with 10 million or more in total assets that file 250 or more returns a year are required to e file their Form 1120S returns NOTES Every 1099 W 2 940 and 941 form that is filed is counted as part of the 250 return threshold For example if a corporation filing an 1120S return also files 150 W 2 forms each W 2 would count as a separate return within the 250 return threshold Calendar year returns are due on March 15 2013 Fiscal year returns are due on the 15th day of the third month two and a half months after the S corporation s year end Returns can be e filed after these dates however if an extension has not been filed penalties and interest are applied Additional Return Types Electing a 52 53 Week Year Initial Return 40 Short year return
110. olders should be entered in the NOTE 1040 package in Drake this information cannot be exported from the 1120S package to a 1040 return Such an import would override limita tions and carryovers calculated in the 1040 program Use the Shareholder s Adjusted Basis Worksheet Basis Wks screen to calculate a shareholder s new basis after increases and decreases are made during the current year The basis of S corporation stock is adjusted on an ongoing basis unlike for a C cor poration where stock basis remains constant unless additional stock purchases are made or stock is sold A shareholder s beginning basis in S corporation stock 1s the original capital contribution The Basis Wks screen 1s accessible by clicking the Basis Wks tab at the top of the KI screen for a shareholder Figure 15 on page 27 Access the K1 screen from the Data Entry Menu Tax Year 2012 Drake Software User s Manual Schedule L Balance Sheet Per Books Ki Supplemental Info Schedule K 1 Shareholder s Share of Income Credits Deductions etc shareholder Name and Address Information EL Wpe E Name Pante Alighieri Care FOOD Ba ff bec c oor e IN ME 1234 M eco ANA PAP PA AA NM Florence U S AG PT eer Resident state Foreign Province state country postal code Tuscany IT E an Ple DURO m a apost ihid adi maie emat o d NUM TE S Figure 15 K1 screen tab for accessing the Adjusted Basis Worksheet Increases 7 Increase
111. on fother Ch AP AA AK US State ZIP E Foreign Province state country postal code Royalties Self rental Other Ul 5 7 5 9 eo p m Personal use days Figure 4 Selecting Land as property type on screen 8825 Preparers should be aware e Attachment K1 8825 is generated automatically whenever Form 8825 is gener ated e Ifthe property type selected from the Type of Property drop list on screen 8825 Figure 4 is Land type 5 or Self Rental type 7 this type of property is recharacterized by the IRS as active income if there is a net profit Net losses are subject to passive limitations The preparer must use this K 1 information when completing the individual shareholder s or partner s return e Columns for Line 19 4797 and Line 20s Pass thru appear on the attachment but only a total will be included for those columns No other details will appear e To explain details of the totals from the Line 19 and Line 20a columns of the K 1 Rental Real Estate Activity attachment lines 19 and 20a of Form 8825 to the shareholders open Drake go to the K1 screen click the Supplemental Info tab and enter the information from the attachment Figure 5 on page 5 4 Tax Year 2012 Drake Software User s Manual What s New in Drake for S Corporations KI Basis Wks upplemental Info K15 K 1 Supplemental Information Statement 243243243 Amelia Carter Enter global supplem
112. on and inclusion of Form 2553 with return tem H Check boxes for final return name change address change amended return and S election termination or revocation Item I Number of shareholders during the year completed automatically based on the number of K 1s number can be overridden on line I of screen 1 NOTE Enter accounting method at the bottom of screen 1 Income and Deductions Income and deductions are entered primarily on the INC Income and DED Deduc tions screens For information on the Schedule K items at the bottom of the INC NOTE screen see Schedule K Shareholders Pro Rata Share Items on page 21 Gross Receipts Enter gross receipts Form 1120S line la and returns and allowances line 1b on the INC screen The program calculates gross receipts or sales after returns and allowances based on gross receipts sales and any direct entry on line 1b The IRS does not require a detail Ctrl W worksheet for gross receipts therefore if you are using the trial balance import feature do not NOTE include a detail worksheet for this line or for any other line that does not require a detail worksheet For more on the trial balance worksheet see Importing Trial Balance Information on page 45 8 Tax Year 2012 Drake Software User s Manual Income and Deductions Cost of Goods Sold Form 1125 A For cost of goods sold COGS complete screen A Form 1125 A Cost of Goods Sold On
113. on request enter the amount being paid on the 7004 screen If an extension was previously requested and a payment was made then enter the amount paid on screen 4 line 23b Tax Year 2012 Drake Software User s Manual Direct Deposit of Refunds Tax Paid on Fuels Use screen 4136 to enter information for Form 4136 Credit for Federal Tax Paid on Fuels Note that this screen actually consists of two screens with lines 1 through 8f on the first screen Press PAGE UP or PAGE DOWN to go from screen to screen Underpayment of Estimated Tax For underpayment of estimated tax complete all applicable fields on screen 2220 Direct Deposit of Refunds The IRS requires that Form 8050 Direct Deposit of Corporate Tax Refund be submit ted with an e filed return in order for a corporation s refund to be directly deposited To complete this form in Drake use the DD screen Figure 9 Federal Account and State if same as Federal Deposit selection Federal selection bd State city selectian Name of financial institution RTM Account number Type of account Checking Savings Repeat Account Information Checking Savings Figure 9 Federal section of DD screen also 8050 screen When filling out the DD screen e Ifthe federal refund is to go to the account listed select Yes for the Federal Account selection otherwise select No Default is Yes e Ifa state refund i
114. or certain fields are sometimes included in the actual election statement other times they are included as separate lines Signature lines are printed as needed on some statements Making Changes on the Fly Use the PRNT screen to override program defaults Suppressing Forcing Items To suppress the printing or production or force the printing or production of certain documents go to the PRNT screen and select the desired options Many on the fly changes override the options established in Setup 38 Tax Year 2012 Drake Software User s Manual Making Changes on the Fly 1120S Items K 1 Items These items can be forced forcing the program to generate the item on a return e Schedules L and M 1 e Form 4562 Depreciation and Amortization e Next year depreciation listing e Inactive return printed on first page of the 1120S e Preparer and officer signature on printed copy of return The following 1120S items can be suppressed kept from being generated on a return e Schedule M 2 e WK M2 Retained Earnings Reconciliation Worksheet e Form and worksheet references Form and worksheet references are for the benefit of the preparer and client but are not required for the tax return References appear on tax NOTE forms to clarify which worksheets available in View mode correspond to which calculations and which forms screens certain amounts are carried from The following K 1 items can be forced
115. ptions 15 27 28 29 and 31 and it explains what specifically should be entered for each of these elections Drake Software Data Entry Help Other Date or Year Ending direct entry Enter any additional date or year ending information required for the gelected eletion The description field is used on the following election statements for this package SIM Use 15 Date of Occurrence 27 Shareholder s signature date 28 Officer a signature date 29 C Corp tax return ending date 31 Shareholder s tax year EL ON cL Lum c xu Ai ee F i Figure 22 Help text for Other date or year ending field on ELEC screen If the election option you selected is not listed in the help text for a field NOTE then that field should be left blank For example if you chose election 01 General Election Statement you would not need to enter any thing into the Date or year ending field help text in Figure 22 To open a new ELEC screen for an additional election press PAGE DOWN Election Statements Once an election is made and the return is calculated the election information is pro duced on a statement referenced STM ELXX where XX 1s the number of the election For example election 01 General Election Statement is generated as Statement ELO1 The election statement includes the election title election wording and any additional information required for the election such a date or amount Entries f
116. r P ma pa 5 E PGH Lm T Tl teens oT bee T met TA Tee a TT a dec et te Doe muet UA i X E atti T id is 207 eu Lar ees ad line d ox s un Y E hal ical verte kd Tax exempt interest Bu k line 15a HE line 158 Hi ine Gross real estate rental income 8825 line 2 Form 8825 line 2 Total real estate rental expenses 600 eel Esteve anita Baa requires detail Gross other rental income RENT line 1 Rent Line 1 Total other rental expenses 0 Binar Haniel Bse requires detail Gross royalties FOO K line 6 Schedule K line 6 R Capital FW a lasses X d o d FUL AG sas dees not GALEY PEN UM Geta pci rag on HELD aya Figure 41 Rental expense rows on an S corporation trial balance worksheet When imported the rental expense data entered on the trial balance worksheet appears on either the 8825 screen if real estate rental or the RENT screen if rental other than real estate 54 Tax Year 2012 Drake Software User s Manual Form 3115 Application for Change in Accounting Method Because the trial balance worksheet has only one detail screen per rental type the importing function does not accommodate entities with multiple rental properties or expenses however the following procedure allows the trial balance to remain in bal ance 1f there are multiple rental properties or expenses To accommodate entities with multiple rental properties or expenses 1 Calculate the totals for both types of rental expenses 2
117. r codes 42 estimates 2008 tax 14 underpayment of 15 expenses 10 13 exporting K 1 data 23 extensions 17 F filing instructions 39 final return 8 fiscal year returns 7 foreign addresses for shareholders 23 transactions 15 21 Form 1099 B Proceeds From Broker and Barter Exchange Transactions 2 Form 2553 Election by a Small Business Corporation 6 8 Form 3115 Application for Change in Accounting Meth od 55 65 Form 4136 Credit for Federal Tax Paid on Fuels 15 Form 4562 Depreciation and Amortization 34 39 Form 4797 Sales of Business Property 9 Form 5884 Work Opportunity Credit 37 Form 6478 Alcohol and Cellulosic Biofuel Fuels Credit 10 36 Form 6765 Credit for Increasing Research Activities 37 Form 7004 Application for Automatic Extension of Time to File 17 Form 8050 Direct Deposit of Corporate Tax Refund 15 Form 8820 Orphan Drug Credit 37 Form 8825 Rental Real Estate Income and Expenses of a Partnership or an S Corporation 34 36 Form 8844 Empowerment Zone and Renewal Community Credit 37 Form 8845 Indian Employment Credit 37 Form 8846 Credit for Employer Social Security and Medi care Taxes Paid on Certain Employee Tips 11 37 Form 8864 Biodiesel and Renewable Diesel Fuels Credit 10 36 Form 8873 Extraterritorial Income Exclusion 13 Form 8881 Credit for Small Employer Pension Plan Star tup Costs 37 Form 8903 Domestic Production Activities Deduction 24 Form 8912 Cre
118. r credit amount is imported Form Page Sch and or line Location of the amount on the printed return Other information Additional details for preparers see Details for Pre parers on page 52 Displayed at the bottom of the trial balance worksheet are the calculated amount for Schedule M 1 line 1 the credit and debit totals a cell showing whether or not the bal ance sheet is out of balance and if applicable the out of balance amount Figure 33 on page 49 see also Figure 36 on page 50 48 Tax Year 2012 Drake Software User s Manual Importing Trial Balance Information Y ye a Ca Nad quate UU ng woo Salari s and wages shareholder employees Waste removal i TO 1 r Income Loss Schedule M 1 line 1 l 100 600 gt 2 Quas 000000000000 LLL sstogso 549 850 LOUT OF BALANCE Pg Figure 33 Schedule M 1 amount 1 totals 2 and indication of balance 3 Following are instructions and guidelines for using the trial balance template to assemble financial data for importing into data entry Entering Financial Data When a new trial balance file is opened for a return all debit and credit amounts are zero S0 All data must be entered manually into the template Some data cannot be imported with the trial balance and must be NOTE entered directly into the data entry fields within the program For more on these categories of data see Special Conditions on page 52 Direct
119. r export 4 All SSNs in the list are eligible for export Remove the check mark from the box to the left of any SSNs you do not wish to export 5 Click Export The K 1 data will be displayed in the 1040 return in the program Basis information for individual shareholders should be entered in the NOTE 1040 package in Drake this information cannot be exported from the 1120S package to a 1040 return Such an import would override limita tions and carryovers calculated in the 1040 program Supplemental Info Two types of supplemental information can be added to Schedules K 1 e Supplemental data for all K 1s in a return e Supplemental data for a single K 1 in a return To add supplemental information globally to all K 1s from the Data Entry Menu open screen K1G Global Supplemental Information and enter the informa tion in the Supplemental Information text box This information will appear on all printed shareholder K 15 To add supplemental information to an individual K 1 open a shareholder s K1 screen and click the blue Supplemental Info link at the top of the screen In the Sup plemental Information pane Figure 13 enter information pertinent to this share holder When the return 1s printed this information will appear only on this shareholder s K 1 KI Basis Wks Supplemental Info K15 K 1 Supplemental Information Statement Enter global supplemental information for all K 15 on the K1G screen Enter spec
120. re SCH2 detail screens are needed for Schedule L items If you are using Drake s trial balance worksheet feature be aware that data for the SCH2 screens cannot be entered directly into the trial balance worksheet and it cannot be imported into the data entry The SCH2 detail screens must be created apart from the trial balance worksheet When the return is produced Schedule L reflects both the amounts imported from the trial balance worksheets where direct entry was allowed and the totals of the SCH2 screen amounts For more information see SCH2 Detail on page 53 Autobalance forces Schedule L to balance for both the beginning and end of year amounts The program adjusts the unappropriated retained earnings amount on Sched ule L by the difference between the total assets and the total liabilities and capital before the adjustment Example If Assets 1 000 and Liabilities and Capital 900 the program increases the unappropriated retained earnings by 100 The program makes the adjustment due to differences in the balance sheet These dif ferences can come from amounts entered incorrectly but are usually the result of one of the following causes e Anasset was deleted from the 4562 screen Depreciation Detail instead of being indicated as sold e Beginning inventory amounts were adjusted on screen A or ending inventory amounts were entered incorrectly e Amounts were erroneously deleted from or changed on screen L
121. rogram overrides Schedule B Enter the accounting method principal business activity and product or service on screen 1 This information questions and 2 of Schedule B flows to Schedule B Use screen B to answer questions 3 13b of Schedule B If the S corporation owned directly 20 or more or owned directly or indirectly 50 or more of the total stock issued and outstanding of any foreign or domestic corpora tion click the B4A Screen link to enter information about the domestic or foreign cor poration owned You can enter information for up to 10 lines corporations per B4A screen to add more press CTRL PAGE DOWN If the S corporation owned directly 20 or more or owned directly or indirectly 50 or more in the profit loss or capital in any foreign or domestic partnership including an entity treated as a partnership or in the beneficial interest in a trust click the B4B Screen link to enter information about the domestic partnership owned 18 Tax Year 2012 Drake Software User s Manual Additional Information You can enter information for up to 10 partnerships per B4B screen to add more press CTRL PAGE DOWN State specific Information Resident The program automatically generates a return for the corporation s resident state Use State screen 2 to enter company information as it should appear on the state return The company information fields on screen 2 apply for the resident state NOTES on Cli
122. rom the K1P screen line 11 code B 10D Mining exploration costs recapture Adjusts amounts flowing from the K1P screen line 11 code D Adjusts amounts being carried from screen K1P line 11 code 10E h i J UMC EINCOM 11088 F and K1F screen line 11 code D 12a A Cash contributions 5096 Overrides amounts flowing from screen 3 and from the K1P screen line 13 code A 12a B Cash contributions 3096 Adjusts amounts flowing from the K1P screen line 13 code B H o 10A Adjustments Worksheet Adjustment Location Screen Line Field Name Location of Information Being Adjusted 1120S Adjusts amounts flowing from the 8283 screen and from the 12a D Noncash contributions 30 K1P screen line 13 code D 12aE Capital gain property to a 5096 organization 3096 Adjusts amounts flowing from the K1P screen line 13 code E 12a F Capital gain property 2096 Adjusts amounts flowing from the K1P screen line 13 code F 12aG Cash contributions 100 Adjusts amounts flowing from the K1P screen line 13 code G 12b H Investment interest expense Adjusts amounts flowing from the K1P screen line 13 code H 12c J Section 59 e 2 expenditures Adjusts amounts flowing from the K1P screen line 13 code J 12d Deductions royalty income Adjusts amounts flowing from the K1P screen line 13 code l 12d K Deductions portfolio 2 floor Adjusts amounts flowing from the K1P screen line 13 code K 12d L Deductions por
123. ruc tions for further details on signature requirements Tax Year 2012 17 Amending a Return Drake Software User s Manual Amending a Return Amended 1120S can be e filed using Drake Software When you amend a return in Drake the amended information replaces the original in the data file Before amending a return you CAUTI UN should archive the original to avoid losing previously submitted data For more information on archiving returns see Archive Manager in Chapter 6 Return Results of the Drake Software User s Manual Tax Year 2012 To file an amended 1120S return 1 Go to screen 1 and select Amended return in section H Make changes as applicable to forms and schedules Go to the EF screen and mark the 1120S check box on the left side of the screen Go to the AMD screen and list the changes that have been made along with an explanation for each change Use a different AMD screen for each line of the 1120S Press PAGE DOWN to open a new AMD screen mo m9 If amending just the K 1s go to each applicable KI screen select Amended K1 and make needed changes When amending an 1120S return all K 1s are amended and the NOTE Amended K 1 box on the return marked by default To override this default go to the PRNT screen and mark Do NOT check amended box on Sch K 1 See Figure 12 on page 23 Additional Information This section covers Schedule B Other Information state specific information and some p
124. rward from line 8 of the previous year Due to prior year net losses and reductions the amount on line 1 can be negative e Changes to AAA The Accumulated Adjustments Account AAA is increased for ordinary income from page 1 line 21 line 2 and other additions listed on line 3 The AAA is then decreased for any loss from page 1 line 21 line 4 and other reductions listed on line 5 e Reduction of AAA Once these adjustments are made the AAA is reduced by ordinary distributions on line 7 but not less than zero Thus if the distribu tions are 20 000 but the net amount on line 6 is 10 000 line 7 is limited to 10 000 If line 6 is a negative number then line 7 will be zero in this exam ple To allow an amount on this line would take the AAA to a larger negative number That is even more below zero than it really is 32 Tax Year 2012 Drake Software User s Manual Schedule M 2 Analysis of Accounts Important Note about the AAA Schedule M 2 Item Amount Line 1 Balance at beginning of tax year 11 785 Lines 2 amp 3 Ordinary income and other additions 58 440 Lines 4 amp 5 Loss and other reductions 489 Line 6 Combine lines 1 5 46 165 Line 7 Distributions total 60 000 45 155 Lines Balance at the end of tax year 0 The rules from the preceding chart apply when the net adjustment for lines 2 through 5 is positive When the net adjustment for lines 2 through 5 1s negative the ordering rules are switched a
125. s 2 The day of the week on which the tax year always ends 3 The date the tax year ends Figure 24 Elections for 52 53 week tax years 4 For line 1 select the month in which the 52 53 week year ends for the current fis cal year 01 January 02 February etc 5 For line 2 select the day of the week the tax year always ends 6 For line 3 enter the actual date that the tax year ends the same date entered in the Fiscal year ends field on screen 1 Once a 52 53 week year is selected the entity must use that account NOTE ing period every year To change accounting periods the entity must submit to the IRS Form 3115 Application for Change in Accounting Method In subsequent years only the 52 53 week tax year check box on screen 1 must be marked the program automatically updates the dates Inactive Entities that are inactive but are still required to file returns may e file inactive returns Returns in Drake To indicate that a return is inactive 1 Go to the PRNT screen accessible from the General tab 2 Under Items to Print mark the Print inactive return box When the return is calculated the program displays the words Inactive Return on the main form of the return specifically in the box above on lines 1c Zeros are dis Tax Year 2012 4 Binary Attachments Drake Software User s Manual played where required by the IRS in order for amounts to be properly
126. s 52 53 week year returns and inactive returns can all be e filed using Drake For information on how to indicate a short year return in Drake see Short Year Returns on page 7 Information on e filing 52 53 week returns and short year returns 1s provided in the following sections To elect a 52 53 week year a new entity one that has never filed a return must enter data on both screen 1 and the ELEC screen To elect a 52 53 week year for any entity 1 In the If not calendar year section of screen 1 enter the Fiscal year begins and Fiscal year ends dates Ue MMDDYYYY format as shown in the example in Figure 23 on page 41 2 Mark the 52 53 week tax year box Tax Year 2012 Drake Software User s Manual Electronic Filing If not calendar year Fiscal year begins 09 29 2012 Fiscal year ends 03 25 2015 i 52 53 week tax year ELEC Screen Figure 23 In this example the fiscal year begins 09 29 2012 and ends 09 25 2013 the Wednesday closest to the end of September giving the entity a 53 week year for 2012 An entity that has filed returns in the past must complete only steps 1 NOTE and 2 of this process An entity that has never filed a return before must continue with steps 3 through 6 3 Click the ELEC link to open the Election Options screen Figure 24 Election Options Tax Year Elections ENTER ONLY ONCE 52 53 Week Tax Year Election 1 Month in which new 52 53 week tax year end
127. s entered on screen 3 line 16b and from K lines 1 through 10 Other Schedule K screen line 16b for officer life insurance proceeds o chedule M 2 Analysis of Accumulated Adjustments Account 3 a Other additions Adjusts the amounts that flow from Schedule K line 10 Adjusts amounts flowing from screen 3 line 16b officer life 3 b Other additions insurance proceeds and amounts entered on Schedule K line 16b for tax exempt interest Adjusts the sum of the amounts coming from Schedule K line 5 a Other reductions 11 Schedule K line 12d Other Deductions S and Schedule K line 16c Nondeductible expenses Adjusts amounts from screen 3 line 16c or Schedule K screen 5 b Other reductions 2 l 3 line 16c Officer life insurance premiums Adjusts amounts from screen 3 line 16d and from Schedule K Non dividend distributions line 16d subject to limitations due to negative amounts on line 6 or both lines 6 and 1 7 a 4562 Parti Carryover of disallowed deduction from prior year Adjusts amounts from the 4562 screen orm 5884 Work Opportunity Credit Work opportunity credit from pass through entities Adjusts amounts from K1P screen line 15 code J and K1F screen line 13 code F orm 6478 Alcohol and Cellulosic Biofuel Fuels Credit 9 Pass through credit from other entities Adjusts amounts from K1P screen line 15 code and K1F screen line 13 code H orm 6765 Credit for Increasing Resear
128. s to basis can include additional stock purchases and capital contributions and separately stated income including tax exempt income and depletion in excess of Decreases basis of property Decreases to basis can include distributions of cash or property to shareholders sepa rately stated losses and deductions nondeductible corporation expenses and credit adjustments Annual When the program is updated to the next tax year the end of year basis and share Update of holder loan amounts are automatically updated to the beginning of the new year Any Shareholder loss deduction carryover is updated to the beginning of the year and its character Information ordinary loss section 179 expense charitable contributions etc maintained The program also tracks the amount of debt applied to losses and the total amount of loss carryforwards NOTE If a K1 screen is marked as final none of the related screens for that shareholder are updated for the next year Schedule L Balance Sheet Per Books Schedule L is required if the corporation s total receipts for the tax year or its total assets at the end of the year are greater than 250 000 To force the program to print Schedule L even if not required mark the Force print Schedules L and M 1 box on screen L or on the PRNT NOTES screen With the Trial Balance Import feature you might not need to use screen L at all See Importing Trial Balance Information on page 45 Flow of In
129. s to go to the account listed select the state abbreviation from the State city selection drop list e Enter the name of the financial institution the routing number RTN the account number and the type of account Checking or Savings e Re enter the RIN account number and type of account to verify If receiving refunds from different state tax authorities use the State Account sec tions on the DD screen to indicate where other state refunds should be deposited International ACH Transactions Tax Year 2012 In 2009 state taxing agencies added foreign account questions to their forms to com ply with NACHA rules regarding International ACH transactions LAT however processing IAT is not yet supported by any federal or state tax authority If you were to indicate that the account was outside the U S the state tax authority would auto matically ignore the account information and either issue a refund via paper check or contact the taxpayer requesting the payment of a balance due via check or domestic bank account If you indicate that an account is located outside of the U S Drake Software generates an EF message instructing you to choose an account located in the U S For more information see Screen Help on the DD screen and PMT screens Electronic Funds Withdrawal Direct Debit Drake Software User s Manual Electronic Funds Withdrawal Direct Debit Use the PMT screen accessible from the General tab to indicate that
130. se sections consist of a series of drop lists under a Present column and a Pro B and C posed column Present refers to the current accounting method while proposed refers to the requested change in accounting methods You should address only the items necessary do not make a selection for any item for which an answer is not required for the entity s situation For each item in sections B and C you can e Select X If you select X the corresponding box on Form 3115 will be marked with an X See Figure 47 Select B If you select B the corresponding box on Form 3115 will be left blank and an attachment will be required explaining why the line was left blank EF messages will outline which statements are missing See Figure 47 e Select nothing If you select neither of the above options N A will appear in the corresponding box on Form 3115 No attachment is necessary for a box marked N A See Figure 47 Tr Pa prop by a an th a ee Lr emet QD MS pn Nic ABI Ath LUI s cas TTL s A QE zeion E peg PIN Wa as T3 ect 1 460 Mark N A in a box if those costs are not incumed by the applicant If a box is not checked it is assumed that those costs are nat fully included to the extent required Attach an explanation for boxes that are not checked 4 Direct matesial Applies to this 2 Diedlabo 2 sss return 3 Indirect labor a snn R nG a wd 4 Officers compensation nat i
131. sheets totals for depreciation Schedule L rentals 1120S amp 1065 only Make corrections in TB worksheet Populate Data Entry Enter any trial balance data that cannot be imported via Trial Balance Import Screen SCH2 for Schedule L items Screen 4562 for individual assets depreciation Compare M 1 line 1 Does trial balance match Schedule M a line 1 Trial Balance Import General Process Is an M 1 adjustment necessary YES Make M 1 Adjust adjustment amounts elsewhere in data entry Were rental totals entered 11205 amp 1065 in trial balance Go to data entry an enter individual rentals on 8825 or RENT screens as applicabl Delete imported 8825 and RENT screens Process complete Drake Software User s Manual Supplement S Corporations Appendix B Adjustment Worksheet Tax Year 2012 The Adjustment Worksheet is updated each year to help you understand what happens in the return when certain data is changed through the use of adjustment fields The following pages contain the 2012 Adjustments worksheet These worksheets are also available through the FAQ screen To access them open the FAQ screen click the Screen Help button or press CTRL ALT and click the links at the top of the window Adjustments Worksheet Adjustment Location Screen Line Field Name Location of Information Bei
132. stitution routing number RTN account number and account type are required As with the DD screen the RTN Account number and Type of account data must be entered twice item 2 in Figure 10 Finally the PMT screen must indicate the return to which the payment data applies item 3 in Figure 10 Put a check mark in the box of the applicable return type Withdrawal from Multiple Accounts Only one account can be designated for direct debit of funds for payment of federal or state taxes To have state amounts withdrawn from an account other than the account indicated for federal payments complete the fields in the State Account sections of the PMT screen NOTE Neither the federal nor the state balance due can be paid from more than one account 16 Tax Year 2012 Drake Software User s Manual Filing an Extension Filing an Extension Calendar year returns are due on March 15 2013 By filing Form 7004 an S corpora tion can extend the deadline six months to September 16 Fiscal year returns are due on the 15th day of the third month after the end of their year Form 7004 extends the deadline six months To file an 1120S extension use either of the following options e Go to the 7004 screen in Drake and select Generate an extension Complete any other applicable fields on the screen e Go to the PRNT screen and select Prepare Form 7004 based on screen 1 data Signing the Return Electronic PIN signatures are required for e fil
133. te Clients 2011 to 2012 not recommended When you update an 1120S return that was previously marked as final the program informs you that the return was marked final before prompting you to proceed Indicating an S Corporation S Corp Election If the corporation is electing as an S corporation for the first time it is necessary to indicate this in the program On screen 1 in the General Information section line A enter the date of election as an S corporation On line E enter the date incorporated Form 2553 Election by a Small Business Corporation 1s required if the entity is mak ing the election with the return In Drake use screen 2553 accessible from the Other Forms tab or by clicking the Form 2553 link on screen 1 If attaching a signed Form 2553 to the return as a PDF mark the NOTE Attaching Form 2553 as a PDF document box on screen 1 If not sent as a PDF the form must be mailed separately to the IRS before filing the tax return See Form 2553 instructions at www irs gov 1120 to To change a C corporation to an S corporation 1120 to 1120S 1120S 1 o ee IM Go to Tools gt File Maintenance gt Change File Type Enter the EIN of the entity Click Continue Select the new return type Sub S Corp 1120S Click Continue to save changes Click OK Tax Year 2012 Drake Software User s Manual Header Information Header Information Screen 1 contains fields for the general informatio
134. tfolio other ust amounts flowing from the K1P screen line 13 code L 12d M Preproductive period expenses Ast amounts flowing from the K1P screen line 13 code P 12d N Commercial revitalization deduction from real estate Adjust amounts flowing from the K1P screen line 13 code Q 12d O Reforestation expense deduction Aust amounts flowing from the K1P screen line 13 code S 12d S Other deductions Adjusts amounts flowing from screen K1P line 13 code W 13d Other rental real estate credits Adjusts amounts flowing from the K1P screen line 15 code F 13e Other rental credits Adjusts amounts flowing from the K1P screen line 15 code G 13g H Undistributed capital gains credit Adjusts amounts flowing from the K1P screen line 15 code H Adjust amounts flowing from various credit forms without O ANGT CGI specific K1 codes and the K1P screen line 15 code P chedule K Shareholders Pro Rata Share Items Screen 2 of 2 14b Gross income from all sources Adjust amounts flowing from the K1P screen line 16 code B Gross income sourced at shareholder level Adjust amounts flowing from the K1P screen line 16 code C o Passive category Adjusts amounts flowing from the K1P screen line 16 code D General category Adjusts amounts flowing from the K1P screen line 16 code E other aust amounts flowing from the K1P screen line 16 code F Interest expense Adjusts amounts flowing from the K1P screen line 16 code G other aust
135. the ATT screen e Part II Change in Pooling Inventories Enter the descriptions of the contents and the base years of the present and proposed pools If any of the conditions on lines 2 4 match the entity s situation click the corresponding attachment link to access the ATT screen where you can complete the required statement Use the D Parts I II screen to complete the following parts of Form 3115 Schedule D Change in the Treatment of Long Term Contracts Under Section 460 Inventories or Other Section 263A Assets e Part I Change in Reporting Income From Long Term Contracts e Part II Change in Valuing Inventories Including Cost Allocation Changes If an entity is currently using a LIFO inventory method or submethod NOTE and is changing to another LIFO inventory method or submethod Part ll of Schedule D is not applicable Use Schedule C Changes Within the LIFO Inventory Method instead A long term contract refers to any contract for the manufacture building installation or construction of property that 1s not completed in the tax year in which it is entered into Answer the questions in Part I that apply to the entity s situation This section concerns changes in the identification and valuation methods of invento ries Note that some lines require attachments To access the ATT screen and com plete a required statement click the desired attachment link The items on this part of the screen match the items on the
136. tions Elecion Description Cost basis amount years Date or year ending Other cost basis or amount Other date or year ending See eee Renee eer eee AP Wilde RUE OSEE 7 Other information Explanation afl ili an uii mh T EN TW pm NU NET TE LM cnni Mail nonu ill to ea MP Figure 20 Return Elections portion of ELEC screen Making an Election in Drake Tax Year 2012 To indicate that the S corporation is making an election 1 Openthe ELEC screen accessible from the Miscellaneous tab of the Data Entry Menu 2 Make a selection from the Election drop list Return Elections EE s 01 General Election Statement 02 Capitalize and Amortize Circulation Costs over 3 Years Cost basis amount years 03 Capitalize and Amortize Research and Experimental Expenditures 04 Capitalize and Amortize Intangible Drilling and Development Deschplion Date or year ending Figure 21 Election drop list 37 Making Changes on the Fly Drake Software User s Manual 3 Complete all other fields as applicable Press F1 in any field to learn if a field is required for your selection and the type of information that may be needed For example the help text for the Other date or year ending field shows that the field is required only for election o
137. totals of the amounts entered on the SCH2 screen See The SCH2 Screen on page 28 for more details on using the SCH2 screen Depreciation S corporation returns can have up to four components of total depreciation e COGS e Real estate rental e Rental other than real estate e Any remaining depreciation For trial balance purposes enter depreciation amounts directly into the appropriate fields on the trial balance worksheet Note that for 1120S trial balances rental expense detail worksheets are required for 8825 and RENT depreciation Enter 8825 and RENT depreciation amounts in the detail work NOTE sheets for importing purposes but be aware that the 8825 and RENT screens in the program will have to be edited if 4562 detail screens see Figure 40 on page 54 are used Tax Year 2012 53 Importing Trial Balance Information Drake Software User s Manual When the trial balance is imported the COGS depreciation expense amount flows directly to the appropriate line of Form 1125 A of the return and the rental deprecia tion expense amounts flow directly to the appropriate lines of the 8825 and RENT screens as applicable Because the remaining depreciation can comprise any number of assets the amount entered on the trial balance does not flow to the return To ensure that each component of the total remaining depreciation is calculated into the return each asset must be entered on the applicable depreciation screens in data entry
138. ule M 2 column b Other adjustments account line 5 All other amounts such as expenses must be entered manually on the M2 screen Column C Undistributed Taxable Income Previously Taxed Tax Year 2012 The total of column c cannot be negative This column is active in an 1120S only if the entity was ever a C corporation thus having earnings and profit E amp P or if it was 33 Rental Activities Drake Software User s Manual a pre 1983 S corporation By design Drake does not allow negative numbers in col umn c If a corporation becomes an S corporation and has net operating losses NOLs the NOL is not generated for the return because it cannot be carried to an 1120S the IRS does not want the NOL to be used by the shareholders to offset income it either runs out within the years allowable for the NOL by statute or is used if the S corporation terminates its S status within those years Rental Activities Income and expenses for rental real estate properties appear on Form 8825 Rental Real Estate Income and Expenses of a Partnership or an S Corporation To make entries in Drake use the 8825 screen If there are multiple 8825 properties press PAGE DOWN for a new 8825 screen Use one screen per rental property If a return has more than one 8825 screen the program reports each property s information on a separate column of the Properties section of Form 8825 up to eight properties can be include
139. unici SSN EIN 243 24 3243 Percentage 505 pampa intemal Revenue Service Attach to your tax return jp See separate instructions Sequence No 143 Name s as shown on retum SSS tx A LLGGGGCLGUQGCAGG I r pv pp p p p p DG GGLCopoqni oG o yaxi B 7 tiying number EssBeeEss 40 0500600 Note Do not complete column 8 unless you have cil related a b production activities Enter amounts for all activities in column b apo Al ot including cil related production activities Oil elsted production activities activities 1 Domestic production grossreceipts DPGR 16 666 2 Allocable cost of goods sold If you are using the small business simplified overall method skiplines2and 3 2 2 d2 222 3 Enter deductions and losses allocable to DPGR see instructions I3 0 217 117 4 If you sre using the small business simplified overall method enter the amount of cost of goods sold and other deductions or losses you Vu x anpediog da DECR All oiber ip line we R Fe aT F E aa anmik gp KK EU XP i Figure 14 KI 8903 attachment Review the screen level help on screen 8903 and the 8903 instructions accessible through the Screen Help button on the 8903 screen to determine when the KI 8903 in needed Line 11 Income limitation of Form 8903 is not applicable for the S corporation because the income limitation is calculated at the share N TE

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