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1120, Corporation Supplement

1. 27 INE Troubleshooting ss ois duce Aer vds ote outer d dc E Sopas NAIG DAW ads ea tad 21 Schedule O Controlled Group Information 28 AMT Adjustments and Other Items 22 eee 28 Types of Controlled Groups 0 eee e eens 28 Line 5 Apportionment Plan Status 0 0 0 ccc eee eens 29 Credits and Adjustments 0 0c ee es 29 Adjusting Charitable Contributions NOL ees 29 cile MC P ed dee cde eee hese ee ee eee ee AA E 30 Making an Election in Drake 2 0 eee eee eee eens 30 1V Tax Year 2014 Drake Software User s Manual Supplement Corporations Election Statements acea ros DAWA ode vods aci do p nod opes BANA ac Noe eae Ede eke 31 Safe Harbor Ca irradia ae id ee aida 32 Making Changes on the Fly 0 0 cee es 32 Suppressing Forcing Documents a 32 Calculation and Other Options 0 0 a 33 Overriding Other Setup Options 0 00 eee een E a 33 Scieqigeiiem gli oe ee arrancaron adan 34 Common Error Codes 22a imd dri o 9 dic e Roi dirait b Jed a bon di ida 34 Special Types of Returns occoccc hh 34 Electing a 52 53 Week Year Initial Return 0 aa 34 Inr RON TT P c 35 Binary Attachments nnna ce een nn 36 The PDF Attachment Process 2423 duae pise HERE E rte wid Du RA RR bans 36 Form 3115 Application for Change in Acco
2. x 2 The day ofthe week on which the tax year always ends gt 3 The date the tax year ed Other short year reasan Figure 16 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 hn 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 ending field on screen 1 Once a 52 53 week year is selected the entity must use that account N OTE 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 Returns Entities that are inactive but still required to file returns may e file inactive 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 Tax Year 2014 35 Binary Attachments Drake Software Manual Supplement Corporations When the return is calculated the program displays the words Inactive Return on the main form of the return specifically in the box above line 1c Zeros are displayed where
3. 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 Part I General LIFO Information This section is made up of attachment links 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 the ATT screen 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 Tax Year 2014 Drake Software Manual Supplement Corporations Form 3115 Application for Change in Accounting Method 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 Schedule D Use the D I II screen to complete the following parts of Form 3115 Schedule D Parts and ll 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 Allocat
4. On line 3 line 5 for 1120 C enter the EIN and name of the parent corporation if the corporation is a subsidiary in an affiliated group or a parent subsidiary controlled group 18 Tax Year 2014 Drake Software Manual Supplement Corporations Schedule K Be aware of the following guidelines from the IRS If the corporation is an excluded member of a controlled group see definition in the Instructions for Schedule O Form 1120 it is still considered a member of a controlled group for this purpose e An affiliated group is one or more chains of includable corporations section 1504 a connected through stock ownership with a common parent corporation The common parent must be an includable corporation and the following require ments must be met e The common parent must directly own stock that represents at least 80 of the total voting power and at least 80 of the total value of the stock of at least one of the other includable corporations e Stock that represents at least 80 of the total voting power and at least 80 of the total value of the stock of each of the other corporations except for the com mon parent must be owned directly by one or more of the other includable corpo rations e For this purpose the term stock generally does not include any stock that a is nonvoting b is nonconvertible c 1s limited and preferred as to dividends and does not participate significantly i
5. Part lll 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 see Figure 25 on page 46 to attach a description of the present and proposed methods used to capitalize direct and indirect costs Tax Year 2014 45 Form 3115 Application for Change in Accounting Method Drake Software Manual Supplement Corporations Parts iil PartsiLiv AB C D LII Form 3115 Schedule D Part Ill Method of Cost All 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 Explanation for boxes that are not checked X C 1 Direc maternal VU S TN DRM tet toe te Dite EN UT D l ad hE T or ote li aman te Em Figure 25 Link to ATT screen for attaching statements Sections B Sections B and C consist of a series of drop lists under a Present column and a Pro 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 1s not re
6. Returns and Allowances Outside to within 6789 6343 Win bo wih 0 0 1 Within to U S Goemmenl Within to nontaxable jurisdiction bea o ron mi A At li dd M tees a PE F o 2 o o 0 TA AY HRS ie Figure 8 State APPT screen Mark the Zero Apportionment check box Figure 8 to add a state but N OTE not include any apportionment data This will include the state on the apportionment summary worksheet SAC SUM available through View mode APPT Screens The APPT screen is opened to the Sales tab Links at the top of this screen open the Payroll Property and Additional Property information tabs for each state selected 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 Additional Property Select additional apportionment factors from drop lists The Ending amount entered on the Property and Addition Property N OT F screens in Drakel4 will become the Beginning amount for property on the APPT screen when the client s return is updated next year in Drakel 5 22 Tax Year 2
7. General LIFO Information and Part II Change in Pooling Inventories Schedule A Part II Change to the Cash Method for Advance Consent N OTE 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 Schedule B Schedule C Leave blank any lines that aren t required for the entity s application N OTE 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 la 1c 1d le and 1f of Schedule A When you enter an amount on any of these lines in Drake a CTRL W worksheet 1s automatically opened allowing you to begin entering 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 N OTE If nothing is entered in a Schedule A field the program automatically displays the word NONE in the field on the generated form This section has just two lines both referring to the request for deferral for advance payments
8. Other Information column as shown in Figure 37 SCH2 Detail Typically a balance sheet subsidiary schedule SCH2 detail screen for Schedule L is required for an item marked does not import on the trial balance Figure 37 Seay s Trucking Trial Balance 1 12 2014 Account Title DM Import to screen line orm Page Sch and or line Other Information xo ftm gettin ite aile tih stefano nan sanies Mb tat Merc en p RAP ai o Meme ari N ten a ap mt X n gt q a 24s tm DW VER Tt 2 Wal o ms Oe TS mai T t n Ending inventory 0 A line 7 OEA ine U S government securities 0 L line 4 col d Form 1120 Sch L line 4 cold Tax exempt securities 0 Other current assets 6 789 Loans to shareholders 0 L line 7 cold Mortgage and real estate loans 0 L line 8 col d Form 1120 Sch L line 8 col d Other investments so Puldipgs ang EE AAA A a capo an AL D A ptional Figure 37 SCH2 screen required for does not import items To complete an SCH2 detail screen in data entry 1 Open the SCH2 screen for the return 2 Select the line number from the Line Number drop list 54 Tax Year 2014 Drake Software Manual Supplement Corporations Importing Trial Balance Information Depreciation Tax Year 2014 3 Enter the applicable item descriptions and beginning and end of year totals N OTI Alternately open screen L and click the SCH2 Screen link f
9. The total tax from Schedule J is calculated and carried to line 31 of Form 1120 Controlled groups are also required to complete Schedule O Use the O N OTE screen in Drake to complete Schedule O See Schedule O Controlled Group Information on page 28 Estimated Taxes and Applied Refunds Enter on screen ES the estimated corporation taxes paid If necessary use screen W to override 2014 estimated taxes paid and apply any overpayments from 2014 to 2015 N OTE Estimate vouchers are not used in federal corporation tax returns Over Overpayments will not be automatically applied unless 2015 estimates are being cal payment culated If no estimates are required enter the application of the overpayment using the Overpayment applied override fields Quick To file Form 4466 Corporation Application for Quick Refund of Overpayment of Refund Estimated Tax go to the PRNT screen accessible from the General and the Miscel laneous tabs of the Data Entry Menu and mark the Calculate Form 4466 box This is the only entry necessary to produce the form There is also a link to the PRNT screen from the first Other Forms tab of the Data Entry Menu Click Application for Quick Refund Under Use screen 2220 to enter information for Form 2220 Underpayment of Estimated Tax payment by Corporations Note that the 2220 screen in Drake consists of two screens Press PAGE UP and PAGE DOWN to move from screen to screen The program retains the underpaymen
10. book to tax difference Schedule M 1 25 brother sister group 28 C calendar years 6 capital gains and losses 8 carryover of NOLs 13 29 cash accounting method 44 Change in Accounting Method 38 47 multiple changes 42 change of name or address 6 Changes on the fly 32 charitable contributions 11 29 codes error reject 34 miscellaneous screen 1 23 multi form 39 state 21 combined group 28 compensation of officers 9 Tax Year 2014 Index consolidated returns 8 contact information for state returns 21 contributions charitable 11 29 controlled groups 14 28 converting to 1120 5 cost of goods sold see Schedule A Cost of Goods Sold coversheets 33 credit for tax on fuels 9 credits and adjustments 29 Ctrl W detail worksheets 8 13 44 48 D data entry trial balance import 50 debts bad 11 deductions and income 6 13 depletion 12 depreciation and auto balance errors 25 expense 12 for cost of goods sold Schedule A 7 on short year returns 6 trial balance business returns only 55 detail Ctrl W worksheets 8 13 44 48 direct debit of balance due 15 16 Domestic Production Activities 13 domestic production activities deduction 13 E e filing new features in Drake 34 PDF documents 36 38 Elections Safe Harbor 32 electronic funds withdrawal direct debit 15 signatures PIN 17 entertainment and meals 13 envelope coversheets 33 error codes 34 estimated tax worksheet 33 estimates 14 33
11. PDF worksheet that lists all items entered on the PDF screen see item 1 in Figure 17 e An Attach PDF button on the toolbar item 2 in Figure 17 E o W e Data Entry Print Setup Archive Email Hefresh Basic me Select Forms to Yiew Prnt U S Corporation Income Ta For calendar year 2012 or tax year beginning 09 2 5 212 ena AQ IE om 1120 Deparment of he Treasury ml 1120 PG2 MD 1120PG3 1 1120 P G4 E hd VA cuam mu Figure 17 The red MESSAGES file and the Attach PDF button 2 Click the MESSAGES file to view the EF Message which provides information on how to attach the required documents to the return 3 Click the Attach PDF button in the toolbar at the top of the window The EF PDF Attachments window Figure 18 on page 38 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 Tax Year 2014 37 Form 3115 Application for Change in Accounting Method Drake Software Manual Supplement Corporations Drake 2014 EF PDF Attachments Hequired PDF Attachments The list below contains PDF Attachments that are required for electronic filing Select an item from the list and click Browee to locate the associated PDF file Items with a green check mark already have the PDF file Items with a red are missing the required PDF File Reference Descript
12. SCH2 screen amounts See Importing Trial Balance Information on page 47 for detailed instructions using the trial balance worksheet for SCH2 items and amounts 24 Tax Year 2014 Drake Software Manual Supplement Corporations Schedules M 1 and M 3 Reconciliation of Income per Autobalance 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 For example if assets are 1 000 and liabilities and capital are 900 the program increases the unappropriated retained earnings by 100 The program makes the adjustments due to differences in the balance sheet Incorrect data entry could cause these differences but they are usually the result of one of the following issues e An asset was deleted from 4562 screen Depreciation Detail Items instead of being indicated as sold e Beginning inventory amounts were adjusted on the Schedule A or ending inven tory amounts were entered incorrectly e Amounts were erroneously deleted from or changed on screen L To reconcile the differences it is best to compare the corporation s beginning and end ing balance sheet amounts for the tax year To turn off this feature for a specific return go to the PRNT screen and select Turn off autobalance N OTE If you are using trial bal
13. Short term capital gains flow to Part I lines 1b of Schedule D Long term capital gains flow to Part II lines 8b 9 of Tax Year 2014 Drake Software Manual Supplement Corporations Income and Deductions Schedule D The net gain from Schedule D is carried to line 8 of Form 1120 Any net capital loss is carried to the ATT D attachment to offset future gains You can import data for Schedule D using the Form 8949 Import fea N OTE ture For more on using this feature see Form 8949 Imports in Chap ter 5 of the Drake Software User s Manual Tax Year 2014 Ordinary Gains and Losses The amount generated on line 9 flows from screen 4797 Amounts can also flow from screen 4562 to Form 4797 making screen 4797 entries unnecessary but only if screen 4562 shows assets sold date and property type Other Income Loss Use the INC screen to enter amounts for the Other income line of the main form Specific INC screen entries are displayed on attached statements in View mode of the return For Form 1120 calculated amounts from the following screens also flow automati cally to the Other income line line 10 e Screen 6478 Form 6478 Biofuel Producer Credit e Screen 8864 Form 8864 Biodiesel and Renewable Diesel Fuels Credit Additional fields for other income on the INC screen include e Amount of credit for tax on fuels e Interest income on receivables e Recoveries of bad debts e Section 481 adjustments e St
14. and Licenses Interest Enter tax and license amounts in the Taxes and licenses section of the DED screen Amounts are combined and the sum generated on Form 1120 line 17 Taxes and licenses Note that credit from Form 8846 Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips adjusts the line 17 amount These amounts also appear on the Taxes and Licenses Attachment ATT CTL referred to on line 17 with an ATT CTL reference To N OTE keep the notification from appearing go to the PRNT screen accessi ble from the General and the Miscellaneous tabs of the Data Entry Menu and select Suppress printing form and attachment refer ences 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 Enter interest expense on the DED screen Note 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 Charitable Contributions Tax Year 2014 The DED screen provides two fields for entering data for line 19 Charitable contri butions 11 Income and Deductions Drake Software Manual Supplement Corporations NES D ER tee T na ov a TIN Re 19 Contributio
15. eligible to use Form 8941 Reconciliation Totals Displayed Schedule L and Schedule M 2 reconciliation totals are displayed on screens L L2 and M2 to facilitate reconciliation of the balance sheet item 1 in Figure 1 Schedule L Balance Sheet Beginning of Year Iv Force print Schedules L and M1 1120C 1120 Assets 1 1 bol ANA ENRICO eee 2a 2a Trade notes accounts recv 2b 2b Less allowance for bad debts 3 3 IEEE AN AAA N A 4 U S government securities 5 5 Tax exempt securities 4 6 Other current assets 6 T Loans to shareholders 7 8 aeta an diitiqage amp real estate loans aaa Schedule L Balance Sheet End of Year End of Year 1120C 1120 d c 2a 2a Trade notes amp accounts recu 4567 2b 2b Less allowance for bad debts 1234 3 3 ARA z N A 4 U S government securities 5 5 Tax exempt securities 4 6 Olier Core A SCH2 Screen 6 7 Loans to shareholders Las Boang Morinage BIR estate 1220S nen Figure 1 Beginning and End of Year totals displayed on screens L and L2 1 force printing end of year totals 72 Note that the totals from the balance sheet s subsidiary schedule SCH2 screen also appe
16. for the tax year or its total assets at the end of the year are greater than 250 000 Flow of Information Many ofthe entries made elsewhere such as inventory information from Schedule A flow automatically to the generated Schedule L Depreciable asset information from the 4562 screen and intangible assets and amortization also flow to Schedule L Use the corporation s balance sheet to enter data directly onto Schedule L N OTE oee Importing Trial Balance Information on page 47 for information on using the trial balance import to enter Schedule L data The SCH2 Screen The SCH2 screen see Figure 9 on page 24 is used to provide detailed information required by the IRS for certain lines on Schedule L The amounts are carried to Form 1120 and printed on an attached statement Tax Year 2014 23 Schedule L Balance Sheet per Books Drake Software Manual Supplement Corporations This screen can also be used in place of the actual L screen in Drake If you use this screen for all applicable lines on Schedule L you do not need to make any entries on screen L N OTE To access the SCH2 screen from screen L click an SCH2 Screen link Press ESc to return to screen L Entering To create a statement for a line using the SCH2 screen select the desired line from the Information Line Number drop list and enter descriptions and their corresponding amounts Line Number amp Other current assets bi Beginning of End of D
17. from data entered in these fields The result ofthe WK DRD is carried to Schedule C of the return The total from Schedule C line 19 column A is carried to Form 1120 line 4 Dividends and the total from Schedule C line 20 column C is carried to Form 1120 line 29b Special deductions N OTE If the corporation is filing a consolidated return do not enter non included dividends here or anywhere else in the program Line 5 of Form 1120 1s for interest income which 1s entered on the INC screen Note that the Interest income field is an adjustment field an amount entered there is com bined with the interest amount if any entered on screen 6252 Form 6252 Installment Sale Income and interest income entered on screen K1P Schedule K 1 Form 1065 Enter tax exempt interest income on the INC screen This amount flows as applica ble to Schedule K line 9 and to Schedule M 1 line 7 Override fields are available on screens K and M1 if necessary to override the INC screen amount Rents and Royalties Capital Gains Enter gross rents and gross royalties using the direct entry fields on the INC screen Line 7 Gross royalties 1s an adjustment field Any amount entered here adjusts amounts flowing from line 7 of screen K1P Note that passive activity loss rules may be applied to rental activities held by a closely held corporation or a personal service corporation Use screen 8949 to enter capital gains and losses
18. in Drake and on the return Tax Year 2014 53 Importing Trial Balance Information Drake Software Manual Supplement Corporations Other Info The Other Information column in the trial balance worksheet indicates special con Column ditions and additional information 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 import Information cannot be imported and must be entered on the appropriate screen in Drake Screen is specified in Form Page Sch column to the left of Other Infor mation optional Amount is optional not required for import but could require direct entry in the software enter deficit as negative number Some deficits must be entered as negative numbers import includes the calculated Used for total purchases when calculating cost of change in inventory goods sold COGS in the return the program takes the change in inventory into account for the Schedule A cal culation Form or Schedule may be Non financial information such as names of officers for required a Schedule E must be completed in Drake in addition to the financial data entered in the worksheet All does not import notes are accompanied by further instructions in the column to the left of the
19. ito ci o ME UY 3 L dumm A ue d e E Lun Figure 13 Help text for Date or year ending field on ELEC screen If the election option you selected is not listed in the help text for a field N OTE then that field should be left blank For example if you chose election 01 General Election Statement you would not need to enter anything into the Date or year ending field help text in Figure 13 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 is the number of the election For example election 01 General Election Statement is generated as STM ELO The election statement includes the election title election wording and any additional information required for the election such a date or amount Entries for 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 Tax Year 2014 3l Making Changes on the Fly Drake Software Manual Supplement Corporations Safe Harbor Elections New Options on ELEC Screen New for 2014 A check box was added to screen 4562 to apply a small taxpayer Safe Harbor election to a building listed in the Description field An election statement will be produced and the building description a
20. or more of the corporation s stock entitled to vote see Schedule K Line 4 on page 19 Schedule K Line 13 On line 13 of screen K select Yes if the corporation s total receipts line 1a lines 4 through 10 on page 1 of Form 1120 are less than 250 000 for the tax year and its total assets at the end of the tax year are less than 250 000 If the answer to line 13 1s Yes in the lower text box of line 13 enter the total amount of cash distributions and the book value of property distributions other than cash made during the tax year An entry here is added to the amount calculated from entries on line 5 Distributions on the M2 screen and reflected on page 4 line 13 of the 1120 return If the answer on line 13 is Yes the corporation is not required to com N OTE plete Schedules L M 1 or M 2 To force the software to print these forms go to the PRNT screen and select Force Schedules G 1120 C L M 1 and M 2 to be printed Schedule K 1 The 1120 package includes a K1P screen accessible from the first Other Forms tab of the Data Entry Menu for entering information from Form 1065 Schedule K 1 This screen works the same as it does for the other packages with amounts being car ried automatically to the appropriate forms schedules and lines In addition 20 Tax Year 2014 Drake Software Manual Supplement Corporations State Specific Information e Ordinary income is carried to Form 1120 page 1 line 10 Othe
21. required by the IRS in order for amounts to be properly included in the e file data M PO RTANT 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 2014 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 PDF must be available to be attached to the return in order to be e filed with the return Attach files through the PDF Attachments screen accessible from the Electronic Filing section on the General tab of the Data Entry Menu The PDF Attachment Process Three main steps are involved in the PDF attachment process in Drake 1 Creating a PDF file to be attached 2 Informing the program that a PDF file will be sent with the return 3 Attaching the PDF file for e filing These steps are described in the following sections Creating a To create a PDF file PDF File 1 Scan the document to be attached to the return as a PDF document TI Its a good idea to use the DDM scanning feature for this step 2 Save the document to your client s D
22. state tax 9 reject codes 34 rent paid on business property 11 rental amp royalty income 8 repair costs 10 resident state 23 returns consolidated 8 converting from another type 5 fiscal and calendar year 6 updating 4 S Safe Harbor Elections 32 salaries 10 SCH2 screen for Schedule L 23 Schedule A Cost of Goods Sold 7 8 25 Schedule B Additional Information for M 3 Filers 27 Schedule C Dividends amp Special Deductions 8 Schedule D Form 3115 45 Schedule E Compensation of Officers 32 Schedule G Information on Certain Persons Owning the Corporation s Voting Stock 32 Schedule G Schedule G Information on Certain Persons Owning the Corporation s Voting Stock 19 Schedule K 18 Schedule K line 13 20 Schedule K line 3 18 Schedule K line 4 19 Schedule K line 5 19 Schedule K line 7 20 Schedule K 1 20 Schedule L Balance Sheet per Books 23 25 32 Schedule M 1 Reconciliation of Books with Return 25 32 Schedule M 2 Unappropriated Returned Earnings 27 32 Schedule M 3 Reconciliation of Books with Return 26 Schedule O Consent Plan amp Apportionment Schedule for a Controlled Group 28 section 263A costs 7 481 9 short year return 6 signatures electronic PIN 17 signing the return 17 state codes 21 tax refunds 9 Tax Year 2014 Index stock ownership 18 20 T tax alternative minimum AMT 28 and payments 13 exempt interest 8 on fuels credit for 9 to book diff
23. then choose Disable all macros with notification Click OK and then OK 47 Importing Trial Balance Information 5 Interestincome on Drake Software Manual Supplement Corporations Disable Autobalance When autobalance is disabled in Drake 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 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 1s the case you must override the default 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 applicable check box Figure 28 Items to Print Force Form 1125 E Officer Compensation Force Schedules G 1120 C L M 1 and M 2 to be printed Print Form 4562 Print next year depreciation listing Print inactive return FIM for preparers alternative electronic signature Figure 28 Check box for forcing Schedule L 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 or sales fi
24. tion of bankruptcy returns which must be paper filed Common Error Codes If one or more of the following IRS error reject codes is generated when e filing an 1120 return the preparer must contact the IRS for further information The IRS e Help Desk telephone number is 866 255 0654 Reject Code F1120 307 01 Filer s TIN and Name Control in the return header must match data in the e file database unless Form 1120 Item E 3 check box Name Change is marked Reject Code R0000 900 01 The return type indicated in the return header must match the return type established with the IRS for the EIN Reject Code R0000 905 01 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 1120 return type This should be done at the IRS website Review publication 3112 for details Reject Code R0000 932 01 If Amended Return or Superseded for 1120 1120S check box is not selected then Taxpayer TIN in the return header must not be the same as a TIN of a previously accepted paper return for the return type and tax period indicated in the tax return Reject Code R0000 933 01 If Amended Return or Superseded for 1120 1120S check box is not selected then Taxpayer TIN in the return header must not be the same as a TIN of a previously accepted electronic return
25. 0 5 5 AA 7 Cost of Goods Sold Form 1125 A ooo 7 Dividends Schedule arras peneana dt EE 8 ur A 8 Iscnis and ROYAlLES cada ceca ou od e e rebase ued ous anes oes aa aaa 8 Banag AA aa 8 Ordinary Gains and Losses a 2559 AKMANG hone doce node doce dones BA AGAR ge oe 9 Other Income LOSS TP 9 Compensation of Officers Form 1125 E 2 0 0 0 rro 9 VOLUISSE EPUM 10 Repairs and Wig me AO uso aso dona cias dre wa die diet mp dew he ede a 10 Bad DO Kac serranas a daa aia KG DA ree 11 icu sir rt AA 11 E c ana License ois ag tin oe hog a pati he BA MAG Oe See e ta ple 11 IMEE avaro YNG WAH A BANG TORO nan baaa 11 Charitable COntribUlONS seo shared di AA 11 DE avena olaa iaa sd da a 12 IJ DICHOD A 12 td D MPP T 12 Pension and Profit Sharing 22 13 Domestic Production Activities ene ee eee rs 13 Other Deductions 2 awake att doeet dp odo de d werden 13 Tax Year 2014 ill Drake Software User s Manual Supplement Corporations NOL Carrybacks and Carryforwards AA 13 Tax Refundable Credits and Payments 13 TOV TAR Jqo 14 Estimated Taxes and Applied Refunds aa 14 Direct Deposit of Refunds 0 0 0 ccc eee 14 Electronic Funds Withdrawal Direct Debit 15 Program Defaults and Overrides 0 0 0 0 0 aaa
26. 0 items on a return e Form 1125 E e Schedules G 1120 C L M 1 and M 2 Tax Year 2014 Y y Myr gt NG cs o O T pA p ng a ga ron oth Bn nme ee e T asit dl petenti An Mrd A am Drake Software Manual Supplement Corporations Making Changes on the Fly Form 4562 Next year depreciation listing Inactive returns PIN for the preparer s alternative electronic signature Form 1125 E is required if total receipts line 1b lines 4 through 10 N OTE are 500 000 or more ochedules L M 1 and M 2 are not required if receipts and total assets Schedule K line 13 are less than 250 000 The PRNT screen can also be used to suppress printing of the following items on a return Form and attachment references References are printed by default Form 4626 Alternative Minimum Tax Corporations Calculation and Other Options The following calculation and other options are available Calculate Form 2220 penalty Select this box to have the program calculate the penalty for Form 2220 Underpayment of Estimated Tax by Corporations The program retains the rates as of 12 31 of the calendar year If a corporation has a fiscal year end the preparer must enter the effective rates manually Calculate WK 1120W based on 2014 taxable income The WK 1120W is an estimated tax worksheet based on the current tax year taxable income Calculate Form 4466 application for quick refund Form 4466 Corpora tion Applicat
27. 014 Drake Software Manual Supplement Corporations Other Information and Overrides You may enter up to four states on one APPT screen If you need more than four states press PAGE DOWN for anew 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 Other Information and Overrides Use screen 1 to enter the following additional information Resident State If the corporation has a mailing address in one state but does busi ness in another select the state in which the corporation does business from the Resi dent State drop list Drake Codes and Overrides Screen 1 includes fields for miscellaneous codes invoice numbers and several overrides See Listing a Different Firm Preparer or ERO on a Return in Chapter 2 and Miscellaneous Codes in Chapter 5 of Drake Software User 5 Manual Tax Year 2014 for more information Schedule L Balance Sheet per Books Schedule L 1s required if the corporation s total receipts
28. 120 C U S Income Tax Return for Cooperative Associations e H For Form 1120 H U S Income Tax Return for Homeowners Associations If one of these screens contains data the program automatically produces the type of return indicated For example if a deduction is entered on screen 20C an 1120 C return will be produced Is Form 1120 C or 1120 H being produced in error Check the corre T D sponding screen 20C or H for data entered To delete a screen open the screen and press CTRL D Header Information Screen 1 contains fields for the general information that is printed in the top section of page 1 of Form 1120 or Form 1120 C or 1120 H as applicable Name and Address Use screen 1 to enter the corporation s name and address for Form 1120 For state pur poses only if the corporation has an alternate address such as a P O box you can enter that address on screen 2 State General Information in the Address Line 2 field at the bottom of the screen The screen 2 State General Information link is located on the States N OTE tab of the Data Entry Menu and on screen 1 You can also type 2 into the selector field and press ENTER Tax Year 2014 5 Income and Deductions Drake Software Manual Supplement Corporations Tax Year The software uses the calendar year as the default tax period for all corporate returns no date entries are required on screen 1 for a December 31 tax year end Fiscal and Ifthe corporation uses
29. 15 Required Information 2222 aaa 15 Withdrawal from Multiple Accounts aa 16 Filing an Extension soo hee KAGAD LENA BANNA AKU ENG REN eee eee cece eee ees 16 Signing the Return on se AA aria arena DES 17 Amending a Return es 17 SOCREOUIB id ce deg a de EXC RUE C aha eee eee ei RR ROR S NA eas idad ae earn 18 Schedule R TUS ous sarta wn esas AERE AA 18 Schedule K Line4 ce ee ec ee eee RR hh he n 19 Schedule K Line AO 19 Schedule K LIE oou eunt pu beech bee hehe eenaa aa ES eee deeb bane 20 Schedule K Line 13 1 2 ess emere or ned evens bench RR hr aote ae ode x be d RP e RR a 20 Schedule K 1 ee ee ee ee RUE RH ee 20 State Specific Information 000 cee ees 21 Contact Information 0 0 00 eee eee he 21 Other States oho oboe rh aor Gee peed head arp Rear a dedos ou Give RE REPE EE wa bis 21 Other Information and Overrides leeren 23 Schedule L Balance Sheet per Books ele 23 Flow of Information eee ee RR RR RR e ls 23 T DC HZ SCLC te a5 cate eve Ge ees hh ooh Be aes Se is Ba TTE 23 AWODI 544200415444 oa ae eo bows eens ETT TT TETTE 25 Schedules M 1 and M 3 Reconciliation of Income per Books 25 SEC MEL a aa BANG NAG NAL ANA DAG MANG MG AG a Grap DENG Er GA AA EG NG AYA 25 vitm a ap oot hae AD E GUD ow Eas e ey E eds AD HONG LAAN GD Chee AD HONG BA NGA 26 Schedule M 2 Unappropriated Retained Earnings
30. 2 pa 2 wie 4 47T aa PP gt a a YANO de onm Other apportionments for the corporation listed on screen 1 Phaseout of AMT AMT Penalty for Accumulated exemption exemption failure to pay earnings credit amount amount estimated tax Description ha O sl 9 320 9X 93 AAA oO Na ts 4 p A Mien dios ate 7 ee etn mth ARA a a Ka di e n ae ionem Acn E tf de ari a Figure 10 Other information fields for other AMT adjustments Types of Controlled Groups At the top of screen O mark the box indicating the type of controlled group for which Schedule O is reporting Controlled group types are briefly defined below See Sched ule O instructions for more details e Parent subsidiary group One or more chains of corporations that are con nected through stock ownership with a common parent corporation if certain con ditions apply e Brother sister group Two or more corporations if the same five or fewer per sons who are individuals estates or trusts directly or indirectly own stock of each corporation with a certain amount of voting power e Combined group Three or more corporations each of which is part of a par ent subsidiary group or a brother sister group and one of which is 1 a common parent corporation included in a group in a parent subsidiary group or 2 included in a group of corporations in a brother sister group e Life insurance companies only Two or more insurance compan
31. 3 Figure 26 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 To attach a statement for section B or C click the D3 2 Attachment link at the top of Section B Figure 27 on page 47 A single statement may contain all necessary expla nations for sections B and C 46 Tax Year 2014 Drake Software Manual Supplement Corporations Importing Trial Balance Information te A SES compens aon ng ag Selling E Parts Lil Parsi ABC D LI D M Form 3115 Schedule D Part Ill Method of Cost Allocation Multiformcode Section A Allocation and Capitalization Methods D3 1 attachment Allocation and capitalization methods detail Section B Direct and Indirect Costs Required To Be Allocated D3 2 attachment Explanation for boxes that are not checked X Check B Blank No Selection N A Present Proposed VDE AA E RR AA x D Pe EA AAA UIC Utt tot RR A obe UR Ut ES 3 Indirect labor COS PEP detec det sede AA RUE UE NE ded Ru apnea mana a zt ll Figure 27 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 Importing Trial Balance Information Drake s trial balance import feature allows data to be imported into an 1120 return from a trial balance worksheet The trial balance template and importing function has the following benefits E
32. 33 might include one or more detail worksheets Do not create detail worksheets in data entry if the trial balance work N OTE sheet does not provide an equivalent detail worksheet Otherwise the trial balance will not be imported correctly Totals Totals are displayed at the bottom of each worksheet If credit and debit columns are Tax Year 2014 out of balance the worksheet highlights the out of balance amount Figure 34 SI Importing Trial Balance Information Drake Software Manual Supplement Corporations lvages Detaielowr om OO el DD ET Officer compensatian 50 Salaries and wages 50 Waste removal 0 Net Income Loss Schedule M 1 line 1 301 056 Totals 971 301 OUT OF BALANCE Figure 34 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 see Figure 28 on page 48 N OTE The data cannot be imported if the worksheet is out of balance Saving a File To save a file click the Save icon or select File gt Save from the menu bar To re name a file when saving select File gt Save As For more information on file names in the trial balance program see Naming Convention on page 49 Importing Data into a Return Not all trial balance data can be imported directl
33. 8932 Credit for Employer Differential Wage Pay ments 29 Form 8941 Credit for Small Employer Health Insurance Premiums 29 Form 8941 Credit for Small Employer Health Insurance Premiums 13 G gains and losses 9 gross receipts 7 H header information 5 Vill Drake Software User s Manual Supplement Corporations importing trial balance 47 55 inactive returns 35 income and deductions 6 13 instructions for filing 33 insurance proceeds income from 9 interest expense 11 income 8 9 inventory 7 L life insurance companies 28 limitations meals and entertainment 13 on NOL deductions 30 M 2 out of balance troubleshooting 27 maintenance costs 10 meals and entertainment 13 Multi State Apportionment 21 N net operating losses NOL 13 29 new features in Drake 1 next year depreciation listing 33 O officer compensation 9 ordinary gains and losses 9 Other Deductions 13 other income loss 9 out of balance M 2 troubleshooting 27 ownership foreign 20 of stock 18 20 percentages 10 P parent subsidiary group 18 28 PDF documents e filing 36 38 Pension and Profit Sharing 13 percentage stock and ownership 10 PIN electronic signatures 17 printing statements for Schedule L 24 suppressing forcing 32 prior year returns updating 4 Tax Year 2014 Drake Software User s Manual Supplement Corporations R receipts 7 references to forms and worksheets 33 refunds direct deposit of 14
34. DM file your computer s desktop or any where you can readily find it Many types of documents for instance documents created in Micro N OTE soft Word can be printed or saved as PDF files if you have a PDF printer such as Adobe Reader installed Adding PDF To indicate in the software that a PDF file will be sent with the return Files 1 Goto the PDF screen in data entry 36 Tax Year 2014 Drake Software Manual Supplement Corporations Binary Attachments 2 Fill out the columns on the 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 1120 makes attachments necessary Description Description of form or documentto 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 screen Because you ve indicated that a PDF file is attached the program generates an EF message regarding the attachment when the return 1s calculated Attaching To attach a PDF file to a return Documents to the Return 1 From the return click View If anything was entered on the PDF screen see Figure on page 36 there will be three PDF related items in the View Print win dow e Ared MESSAGES alert see item 1 in Figure 17 e AnEF
35. Filing an Extension Calendar year returns are due on March 16 2015 By filing Form 7004 a corporation can extend the deadline six months to September 15 Fiscal year returns are due on the 15th day of the third month after the end of the corporation s year The 7004 extends the deadline six months N OTE An 1120 return is due no later than eight and a half months after the close of the corporation s tax year Use one of the following options to file an extension for an 1120 1120 C or 1120 H 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 extension based on screen 1 info 16 Tax Year 2014 Drake Software Manual Supplement Corporations Signing the Return Signing the Return Electronic PIN signatures are required for e filed returns If e filing a return complete all fields on the PIN screen A return cannot be e filed if the PIN screen fields includ ing the title and signature name of the officer signing the return are not completed An 1120 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
36. I AUTO CHNG ROST 1 _ Exemptorganizaton Enter Codesecton ib ISVS TLET ETO USE STF STEMS is Caution To be eligible for approval ofthe requested change in method ofaccouniing the ta relevant to the taspayer or to the tagayer s requested change in method ofaccounting This includes all pisi req on bis Form 31151 e its instructions as vell as anyother information that is not specifically requested Thetaxpayer must attach all applicable supplemental statements requested throughout this form Information For Automatic Change Request 1 Enter he applicable designated automatic accounting method change number br the requested automatic change E nter oniyone designated automatic accounting method change number except as provided br in guidance published bythe IRS If the requested change has no designated automatic pens method piae number check Other and proide both a description ofthe change and citation of the I S guidanca ceca dag ctio Pp a Change No b Ot rd Do any of hie scope imitations described in secioni unavailable for the applicant s requested change If res atadi i n ee A CEA A Note Complete Part Il belowand then Part IV and also Schedules A through E of this form if applicable Figure 24 Accounting change requests noted on Form 3115 Parts ll and In addition to the Multi form code text box the Parts IL IV screen consists of the IV Part IL and Part IV sections used to complete
37. Proc 2015 14 for a list of automatic changes to which the automatic change pro cedures in Rev Proc 2015 13 apply 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 first Other Forms tab of the Data Entry Menu Figure 19 on page 39 38 Tax Year 2014 Drake Software Manual Supplement Corporations Form 3115 Application for Change in Accounting Method To oP P o tame mo of of perme FS M tvm fe s AR y M L ML uem o m HY 4 impot CSM Email Help Exit ido 1 Credits Other Forms other Forms Miscellaneous States k 20C 1120 C Cooperative Associations 5 Affiliations Schedule Pi 851 Parent Corporation lations 851A Subsidiary Corporation Information ng 851D Descriptions 4 Explanations 982 Debt Discharge p 1122 Authorization and Consent Sub Corp 1139 Application for Tentative Refund f 2220 Underpayment of Estimated Tax 2553 Election by Small Business Corp i 2848 Power ofAttorney Change in Accounting Method 3115 Change in Accounting Method 311E Schedule E ATT Explanations and Attachments ATT2 PtliLn 12 amp Pt ll Ln 23b Attachment Figure 19 Screens for Form 3115 Application for Change in Accounting Method The screens accessible from the Change in Accounting Method section include e Screen 3115 Change in Accounting Method Used t
38. SSN Pg N SN Drake SUPPLEMENT CORPORA TIONS 1120 ee ee a AN a NE Support DrakeSoftware com gt 828 524 8020 Drake Software User s Manual Tax Year 2014 Supplement Corporations 1120 Support DrakeSoftware com 828 524 8020 Copyright Trademarks Drake Software User s Manual Supplement Corporations The 2014 Drake Software Manual Supplement 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 2014 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 Microsoft and Windows are either registered trademarks or trademarks of Micros
39. TER 2 Make a selection from the Election drop list Figure 12 on page 31 Tax Year 2014 Drake Software Manual Supplement Corporations Elections Return Elections ENE s m 01 General Election Statement Cost basis amount years 03 Capitalize and Amortize Research and Experimental Tu wv uur 04 Capitalize and Amortize Intangible Drilling and Development EU sam AS 05 Capitalize and Amortize Mining Development Costs Other cost basis or amount 06 Capitalize and Amortize Mining Exploration Costs ih E Include Commodity Credit Loan in Income sec 77a pp Pape nate ona endiag eu Ww o d Afin Ss a cde ille E w ee OM LT re Figure 12 Election drop list 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 Date or year ending field shows that the field is required only for election options 08 09 11 and 15 and it explains what specifi cally should be entered for each of these elections Drake Software Data Entry Help EERE Date or Year Ending direct entry Enter the date or year ending required for the selected election Ihe description field is used on the following election statements for this package SIM Use 8 Date of Disaster 09 Date of Contribution 11 Date Paid or Incurred 15 Date Payment Received IANG s mero
40. a then use the drop lists Changes below line la see Figure 23 on page 43 to select account method changes being requested 42 Tax Year 2014 Drake Software Manual Supplement Corporations Form 3115 Application for Change in Accounting Method Enter information in either Part or Part Ill Part Information for Automatic Change Request 2 Doanyofthe scope limitations of section 4 02 of Rev Proc 2008 52 apply Rao FO PF Figure 23 Making multiple automatic accounting method change requests On page 1 of Form 3115 the Other check box under the type of accounting method change being requested will be marked and a note indicating that multiple automatic change requests MULTI AUTO CHNG RQST have been made 1 in Figure 24 and the designated change numbers of the requests appear in the Description field of Part 1 Z2 in Figure 24 Check the box to indicate the type of applicant Checktheappropriate box to indicatethe type Individual Cooperative Sec 1381 of accounting method change being requested Corporation C Partnership see instructions C Controlled foreign corporation corporation Depreciation or Amortization Sec S67 Insurance co Sec 816 a L Hm Products and or Financial Activities of L 1050 corporation Sec S04 d42XE insurance co Sec 831 Qualified personal service Other speci le EX Other specify M corporation Sec 448 0 2 MULT
41. a fiscal year where the year begins in the current calendar year Calendar and ends in the next specify the beginning and ending dates in the If not calendar Years year section in the lower left corner of screen 1 The program adjusts calculations for depreciation and for gains and N OTE 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 34 Short Year An entity may have a short year return if the entity is changing accounting periods Returns 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 If filing a short year return other than an initial or final return you have to provide an explanation To do so go to the ELEC screen and select an explanation from the Other short year reason drop list Your 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 cannot be e filed For more information on short year explanations see IRS Pub 4163 N OTE 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 scr
42. ance import autobalance must be turned off prior to import See Preparing to Use Trial Balance Import on page 47 Schedules M 1 and M 3 Reconciliation of Income per Books Page 1 of Schedule M 3 is required 1f the balance sheet s total assets at the end of the year equal or exceed 10 million and pages 1 3 of Schedule M 3 are required if the total assets equal or exceed 50 million If the corporation s assets do not equal or exceed 10 million but you want to voluntarily file Schedule M 3 or if the corpora tion s assets do not equal or exceed 50 million and you wish to file the complete M 3 go to screen M3 and make a selection from the Voluntarily file M 3 drop list Choose to print just page 1 of Schedule M 3 or the complete M 3 If the corporation is filing Schedule M 3 Schedule M 1 will not be gen N OTE erated Any entries on the M1 screen for Schedule M 1 should be deleted Schedule M 1 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 the corporation must reconcile book income with the taxable income Tax Year 2014 25 Schedules M 1 and M 3 Reconciliation of Income per Books Drake Software Manual Supplement Corporations Use the M1 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 unfa vorable Exam
43. applicant ceases to engage in the trade or business to which the desired change in accounting method relates or terminates its existence in the year of change the applicant is ordinarily not eligi ble to make the change under automatic change request procedures unless the applicable section of the Appendix of Rev Proc 2011 14 or other applicable pub Tax Year 2014 4 Form 3115 Application for Change in Accounting Method Drake Software Manual Supplement Corporations lished guidance states that section 4 02 5 of Rev Proc 2011 14 does not apply to the requested change in method of accounting If the change is requested under the advance consent procedures the IRS National Office will consider the reasons for the change in the applicant s final year see Part III line 21 in determining whether to approve the requested change e See IRS Form 3115 instructions for details Parts Lill Partsil W ABC D Ill D Ml Form 3115 Application for Change in Accounting Method Multi form code gE All applicants must complete Parts Il and IV Part ll Information for All Requests n 3 Did or will the applicant cease to engage in trade or business to which requested change relates 3 Beginning Date Ending Date As in os comi in A alte Atm T MEE di m mc og if L e e M MN a dt d Figure 22 Automatic Change Request information N OTE Not all applicants are eligible to use the automatic change request pro cedures Part ll
44. ar in the BOY Totals and EOY Totals columns of the L screen If you make any changes to the data recalculate the return press CTRL C for those changes to be displayed on the screen The end of year totals also appear on screen M2 Retained Earnings N OTE From either screen L L2 or M2 press PAGE UP and PAGE DOWN to toggle among screens L L2 and M2 to make reconciliation easier Force Printing Final End of Year Totals Normally if you mark Final on screen 1 indicating that this as a final year return Drake zeros out the EOY Totals column of Schedule L Now mark the Force print 2 Tax Year 2014 Drake Software Manual Supplement Corporations What s New in Drake for Corporations final end of year check box on screen L see item 2 in Figure 1 to display those totals in the EOY Totals column Force Printing Schedule M 3 Page 1 of Schedule M 3 is required 1f the balance sheet s total assets at the end of the year equal or exceed 10 million and pages 1 3 of Schedule M 3 are required if the total assets equal or exceed 50 million If the corporation s assets do not equal or exceed 10 million but you want to voluntarily file Schedule M 3 or if the corpora tion s assets do not equal or exceed 50 million and you wish to file the complete M 3 go to screen M3 and make a selection from the Voluntarily file M 3 drop list Choose to print just page 1 of Schedule M 3 or the complete M 3 See Schedules M 1 and M 3 Recon
45. arming in the Labor hired field The Salaries and wages amount should not include compensation of N OTE officers Enter officer compensation data on screen E or as Officer Compensation on line 12 of the DED screen Repairs and Maintenance Enter repair and maintenance costs on the DED screen An amount entered here is combined with the amount if any entered in the Repairs and maintenance field on screen F 10 Tax Year 2014 Drake Software Manual Supplement Corporations Income and Deductions Bad Debts Rents Use the Bad debts line on the DED screen to enter the total debts that became worthless 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 N OTE screen 8949 Capital Gains amp Losses Cash method 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 The Rents field is an adjustment field An amount entered here is com N OTE bined with the amount if any entered in the Rent fields on screen F lines 24A and 24b Taxes
46. ate tax refund e Taxable income from insurance proceeds e Other itemize Detail worksheet is required Data from Forms K 1 received from partnerships should be entered on the K1P screen located on the first Other Forms tab of the Data Entry N OTE Menu This information is reflected in an attached statement in View mode of the return Losses are included with Other Deductions entered on the DED screen Compensation of Officers Form 1125 E Tax Year 2014 Form 1125 E Compensation of Officers 1s not generated automatically with the return unless it is required in other words unless total receipts line la plus lines 4 through 10 on Form 1120 are 500 000 or more To force the software to print Form 1125 E from the PRNT screen select Force Form 1125 E Officer Compensation Income and Deductions Drake Software Manual Supplement Corporations Officer Use screen E to enter officer information and compensation amounts Press PAGE Information Down to enter additional officers Screen E totals are calculated and carried to line 12 of Form 1120 The total of officer compensation can be entered in the Officer Compensation over ride field on the DED screen generally used when Form 1125 E is not required An entry in that field overrides any calculations from screen E changing lines 12 and 27 of the 1120 but not Form 1125 E You may truncate the officer s Social Security Number in the ID num ber field of screen E To do s
47. ce of the actual M3 and 8916A screens For more information on using this type of screen see The SCH2 Screen on page 23 Schedule M 2 Unappropriated Retained Earnings Information from Schedule M 2 Analysis of Unappropriated Retained Earnings ties to the Schedule L line 25 portion of the balance sheet Increases distributions and other decreases to the retained earnings are entered on Schedule M 2 Unappropriated retained earnings refer to corporation income that has not been distributed to share holders that is available for dividend distribution M 2 Troubleshooting Tax Year 2014 The beginning Unappropriated Retained Earnings flow from Schedule L Balance Sheet and the Net Income Loss per books flows from the completed Schedule M 1 or M 3 on Form 1120 These numbers combined with amounts entered on the M2 screen are used to calculate the ending Unappropriated Retained Earnings If the computed amount does not match the amount in the completed Schedule L Bal ance Sheet the system produces an EF message that says the M 2 1s out of balance Solving this problem can be challenging since it can have any of several causes e The beginning balance sheet entries are inaccurate e The Beginning of Year unappropriated retained earnings amount line 25 on screen L entered on the SCH2 screen for line 24 Retained earning Appropri ated is incorrect e Autobalance is not turned on See Autobalance on page 25
48. ciliation of Income per Books on page 25 for more details on these schedules Missing ID Number In the past if the corporation received a Schedule K 1 from a partnership and the part nership did not have an ID number for instance if the partnership was foreign and did not have an EIN then you typed FORE TGNUS into the Partnership EIN field of the K1P screen If the partnership had applied for an SSN or EIN but had not yet received an ID number then you would have typed APPLD FOR in the Partnership EIN field Now to help avoid a data entry error that might lead to an IRS reject Drake will auto fill the Partnership EIN field Type F into the Partnership EIN field and FOREIG NUS is automatically entered or type A and APPLD FOR appears Schedule K 1 from 1065 Enter data on this screen if the corporation received a K 1 from another partnership M Partnership EIN s A PO RELGNUS Partnership name UNIES RE RR wae ir Rs ra REESE U S ONLY ee a I FOREIGN ONLY Province State Country Postal Code Click to Access M v TE aa apt alten toman ta lp tmn tmo a cm Fu SEP Pes A er haah agin ee eee Figure 2 Drake autofill the Partnership EIN field with FOREIGNUS or APPLD FOR Form 3115 Change Tax Year 2014 Form 3115 Application for Change in Accounting Method is now eligible for e file See Form 3115 Application for Change in Accounting Method on page 38 for detai
49. count Information Account 1 Federal A 1 Withdrawal Name of financial institution RTN Account number Type of account P Us LDL LL Checking Savings Repeat Account Information Checking Savings Federal Federal payment amount Requested payment date Daytime phone number i E a a BS MO ae ount anc ate ame 3 selection Federal selection Y State city selection State State payment amount Requested payment date Daytime phone number Figure 7 Required fields on PMT screen withdrawal selection 1 account information 2 specified return 3 The name of the financial institution 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 7 Finally the PMT screen must indicate the return to which the payment data applies item 3 in Figure 7 Mark the box of the applicable return type 1120 7004 or 1120X 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 N OTE Neither the federal nor the state balance due can be paid from more than one account
50. culated return If the depre ciation amounts match but the line 1 amounts differ an M 1 adjust ment could be required 55 Importing Trial Balance Information Drake Software Manual Supplement Corporations 56 Tax Year 2014 Drake Software User s Manual Supplement Corporations Appendix A Trial Balance Import Tax Year 2014 The trial balance import allows data to be imported into a corporate 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 EHUHUSUHUHUBUESHUIHUHUS HIBUEDHUHUUHPHUBUBUHUSUHUHUHISUEDHUHESYMDHUEUEUHUHUHVUUHUBUEDHUHESVHDHUECHUHUHEHUUUHIBUEDHDHEHEHDHUEUEUHUHIHUSUHIBUEDHOHIHUHDHUECHUHUHPHUNUHUBURCHOHESUHDHUEUEDHUHEEUEUHUBUHCHOHEUHPHUECHUHUHEHUHUHUSUEDHOHEHUEPHUECEUHUHUSUHOHISUEUHDHEHUHDHIHCEHUHUHESUHUHUEUECHUHESUEDHUBUHCHUUPHUNUHUHUECHUHESUEDHUBCHOHUHENSUHUHUHUHUHDHISUEDHUBUEHCHUHENUHUHUHUEUHUHUUEDHUBCHPHUHEBUHUHUHUHUE 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 Ba
51. domestic production activities deduction under section 199 e Any net operating loss NOL carryback to the tax year under section 172 e Any capital loss carryback to the tax year under section 1212 a 1 To prevent the double benefit from the excess charitable contribution deduction when there is a charitable contribution on the return and an NOL carryover the program makes the IRC section 170 d 2 B adjustment In this situation the charitable contri bution carryover amount is reduced on column C of the Contribution Limitation Car ryover worksheet WK CNTRB in View mode and the NOL carryforward is increased on the ATT NOL worksheet 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 11 Return Elections a AAA AA E Description Cost basis amount years Date or year ending Other cost basis or amount Other date or year ending CINNN v O SEND C Other informabon QC Expanalio 1 4 o CNN LU LL o NT SU UL n dam LM m MN vum Ut MT UU ee UO Figure 11 Return Elections portion of ELEC screen Making an Election in Drake 30 To indicate that the corporation is making an election 1 Openthe ELEC screen accessible from the Miscellaneous tab of the Data Entry Menu or by typing ELEC in the selector field and pressing EN
52. e 4 Ifa Security Warning box appears click Enable Macros In Excel 2007 and 2010 you may see a Security Warning message N OTE with an Options button Click Options to open the Security Options dialog box then select Enable this content Click OK In Excel 2013 click Enable Content The trial balance template is 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 Drake14 soft ware The file name consists of the client name as entered in Drake plus TB for trial balance plus the xls extension assigned to all Excel files as shown in Figure 30 Indicates trial balance file Excel extension File location Name of client Figure 30 Example of trial balance template file name To change the name of a file in Excel select File gt Save As and assign the new name If saving a trial balance to a different location make a note of where N OTE you are storing it The program automatically looks in the default directory 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 cr
53. e The ending balance sheet entries are inaccurate e The net income per the tax return is inaccurate e The reconciling items on Schedule M 1 or M 3 need to be adjusted e The reconciling items on Schedule M 2 need to be adjusted If the items are off by a couple of dollars or less resolve the problem by entering a reconciling item on the M2 screen 1 Double click in a field on the M2 screen to open a detail CTRL W worksheet 2 Enter the word Rounding as the description and enter an amount 3 Press ESc The program returns to the M2 screen 21 Schedule O Controlled Group Information Drake Software Manual Supplement Corporations If the problem is not resolved it may be necessary to do a detailed comparison between the corporation s financial records and the completed return information Schedule O Controlled Group Information Use screens O and OM accessible from the first Other Forms tab to fill out Sched ule O Consent Plan and Apportionment Schedule for a Controlled Group Press PAGE UP and PAGE DOWN to navigate from screen to screen Members of a controlled group are entitled to one 50 000 one N OTE 25 000 and one 9 925 000 taxable income bracket amount in that order AMT Adjustments and Other Items Alternative Minimum Tax AMT adjustments are limited among the members of a controlled group These should be entered in the Other information fields of the OM screen Figure 10 foo PER
54. edit amounts Import to Screen and line in Drake to which the debit or credit amount is imported Form Page Sch and or line Location of the amount on the printed return Tax Year 2014 49 Importing Trial Balance Information Drake Software Manual Supplement Corporations Table 4 Trial Balance Template Columns Column Description Other Information Additional details for preparers see Details for Pre parers on page 53 Displayed at the bottom of the trial balance worksheet are the calculated amount for Schedule M 1 line 1 the credit and debit totals and a cell showing whether or not the balance sheet is out of balance and if applicable the out of balance amount Figure 31 see also Figure 34 on page 52 Wages D tat elowy 6mm ott n D tts Officer compensation 0 Salaries and wages 0 Waste removal r 0 1 Net Income Lass Schedule M 1 line 1 2 a 3r OUT OF BALANCE E 301 056 Figure 31 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 0 All data must be entered manually into the template Some data cannot be imported from the trial balance worksheet and N OTE must be entered directly into the data e
55. een 4562 and or screens 6 7 8 and 9 Boxes A through E Use screen 1 to enter most information for boxes A through E top of Form 1120 Note that boxes A 4 Schedule M 3 attached and D Total assets are completed automatically by the program based on data entered elsewhere Box 1a Consolidated return is automatically marked if there are entries on screen 851 Form 851 Affiliations Schedule Box A 2 N OTE Personal holding company is automatically marked if there are entries on screen PH Schedule PH U S Personal Holding Company PHC Tax Income and Deductions Only three screens are required in order to calculate taxable income for a return INC Includes all items of income reported on Form 1120 page 1 lines 1 through 10 that do not require a separate schedule Schedule C or additional 6 Tax Year 2014 Drake Software Manual Supplement Corporations Income and Deductions information Income reported on Form 1065 Schedule K 1 also includes tax exempt interest income reported on the Schedule K e DED Includes all deduction items reported on Form 1120 page 1 lines 13 through 26 that do not require a separate schedule or form Form 4562 e J Includes loss carrybacks controlled group tax bracket amounts tax payment information and certain credits Gross Receipts Enter gross receipts Form 1120 line 1a and returns and allowances Form 1120 line 1b on lines 1a and 1b of the INC
56. eld on the INC screen if a return has a detail worksheet for that field the trial balance will not be imported correctly into the return Detail worksheets are indicated by red shading as shown in Figure 29 ta Grossreceiptis Or 5d es 1b Returns and allowances plus any other adjustments aa ns Pi AA AA A A A A 1 la E AAA AA O A E A e E l sr ae Figure 29 Example of an unnecessary detail worksheet Remove unnecessary detail worksheets prior to import See Detail Worksheets on page 50 for more information on using detail worksheets in the trial balance Preparing Financial Data for Import 48 Opening a Template 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 The first step in preparing financial data for importing is to open a trial balance tem plate for the return and enter the financial data To open a trial balance template for a return Tax Year 2014 Drake Software Manual Supplement Corporations Importing Trial Balance Information 1 Open the return to the Data Entry Menu D pee 2 Click Import gt Trial Balance Import from the toolbar The preliminary Trial i Balance Import dialog box is opened 3 Click Create New or Open Existing If opening an existing file click Open after selecting the correct fil
57. eneral Information Principal business activity code number 0 T Tax year of change begins Tax year of change ends DES Name of applicant if different from fil L ID number of applicant if different from fil Ey Name of contact person E Contact person s telephone number i mn E N OPE TEER MM main mm hake Figure 21 Override fields in the General Information sections of the Parts I III screen On the Type of accounting method change being requested line select Deprecia tion or amortization or Financial products and or financial activities If request Tax Year 2014 Drake Software Manual Supplement Corporations Form 3115 Application for Change in Accounting Method ing another method describe it in the Other text box The text box is limited to 20 characters For advance consent requests state in the Other text box the type of method change being requested and a short description of the change N OTE for example LIFO to FIFO For automatic change requests these informational requirements are satisfied by properly completing Part I lines 1a and 1b of Form 3115 See Part following Part From the drop list on line la choose a Designated accounting method change num ber If the method is not listed enter the method on line 1b in the Other text box The IRS issued Rev Proc 2014 16 to explain how tax payers can elect to automatically change their account ing methods in order to comply with
58. entory at end of year PN A Methgdmsmed fg Figure 3 Screen A Schedule A line 5 In the Depreciation field enter any depreciation that relates to the cost of goods sold unless the amount is flowing from the 4562 Depreciation Detail Items screen with COGS selected from the For drop list Note that this field of screen A is an Tax Year 2014 7 Income and Deductions Drake Software Manual Supplement Corporations Importing Trial Balance to Sch A override field an entry here overrides calculations from the 4562 screen Amounts entered in this field automatically adjust the total depreciation that is carried to page 1 of Form 1120 An entry in the Other costs excluding depreciation field opens a CTRL W worksheet The depreciation amount is included on the statement for other costs and should not be included in the Other costs excluding depreciation work sheet If using the trial balance import feature see Importing Trial Balance Information on page 47 enter depreciation amounts directly into the appropriate fields on the trial balance worksheet not in the fields 1n data entry When the trial balance is imported the COGS depreciation expense amount flows directly to the appropriate line of Form 1125 A and is calculated accordingly Dividends Schedule C Interest Enter dividends and special deductions on screen C Schedule C The Dividends Received Deduction Worksheet WK DRD is generated
59. erence 25 years fiscal vs calendar 6 taxes and licenses 11 trial balance import 8 23 24 47 55 troubleshooting the M 2 27 U underpayment of estimated tax 14 updating a prior year return 4 V vouchers 14 W wages 10 Drake Software User s Manual Supplement Corporations This page intentionally left blank Tax Year 2014
60. escription year year Notes receivable 3020 Parts inventory 54321 1020 Loans receivable 10203 9595 Taxes prepaid 11223 T made a nn u i L NENNEN PEN Figure 9 SCH2 screen fields for line number description and amounts Once the information is entered or if additional descriptions are required for the line press PAGE DOWN to access a new screen All line selections and screen descriptions are carried to the next N OTE year and year end amounts are carried to the beginning of year col umn when the returns are updated 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 where needed with refer ences to the corresponding statements If a line is required a statement labeled STATEMENT or STM in View mode depending on your Setup Options is produced and is e filed with the return SCH2 and Typically one or more SCH2 screens are needed for Schedule L items Data for the Trial Balance SCH2 screens cannot be entered directly into the trial balance worksheet Although Import the amounts must be included in the trial balance worksheet for the worksheet to bal ance the SCH2 detail screens must be created separately from the worksheet When the return is produced Schedule L will reflect both the amounts imported from the trial balance worksheets where direct entry was allowed and the totals of the
61. extensions 16 33 F filing instructions 33 vii Index final returns indicating in the program 6 updating 4 fiscal year returns 6 foreign ownership 20 FOREIGNUS 3 10 Form 1120 C U S Income Tax Return for Cooperative Associations 5 Form 1120 H U S Income Tax Return for Homeowners Associations 5 Form 2220 Underpayment of Estimated Tax By Corpora tions 14 33 Form 3115 Application for Change in Accounting Meth od 38 47 Form 4466 Corporation Application for Quick Refund of Overpayment of Estimated Tax 14 33 Form 4797 Sales of Business Property 9 Form 5884 Work Opportunity Credit 29 Form 6252 Installment Sale Income 8 Form 6478 Alcohol and Cellulosic Biofuel Fuels Credit 9 29 Form 6765 Credit for Increasing Research Activities 29 Form 7004 Application for Automatic Extension of Time to File 16 33 Form 8050 Direct Deposit of Corporate Tax Refund 14 Form 8820 Orphan Drug Credit 29 Form 8844 Empowerment Zone and Renewal Community Credit 29 Form 8845 Indian Employment Credit 29 Form 8846 Credit for Employer Social Security and Medi care Taxes Paid on Certain Employee Tips 11 29 Form 8864 Biodiesel and Renewable Diesel Fuels Credit 9 29 Form 8873 Extraterritorial Income Exclusion 13 Form 8881 Credit for Small Employer Pension Plan Start up Costs 29 Form 8903 Domestic Production Activities Deduction 13 Form 8912 Credit to Holders of Tax Credit Bonds 29 Form
62. f Goods Sold Description Schedule F Profit or Loss From Farming Delivery Truck 01 10 2009 25656 Federal State AM T AA A alma A A AE 8 LOE Figure 5 Selecting Form 1120 from the 4562 screen For drop list N OTE For more on the For drop list in Drake see Associating One Screen with Another in the Drake Software User s Manual Tax Year 2014 Depletion Enter depletion deductions on the DED screen See Form 1120 instructions and Pub 535 for more information on depletion Advertising Enter advertising expenses on the DED screen 12 Tax Year 2014 Drake Software Manual Supplement Corporations Tax Refundable Credits and Payments Pension and Profit Sharing The software reduces this expense based on the credit amount calculated from Form 8881 Credit for Small Employer Pension Plan Startup Costs Domestic Production Activities Use screen 8903 to complete Form 8903 Domestic Production Activities Deduction DPAD The calculated total of screen 8903 flows to line 25 of Form 1120 N OTE The DPAD is not allowed on returns with a net operating loss NOL for the current year It also cannot be used to create a current year loss Other Deductions Enter all other deductions on the DED screen The program calculates these amounts and incorporates the total into line 26 Other deductions of Form 1120 The follow ing deductions credits adjustments and exclusions also flow to line 26 e Amortization fr
63. for the return type and tax period indicated in the tax return Special Types of Returns This section covers 52 53 week year returns and inactive returns Both types of returns can be e filed using Drake Electing a 52 53 Week Year Initial Return 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 34 Tax Year 2014 Drake Software Manual Supplement Corporations Special Types of Returns 1 In the If not calendar year section of screen 1 enter the Fiscal year beginning and Fiscal year ending dates Use MMDDYYYY format as shown in the exam ple in Figure 15 2 Mark the 52 53 week tax year box If not calendar year Fiscal year begins 08 24 2014 Fiscal year ends 03 30 2015 W 52 53 week tax year ELEC Figure 15 In this example the fiscal year begins 09 24 2014 and ends 09 30 2015 the Wednesday closest to the end of September giving the entity a 53 week year for 2014 An entity that has filed returns in the past must complete only steps 1 N OTE 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 16 Election Options Tax Year Elections ENTER ONLY ONCE 52 53 Week Tax Year Election 1 Month in which new 52 53 week tax year ends
64. ields on this screen and then enter the amended data in the appropriate other screens as described in the example below Example An 1120 return was filed using a different tax software but gross rental income was not reported on line 6 of the return To amend the return From the Data Entry Menu of an 1120 return open screen X Complete all applicable fields on screen X Close screen X and open the INC screen Enter the amount of unreported income on line 6 Close the INC screen and open screen 2X oS ae Enter the line number from the X screen that corresponds to the changes that were made in data entry For this instance if you made a change to income on the INC screen enter 1 for Total Income in the Line Number field of the 2X screen T Enter an explanation in the Explanation of changes text box 8 Calculate and view the return Note the adjustments made on the Form 1120X E filing an To add Form 1120X to the queue for e file go to the EF screen for the return accessi Amended ble from the General tab of the Data Entry Menu and mark the 1120 X box For Return detailed instructions on e filing the returns in the queue see Chapter 8 e File in the Drake Software User s Manual Tax Year 2014 Schedule K Use screen K to enter data for Schedule K Other Information Screen K should also be used for Schedule K of Form 1120 C Detailed here are some specific areas that might need your attention Schedule K Line 3
65. ies subject to tax under section 801 that are members of one of the previously described groups are treated as a particular type of controlled group 28 Tax Year 2014 Drake Software Manual Supplement Corporations Credits and Adjustments Line 5 Apportionment Plan Status The corporation is required to provide information about the status of the group s apportionment plan Select the applicable box on screen O to show the status of the controlled group s apportionment plan If adopting a plan or amending the current plan for a prior tax year at least one year must remain on the statute of limitations for each group member for assessing any resulting deficiency Credits and Adjustments Certain credits require an adjustment to either income or expenses Drake14 carries the required adjustments to the appropriate line of the return and to Schedule M 1 or M 3 Manually reducing the expenses 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 Biofuel Producer 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 expenses for the credit amounts for the following credits e Form 5884 Work Opportunity Credit e Form 6765 Credit for Increasing Research Activities e F
66. in the program but all other M 3 data must be entered manually If Schedule M 3 is present in a return no Schedule M 1 is generated Part I of Schedule M 3 asks certain questions about the corporation s financial state ments and reconciles financial statement worldwide net income loss for the corpora tion or consolidated financial statement group if applicable as reported on Schedule M 3 Part 1 line 4 to net income loss per the income statement of the corporation for U S taxable income purposes as reported on Schedule M 3 Part 1 line 11 Parts II and III reconcile financial statement net income loss for the U S corporation or consolidated tax group if applicable as reported on Schedule M 3 Part II line 30 column d to taxable income loss as reported on Form 1120 page 1 line 28 Tax Year 2014 Drake Software Manual Supplement Corporations Schedule M 2 Unappropriated Retained Earnings Schedule B The SCH3 Screen The software carries certain items that are readily available but it does not balance the M 3 automatically To ensure that the M 3 balances additional data entry may be required on the M31 M32 and M33 screens Schedule B is required when an M 3 is present in a return Use screen M3B for Form 1120 Schedule B Additional Information for M 3 Filers 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 pla
67. ion Changes If an entity is currently using a LIFO inventory method or submethod N OTE and is changing to another LIFO inventory method or submethod Part Il of Schedule D is not applicable Use Schedule C Changes Within the LIFO Inventory Method instead Schedule D A long term contract refers to any contract for the manufacture building installation Part or construction of property that is 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 Schedule D This section concerns changes in the identification and valuation methods of invento Part Il ries Note that some lines require attachments To access the ATT screen and complete a required statement click the desired attachment link The items on this part of the screen match the items on the 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 OTE 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 date s and otherwise complied with the provisions of section 472 d and Regulations section 1 472 3 Schedule D Use the D III screen to complete Part III Method of Cost Allocation of Form 3115
68. ion Required POF FileM ame O Form instructions Title of House on Oak Street TITLEHOUSEQAE PDF E es ados DRB453C PDF gt od he lr ae de gine al FF UT ons A m Xt C NET d aoe mith anil T ru fr Figure 18 The EF PDF Attachments window 4 Click the row of a document to attach one with a red X 5 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 the return to make sure all EF messages have been cleared If so the return is ready to be e filed Form 3115 Application for Change in Accounting Method 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 ment of any material item New for 2014 Form 3115 Application for Change in Accounting Method 1s eligible for e file Drake customers can fill out and e file Forms 3115 and related schedules and attach ments for corporation returns This section provides instructions for completing this form and related schedules and attachments 1n Drake In some cases Form 3115 must still be paper filed See Parts and Ill starting on page 40 for details N OTES Applicants filing Form 3115 should refer to Rev Proc 2015 13 for general automatic change procedures and to Rev
69. ion for Quick Refund of Overpayment of Estimated Tax A check mark in this box 1s the only entry needed to generate the form Turn off autobalance For more information on the autobalance feature in Drake see Autobalance on page 25 Prepare Form 7004 extension based on screen 1 info Select this box to pre pare a six month extension based on the information that has already been entered into the return Note that screen 1 must be completed to prepare an extension N OTE To prepare Form 7004 based on information other than or in addition to that provided on screen 1 use the 7004 or EXT screen Overriding Other Setup Options Tax Year 2014 The following program defaults can be overridden from the PRNT screen Filing instructions federal and state Envelope coversheets corporation IRS state and city Date to print on return Due date to print on letter and filing instructions see note below Amount on Form 1120 page 1 item D Total assets 33 Electronic Filing Drake Software Manual Supplement Corporations IRS Service Center A default due date for filing is printed on all letters and filing instruc N OTE tions generated with a return You can override the default by enter ing an alternate due date in the Due date to print on letter and filing instructions field on the PRNT screen Electronic Filing steps for e filing Form 1120 are the same as for e filing Form 1040 with the excep
70. l If this 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 oee Appendix A of Rev Proc 2012 1 for more information For more on applicants who must apply for advance consent see the IRS Form NOTES 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 enter a check mark on line 23b and go to screen ATT2 to complete the attachment information for Part III line 23b located in the bottom half of the screen Include the necessary information or certification required by Rev Proc 2013 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 or No for line 22 All members of consolidated group use proposed method Press Fl in a specific field for more information on attachment requirements The method for attaching state ments in Drake is covered in Binary Attachments on page 36 Multiple If requesting multiple automatic accounting method change requests on one Form Accounting 3115 go to screen 3115 and in the Part 1 Information for Automatic Change Method Request section make a selection from the drop list on line 1
71. lance Template Import Trial Balance Import direct entry data cells with 0 applicable detail worksheets 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 applicable Delete imported 8825 and RENT screens Process complete Drake Software User s Manual Supplement Corporations Index A accounting method changing 38 multiple changes 42 address change of 6 e mail 21 entering on Form 1120 5 adjustments and credits 29 advertising expenses 12 affiliated groups 18 alternative minimum tax AMT 28 amended returns 17 amortization 13 23 APPLD FOR 3 10 apportionment plan status 29 attachments binary 36 38 PDF see PDF files to Form 3115 38 45 auto balance 25 33 B bad debts 9 11 bankruptcy 34
72. liminates the need to duplicate entries Reduces data entry errors by automatically importing data to the correct fields Allows preparers to merge basic accounting functions with tax preparation N OTE 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 The trial balance import function can be used only on returns that were created in Drake 2008 or later 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 feature requires Microsoft Excel version 2000 or later Tax Year 2014 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 gt Options in Excel and select the Security tab Click Macro Security and select Medium then click OK In Excel 2007 and 2010 click the Office button in the upper left and then click the Excel Options button at the bottom of the window In Excel 2013 click the File tab then select Options from the menu on N OTE the left 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
73. ls of using the Drake screens to file this form See Form 3115 Application for Change in Accounting Method on page 38 for details Before You Start Drake Software Manual Supplement Corporations Safe Harbor Elections A check box was added to screen 4562 to apply a small taxpayer Safe Harbor election to a building listed in the Description field An election statement will be produced and the building description as entered in the Description field will be included in the election statement Two other elections are now available from the Election drop list on the ELEC screen e Sec 1 263 a 1 f de minimis safe harbor election e Sec 1 263 a 3 n Election See Safe Harbor Elections on page 32 for more Form 8878 A For electronic payments on extensions the program now produces Form 8878 A the IRS e file Signature Authorization for Form 7004 Practice Management Tools For details on additions and enhancements to Drake s practice management tools such as the email program the letters and billing editor importing client payment information and the Scheduler see the Drake Software User s Manual Tax Year 2014 Before You Start Actions you might need to take before starting a 1120 return in Drake include e Updating a prior year return if you prepared the tax return last year e Changing a return from another type of return to an 1120 if the corporation has made such a change in the last year Updati
74. n corporate growth and d has redemption and liquidation rights that do not exceed the issue price of the stock except for a rea sonable redemption or liquidation premium See section 1504 a 4 Schedule K Line 4 If a corporation partnership trust individual or estate owned directly or indirectly 20 percent or more or owned directly or indirectly 50 percent or more of the total voting power of all classes of the corporation s stock entitled to vote the applicable data appears on Schedule G In Drake Schedule G data is entered on screens G1 and G2 accessible through the G1 Screen and G2 Screen links on line 4 of screen K or from the General tab of the Data Entry Menu If the stock 1s owned by any foreign or domestic corporation partnership or trust enter on screen G1 the name and EIN of the entity the type of entity corporation partnership or trust the country of the entity s organization and the percentage of stock the entity owns If the stock 1s owned by an individual or estate enter on screen G2 the name and ID number of the individual or estate country of citizenship and percentage of stock owned Use the CTRL PAGE DOWN function to open additional blank G1 or G2 screens For more information on line 4 of Schedule K see the IRS instructions Schedule K Line 5 Tax Year 2014 If the corporation owned stock in other corporations or partnerships or the beneficial interest in a trust enter the informati
75. nancial institution RTN Account number Type of account First Bank and Trust 123456789 9876543210 iv Checking Saving Repeat Account Information 123456789 9876543210 oe o Figure 6 Federal section of DD screen also 8050 screen If receiving refunds from different state tax authorities use the State Account boxes on the DD screen to indicate where other state refunds should be deposited Electronic Funds Withdrawal Direct Debit Use the PMT screen accessible from the General tab to indicate that 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 line 34 Amount owed of Form 1120 1s to be withdrawn on the return due date To indicate other wise complete the Requested payment date override fields see Figure 7 on page 16 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 transmit ted after the due date the requested payment date cannot be later than the date the return 1s transmitted Required Information A Withdrawal selection item 1 in Figure 7 on page 16 is required if the program is to direct tax authorities to withdraw funds from the corporation s bank account Tax Year 2014 15 Filing an Extension Drake Software Manual Supplement Corporations Ac
76. ng a Prior Year Return in Drake A prior year return can be updated in three ways e Asa single return updated one at a time using Last Year Data gt Update Clients 2013 to 2014 recommended e When you open a 2013 return for the first time in the 2014 program and are prompted to update it e With all other returns in the program using Last Year Data gt Update Clients 2013 to 2014 not recommended When you update an 1120 return that was marked final the previous year the pro gram informs you that the return was marked final before prompting you to proceed 4 Tax Year 2014 Drake Software Manual Supplement Corporations Header Information Converting from Another Return Type If the corporation is electing to become an 1120 corporation after existing as another type of entity S corporation partnership etc it is necessary to indicate this in the program To change from another type of entity to an 1120 corporation in the program From the Home window select Tools gt File Maintenance gt Change File Type Enter the EIN of the entity and click Continue Select the new return type Click Continue to save the change Click OK eS Filing Form 1120 C or 1120 H No preliminary steps are required for Forms 1120 C or 1120 H Use the same screens you might for an 1120 return but include one of the following screens in addition accessible from the Other Forms tab of the Data Entry Menu e 20C For Form 1
77. ns EE 19 Qualified conservation contributions 19 F Credit and collection costs SE he F e oe t E Fr ER Figure 4 Charitable contribution lines on the DED screen e Contributions Enter the gross amount of contributions for the year that are subject to the 10 limit on deduction e Qualified conservation contributions Enter the gross amount of contribu tions for the year that are not subject to the 10 limit These contributions have a carryover period of 15 years see IRS instructions for details The program calculates the contributions allowed and determines carryover capability for amounts entered in both fields for line 19 and reflects the applicable amount on Form 1120 Refer to the contribution limitation carryover worksheet WK_CNTRB for calculation of allowed amount Contribution carryovers from prior years are entered on the LOSS screen Note that both fields of line 19 are adjustment fields entries here adjust amounts flow ing from screen K1P line 13 codes A and B Depreciation Enter depreciation on the 4562 screen Select a form from the For drop list Figure 5 to associate the depreciable item with the correct form or activity Data from the 4562 screens 1s calculated and carried to Form 1120 and to the selected schedules or forms Form 4562 1120 COGS F Use Multiform code Corporation Main Form Form 1120 C or 1120H MS Schedule A Cost o
78. ntry fields within the program For more on these categories of data see Special Conditions on page 53 Direct 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 0 Detail Some cells require more detail than can be entered on a single line These cells are Worksheets indicated by buttons Figure 32 on page 51 Buttons do not work if macros are dis abled see Opening a Template on page 48 50 Tax Year 2014 Drake Software Manual Supplement Corporations Importing Trial Balance Information Form 1120 paw Form 1120 ngg 3 Other Expenses Detail requires d DED Form 1120 p Non deductible Expenses Deti it Figure 32 Example of cells that require worksheets Click a worksheet button to open a worksheet in a new tab Figure 33 shows an exam ple of the Other Income worksheet A B C D E G J Statement Required Other Income Form 1120 page 1 line 11 INC line 10 INC line 10 INC line 10 INC line 10 INC line 10 Total other income Click to return to TB 2 Other Income Figure 33 Trial balance worksheet for Other Income To return to the previous worksheet click the Corp TB tab labeled 1 in Figure 33 or the Click to Return button above the worksheet tabs labeled 2 in Figure 33 Note that a detail tab the Other Income Detail button labeled 3 in Figure
79. o enter either only the last four digits of T D the SSN or by entering five zeros and then the last four digits of the SSN In either case you must press CTRL F to force the software to accept the truncated number Neither FOREIGNUS nor APPLD FOR is acceptable in IMPORTANT theID number field Returns with FOREIGNUS or APPLD FOR in this field are not eligible for e file Screen E Screen E has two check boxes Signs return and Books in care of Mark the applica Check Boxes ble box on the screen that identifies the officer who either signs the federal or state paper returns or is the contact person for the books state return only Ownership amp The Ownership and Participation fields on screen E are required Fields are as fol Participation lows e Total Enter the officer s ownership percentage e Common Enter the percentage of common stock owned by the officer e Preferred Enter the percentage of preferred stock owned by the officer e Time Enter the percentage of time the officer devotes to the corporation Enter percentage amounts in whole numbers For example enter 40 for 40 Salaries and Wages Use the DED screen to enter salaries and wages paid Note that the DED screen amount is reduced by the amount if any of credit from Form 5884 Also note that this is an adjustment field an amount entered here adjusts any amount entered on screen F Form 1040 Schedule F Profit and Loss from F
80. o access fields for Form 3115 including Schedules A through D e Screen 311E Schedule E Used to request a change in depreciation or amorti zation methods e Screen ATT Explanations and Attachments Used to create and view cer tain attachments to be generated by the software e Screen ATT2 Pt II Ln 12 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 Codes Figure 20 on page 40 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 311 E or ATT screens you can use those numbers to indicate which instance of Form 3115 the 311E or ATT screen should be associated with N OTE If only one Form 3115 is being submitted you do not need to enter any thing in the Multi form code box 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 Tax Year 2014 39 Form 3115 Application for Change in Accounting Method Drake Software Manual Supplement Corp
81. oft Corporation in the United States and other countries Other product names mentioned in this manual may be trademarks or registered trademarks of their respective companies Tax Year 2014 Drake Software User s Manual Supplement Corporations Table of Contents What s New in Drake for Corporations eee 1 Estimated Lax s SCLC CM s uad aene epi ideae ia edo A as US os ose enn o AYA l Unlimited Forms 2525 5 nas arre A SoG ETERNE CR elo eR New ACA Fields on Form 8941 2 Reconciliation Totals Displayed ooooooooorrrrr 2 Force Printing Final End of Y ear Totals 0 ccc eee eens 2 Force Printing Schedule M 3 22 eee eens 3 Missing ID NUMDET s eoe gone ponatur RRE Oe RR Rue Soa Ee ed a EE OR Oe os 3 Formo CNO AMA 3 Safe Harbor Elections 6606 6 deme daw Sew Roe e Rooster pos ed Bos RU SUR paren ewan oun dos 4 POP 097 0 2 haaa 3 1 dER d 04 64 oper ad du bene NG AUR E EO BOR arde tee eee eee aoe has oo dd 4 Practice Management Toole cs dus dp aoro Erba dre Doa oboedire radio oar ah aid cdi es 4 Dolore VOU SIL aue px ane a Sh RO a 4 Updating a Prior Year Return in Drake a 4 Converting from Another Return Type llle 5 Filing Form 1120 C or 1120 H o 5 Header Information vrai A eee RE A AC RNC eens 5 Name and ddl AAA 5 TAS AA Gee see SUR oa 6 Boxes IBEOUSDLB ose Rr rernu purea aY 6 Income and Deductions 0 cee es 6 en gui sc o 5 4 0
82. om Form 4562 e Credit 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 Drake automatically calculates meals and entertainment limitations N A detail CTRL W worksheet is required for the Other itemize OTES field The program automatically generates a worksheet if an entry is made here or in any other field where a worksheet is required by the IRS NOL Carrybacks and Carryforwards Enter NOL carrybacks from future years to the current year on screen J Loss Carry back Tax Computation Payments To enter multiple carryback amounts use a detail CTRL W worksheet Use the LOSS screen to enter NOL carryforwards capital losses and contribution carryforwards from prior years Use screen J to enter current year carrybacks to prior years Tax Refundable Credits and Payments Screen J has fields for completing the Tax Refundable Credits and Payments sec tion of Form 1120 Note that some fields are overrides Press F1 to view more infor mation on a field Tax Year 2014 13 Direct Deposit of Refunds Drake Software Manual Supplement Corporations Total Tax For corporations that belong to a controlled group complete all applicable fields on screen J If allocating income to the various brackets on this screen you must enter 0 zero in the fields of the brackets to which no income 1s allocated
83. on on the K5A or K5B screen Click the K5A Screen or K5B Screen links on the K screen or from the General tab of the Data Entry Menu to access fields for entering this information Schedule K 1 Drake Software Manual Supplement Corporations Use the CTRL PAGE DOWN function to open additional blank K5A or K5B screens For more information on line 5 of Schedule K see the IRS instructions Schedule K Line 7 Enter information on line 7 of screen K if a foreign person owned directly or indi rectly at least 25 of the total voting power of all classes of the corporation s stock entitled to vote or the total value of all classes of stock of the corporation If there 1s more than one 25 or more foreign owner complete the fields for the person with the highest percentage of ownership Enter the percentage that person owned and the owner s country of residence Generally a 25 foreign owned corporation with a reportable trans action during the tax year must file Form 5472 Information Return of N OTE a 25 Foreign Owned U S Corporation or a Foreign Corporation Engaged in a U S Trade or Business screen 5472 in Drake See Form 5472 for filing instructions and penalties for failure to file See section 6038A c 5 and the related regulations for the constructive ownership rules of section 318 that apply in determining if a corporation is foreign owned If another entity owns 20 or more of the client s corporation or N OTE owns 50
84. or the line your wish to enter 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 totals of the amounts entered on the SCH2 screen On an 1120 return total depreciation consists of COGS depreciation which is reported on Form 1125 A Cost of Goods Sold and any remaining depreciation which is reported on page 1 of the return For trial balance purposes enter deprecia tion amounts directly into the appropriate fields on the trial balance worksheet When the trial balance 1s imported the COGS depreciation expense amount flows directly to the appropriate line of Form 1125 A on the return Because the remaining depreciation can comprise any number of assets the amount entered on the trial bal ance 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 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 N OTE Compare the calculated line 1 at the bottom of the trial balance to the equivalent line on Schedule M 1 of the cal
85. orations Parts and Ill General Information 40 e D LIl Form 3115 Schedule D Parts I and IT e D III Form 3115 Schedule D Part III As shown in Figure 20 you can access these 3115 screens by clicking a link at the top of any other 3115 screen Parts M Parisii IV ABC D 1 1 D II Form 3115 Application for Change in Accounting Method General Information Principal business activity code number O Tax year of change DE Tax year wi hange As c ee Ne iibro A ama om ndi ooo omnim a c anuli A ppn AAO poo MAG Figure 20 Tab links 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 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 N OTE Information should be entered in either the Part section or the Part Ill section but not both Complete all applicable fields in the General Information section Note that the fields for business activity and tax year change are override fields Figure 21 Com plete these fields only if you want to override the equivalent information entered on screen 1 or screen K Parts M Parts ll IV A B C D Lil D II Form 3115 Application for Change in Accounting Method G
86. orm 8820 Orphan Drug Credit e Form 8844 Empowerment Zone and Renewal Community Employment Credit e Form 8845 Indian Employment Credit e 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 8932 Credit for Employer Differential Wage Payments e Form 8941 Credit for Small Employer Health Insurance Premiums Adjusting Charitable Contributions NOL Tax Year 2014 Corporations with a net operating loss NOL carryover from any taxable year must apply the special rule of IRC section 170 d 2 B for charitable contributions The rules are designed to prevent a double tax benefit through interaction of NOL and charitable contribution carryovers The excess charitable deduction can reduce taxable income only once Under these rules a corporation s charitable contributions carry over but not the NOL carryover must be reduced to the extent the charitable contri bution deduction in computing the taxable income of an intervening year would increase the NOL to a succeeding year 29 Elections Limitation on Deduction Elections Drake Software Manual Supplement Corporations The total amount claimed cannot be more than 10 of taxable income line 30 com puted without regard to the following e Any deduction for contributions e The special deductions on line 29b e The deduction allowed under section 249 e The
87. ples of both kind 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 limitations 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 Gains or losses on the sale of during 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 Schedule M 3 26 Parts I III Schedule M 3 is completed using the following screens all found on the General tab of the Data Entry Menu e M3 M31 M32 and M33 for Parts I IL and III of the Schedule M 3 e M3B for Schedule B Additional Information for M 3 filers e SCH3 for subsidiary schedules for Schedule M 3 and Form 8916 A e M3S for supplemental statements e 8916 for reconciling of M 3 with taxable income for mixed groups e 916A for supplemental attachments to the M 3 If the corporation is required to file or voluntarily files Schedule M 3 the corpora tion must file Form 1120 and all attachments and schedules including Schedule M 3 Certain income and deduction amounts and adjustments flow from N OTE Form 1120 to Schedule M 3 and Form 89164
88. provisions of the M PO RT A N T final capitalization regulations Rev Proc 2014 54 fur ther explains how taxpayers can elect to automatically change their accounting methods for the disposition of property in order to conform with the regulations relat ing to the disposition of capital assets Other resources include Drake s Knowledge Base article 13402 For information on using the Drake Knowledge Base see Chapter 10 of Drake Software User s Manual Tax Year 2014 If any of the scope limitations of section 4 02 of Rev Proc 2008 52 apply mark the Yes check box on line 2 By answering Yes on line 2 you are stating that the Appendix of Rev Proc 2002 9 or the procedures in other published guidelines specifically state that the scope lim itations are applicable to the required accounting method IMPORTANT change If you answer Yes on line 2 you must complete all the lines in Part Il Information for All Requests Click the Parts II IV link at the top of the screen to access Part II See Form 3115 instructions for more information 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 Part Il In Part II Information for All Requests answer question 3 see Figure 22 on page 42 If the answer is Yes e Ordinarily the IRS will not consent to a request for a change in method of accounting for the applicant s final tax year If the
89. quired 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 26 e 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 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 personal property produced oF property acquire ror T sale Under section 263A Or arlO eredrio TO gaenmeontadts under s cti n 67 TUT 460 Mark N A in a box if those costs are not incurred by the applicant If a boxis not checked it is assumed that those costs are not fully included to the extent required Attach an explanation for boxes that are not checked IET CG sera a ee Applies to a NA Ik erario pu eee een A Seer xl wa BE ccoo rr eee o NX NA 4 Officers compensation not including selling activities Requires o sip NA 5 Pensionand other related costs statement ZNAN NA CS 27 rr ao a AA ina N A 7 Indirectmaterials andSupplieS Not applicable l wal wa 8 Purchasing C055 oooooooooooooooros to this return NNA wa E ESE repac kag E RS AS
90. r income with the partnership name and EIN required information e Ordinary losses are carried to Form 1120 page 1 line 26 Other deductions with the partnership name and EIN required information Codes or lines that don t flow to any other place may require additional information not available to the program and must be manually entered in the proper place in the return State Specific Information The program automatically generates a return for the corporation s resident state Use screen 2 to enter company information as it should appear on the state return The link to screen 2 is on the States tab or enter 2 in the selector field NOTES and press ENTER The company information fields on screen 2 apply for the resident state only 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 Contact Information Other States Multi State Appor tionment Tax Year 2014 If certain contact information required for state purposes is different from that entered on screen 1 use screen 2 This screen has fields for the following types of contact information e Name and address of registered agent e Principal place of business e Books in care of e General contact information for the name title e mail address ID number and telephone number of the corporation
91. return 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 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 Goodwill amp other intangible assets Land Accumulated amortization Cost of goods sold COGS depreciation Special Conditions Some trial balance items cannot be entered into the trial balance worksheet and must be typed directly into Drake data entry Other items should be entered into the work sheet for balance purposes but are not carried to data entry these must be entered sep arately and the calculated results compared to the trial balance worksheet Details for Most trial balance items go directly to the location indicated in the program and on the Preparers return For example the amounts shown in Figure 36 go to Schedule L line 1 column d in the program and are shown on page 5 line 1 column d of the 1120 return Form Page Sch and or line L line 1 col d Form 1120 Sch L line 1 col d line 2a cal c Form 1120 Sch L line 2a col c L line 2b col c Form 1120 Sch L line 2b col c ng li AL NET mole RA aes impor ARAS cs only aie A am clin Figure 36 Indication of where an amount will go
92. s contact person Data for other states must be entered manually in state data entry To access state data entry select the States tab from the Data Entry Menu or enter the two letter state code in the selector field and press ENTER Enter sales payroll and property factors on the APPT Multi State Apportionment screen This screen Figure 8 on page 22 provides one central location for entering all state 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 21 State Specific Information Drake Software Manual Supplement Corporations The individual state apportionment screens will continue to be available in Drake15 but will be used to override data entered on the APPT screen No state apportionment related screens will be updated from Drake13 to Drake14 Drake 2014 Data Entry 112011201 Seay s Trucking Sales Payroll Property Additional Property Screen links State Apportionment Sales Factor State Selection Zero Apportionment No Activity in State Sales Outside state Within state t Within state t pas Throwback nontaxable jurisdiction
93. s entered in the Description field will be included in the election statement N OTE This Safe Harbor election covers buildings only See IRS Reg section 1 263 a 3 h IRB 2013 43 Rev Proc 2014 16 and Rev Proc 2015 14 for guidance Two other elections are now available from the Elections drop list on the ELEC screen e Sec 1 263 a 1 f de minimis safe harbor election e Sec 1 263 a 3 n Election Election statements are generated with the return Figure 14 EIECUUITS ZUT amp DGUI Names as shown on return William amp Amelia Carter 400 00 6665 have filed Form 4361 and received approval from the IRS to be excluded from SE tax Title Section 1 263 a 1 f de minimis safe harbor election Name William Carter Address 1234 Main Street Franklin NC 28734 TIN 400 00 6665 Statement Taxpayer is making the de minimis safe harbor election under Section 1 263 a 1 f Figure 14 Election statement generated with ELEC screen selection The Sec 1 263 a 3 h election can be made from either the ELEC screen or the 4562 screen Making Changes on the Fly Use the PRNT screen to override most program defaults Suppressing Forcing Documents 32 To suppress or force the printing of certain documents go to the PRNT screen and select the desired options Many on the fly changes override the options established in Setup You can force the program to print the following 112
94. screen Exclude any amounts that are to be reported on lines 4 through 10 of Form 1120 Cost of Goods Sold Form 1125 A Enter the cost of goods sold COGS on screen A Form 1125 A is not produced unless entries are made on screen A On screen A items 9a through 9f are direct entry fields and follow the N OTE 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 Lines 1 2 and 7 of screen A are adjustment fields Amounts entered in these fields adjust add to or subtract from any amount being carried from the F screen Form 1040 Schedule F Profit or N OTES Loss from Farming to line 2 of Form 1120 The fields on screen L Schedule L Balance Sheet Assets for line 3 Inventories are override fields Anything entered in these fields overrides replaces the data entered for inventory on screen A Line 5 Other Line 5 Other costs on screen A is designated for any applicable costs not entered Costs onlines 2 through 4 purchases cost of labor and additional section 263A costs In Drake two data entry fields are used to complete line 5 one for other costs excluding depreciation and one for depreciation Figure 3 Additional section 263A costs Other costs excluding depreciation Depedaallon E fo Inv
95. sign the return in the space provided on the PIN screen If it is pre pared by an employee or officer of the corporation go to screen 1 and select NONE in the Firm and Preparer drop lists To have the preparer s name and address information displayed on the printed return e If the return preparer and ERO entered in Setup gt ERO are the same Goto Setup gt Preparer s and ensure that the Alternative Electronic Signa ture 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 Setup gt ERO must still be completed in Drake for e filing For infor N OTE mation on how to complete this setup window see Drake Software User s Manual Tax Year 2014 See the IRS instructions for further details on signature requirements Amending a Return Returns Previously Prepared in Drake Tax Year 2014 The program can automatically fill the 1120X screen for Form 1120X Amended U S Corporation Income Tax Return When you amend a return in Drake the amended information replaces the original in the data file Before amending a return CAUTION you should archive the original to avoid losing previo
96. t and penalty rates M PO RTANT as of 12 31 of the calendar year If a corporation has a fiscal year end you must enter the effective rates manu ally State Enter 2014 estimates and 2015 overpayments for state returns on the ES screen For Estimates the federal return to override 2014 estimates and apply overpayments to 2015 use screen W 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 direct deposited To access this form in Drake go to the DD screen accessible from the General tab 14 Tax Year 2014 Drake Software Manual Supplement Corporations Electronic Funds Withdrawal Direct Debit When filling out the DD screen e Ifthe federal refund is to go to the account listed select Yes for the Federal selec tion drop list otherwise select No Default is Yes e Ifa state refund is 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 routing number account number and type of account to verify Figure 6 Account Information Account 1 Federal Account and State if same as Federal Deposit selection Federal selection Y State city selection CA E Name of fi
97. the 2014 tax year see the IRS instructions for Form 1120 Estimated Taxes Screen The ES screen has been redesigned this year to provide a way to e file state estimated tax vouchers and payments which is required in some states The functionally of the federal section of the ES screen is unchanged The other change is for estimated taxes from multiple states or cities Rather than fill ing out several State City sections on the ES screen now you press PAGE DOWN and go to a new ES screen For details on using the enhanced ES screen for filing federal estimated taxes and on e filing and paying state estimated taxes see Estimated Taxes in Chapter 5 of the Drake Software User s Manual Tax Year 2014 Unlimited Forms 2848 Tax Year 2014 You can now enter an unlimited number of representatives on the redesigned 2848 screen when filling out Form 2848 Power of Attorney When you need another 2848 screen to enter information on another representative press PAGE DOWN What s New in Drake for Corporations Drake Software Manual Supplement Corporations New ACA Fields on Form 8941 Fields were added to the bottom of the 8941 screen to allow you to complete the two new lines at the top of Form 8941 Credit for Small Employer Health Insurance Premi ums These new lines added by the IRS determines if employer has provided health care coverage for its employees as mandated by the Affordable Care Act and deter mines if the business is
98. the following sections of Form 3115 e Part II Information For All Requests e Part IV Section 481 a Adjustment Applicants must complete both sections of this screen For more information on each line including instructions for any required attachments press Fl in a specific field Part Il Line 12 Note that there is no field on the Parts IL IV screen for Part II line 12 There is instead a link to screen ATT2 Fields for line 12 which should be completed if 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 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 must be completed for Part II line 12 Tax Year 2014 43 Form 3115 Application for Change in Accounting Method Drake Software Manual Supplement Corporations Schedules A Use the A B C screen to complete the following sections of Form 3115 44 B and C Schedule A Change in Overall Method of Accounting screen covers Part 1 Change in Overall Method Schedule B Change to the Deferral Method for Advance Payments Schedule C Changes Within the LIFO Inventory Method screen covers both Part I
99. unting Method 38 Accessing Screens for Changing Accounting Method o ooooooooooooooooooooooo 38 born SEIS o 224 520 0040 b444 450s bay ene LA 020 9 PED eue eens onde BAS am ek eee 39 Importing Trial Balance Information 0 0 0 0 cee ees 47 Preparing to Use Trial Balance Import 22 aaa 47 Preparing Financial Data for Import 0 a 48 Entering Financial Dal ca orae to KANA ha tents DAMI dob doe Dara do dd ceo ded 50 Savio s M c 52 Importing Data into a Return 6 hrs a2 Special CONGIIONG obrador eae oars ae aun PTT PEN 53 Appendix A Trial Balance Import 0 ee n A 1 LL AA A a vil Tax Year 2014 V vi Drake Software User s Manual Supplement Corporations This page intentionally left blank Tax Year 2014 Corporations 1120 The basics of data entry for a corporation 1120 1120 C 1120 H 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 program See the Drake Soft ware User s Manual Tax Year 2014 for the basics of using the program What s New in Drake for Corporations Drake programs its tax software according to the latest IRS rules and regulations The 2014 program reflects all changes to credits and deductions including discontinua tions For details on the new regulations for
100. usly sub mitted data For more information on archiving returns see Archive Manager in Chapter 6 Return Results of the Drake Software User s Manual Tax Year 2014 From the Data Entry Menu of an 1120 return enter an X in the selector field and press ENTER Screen X is also accessible from the first Other Forms tab At the prompt select Yes to automatically fill the screen with data from the original return that 1s the return as originally entered in Drake If the corporation s name or address Schedule K Drake Software Manual Supplement Corporations information has changed enter the new information on screen X Make all other nec essary changes to the regular data entry screens Open screen 2X or press PAGE DOWN while in screen X Enter the line number from the X screen that corresponds with the changes that were made in data entry For instance if you made a change in the tax on screen J enter 4 for Tax in the Line Number field of the 2X screen Enter an explanation in the Explanation of changes text box If more than one item was changed in data entry press PAGE DOWN to open another screen 2X Enter the line number from screen X that corresponds to this change and enter another explanation When you go to View mode the program calculates the amended return New Returns To amend a return not previously prepared in Drake create an 1120 return in Drake and open screen X Complete the applicable f
101. y into a return For N OTE information on program limitations see Special Conditions on page 53 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 If you are already in the Trial Balance Import tool for the selected N OTE 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 1 Open the return to which you will import the trial balance information m 2 Click Import gt Trial Balance Import from the menu toolbar The preliminary Trial Balance Import dialog box is opened Click Next 3 Enter or select the trial balance file to be imported Use the Browse feature if nec essary By default each trial balance file is an Excel xls file showing the client name and ending in TB for trial balance as shown in the example in Figure 35 on page 53 See Naming Convention on page 49 52 Tax Year 2014 Drake Software Manual Supplement Corporations Importing Trial Balance Information 1 Import File Name C DRAKE14 TBSSeay s TruckingTB L5 a Figure 35 Selected file to import 4 Select the Trial Balance Additional Import Options See Additional Import Options following this procedure 5 Click Next and wait for the import to be completed 6 Click Finish The program returns to the Data Entry Menu for the open

1120, Corporation Supplement

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