Home

1120S, S Corporation Supplement

1. E C1 2 attachment C1 3 attachment C1 4 attachment C1 5 attachment C1 6 attachment f any present method or submethod is notthe same as indicated on Form s 970 Ifthe proposed ghange is not requested for all the LIFO inventory fthe proposed change is not requested for all the LIFO pools LIFO inventory valued on method other than cost ce t amp to B a Ift changing to the IPIC method Part Il Se ae oe ee M LANA Figure 49 Attachment links from Schedule C screen A B C Not all lines that require statements include a link to the ATT screen Always check the field level help press F1 in a field to determine if a statement is required The program produces an EF message if any required statements are missing Complete the following ATT fields as applicable for all ATT screen attachments NOTE Multi form codes Use these boxes to associate the attachment with an instance of Form 3115 if the return contains more than one a particular Sched ule E property if the return contains more than one Schedule E or both Schedule Select the line of the form or schedule with which the attachment is to be associated If an item begins with a number it refers to the part of Form 3115 for example 2 4e refers to Part II line 4e If it begins with a letter it refers to a particular Form 3115 schedule for example C2 b refers to Schedule C line 2b C2 5 refers to Schedule C Part 2 line 5 Expl
2. ee Lee NINE CET HEN E CNN Other Income ae FOREN irm m als T LL aims timet latin Tan a HH m O0 58 here Cf pia meli cael LEES 1 mm ee jet anim Ir dnb RATU Figure 30 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 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 48 Tax Year 2014 Drake Software User s Manual Supplement S Corp Importing Trial Balance Information Opening a Template Naming Convention Template Structure Tax Year 2014 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 1 Open the return to the Data Entry Menu 2 Click Import gt Trial Balance Import in the menu toolbar The preliminary Trial Balance Import dialog box is opened 3 Click Create New or Open Existing If opening an existing file click Open after selecting the correct file 4 Ifa Security Warning box appears click Enable Macros In Excel 2007 and 2010 you may see a Security Warning message NOTE with an
3. a Data Entry Print Select Farms to wiew Print ae U S Income Tax Return fo rom 1120S Do not file this form unless thec a2 dad nant amm attaching Form 2553 to elect to e MULUS a mne nto Main menm leh et AT a e a gp ne mE n2 rr ur Figure 25 The Message file and the Attach PDF button 2 Click the Message file to view EF messages including information on how to attach the required documents to the return 3 Click the Attach PDF button The EF PDF Attachments window displays the information entered on the PDF Attachments window in data entry Figure 26 on page 46 A red X means the document has not yet been attached a green check mark indicates an attached document 45 Binary Attachments Drake Software User s Manual Supplement S Corp 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 Browse to locate the associated PDF file Items with a green check mark already have the PDF file Items with a red T are missing the required PDF File Reference Description Required POF FileM ame e IRS Pub 526 Appraisal af Lot 1234 APPRAISALLOT1234 PDF Farm inst For 17205 Title of house on Oak Street TITLEHOUSEQAEST POF ee sa Aan ae ae IC Ae ee EP Figure 26 The EF PDF Attachments window 4 Click the row of a document to attach on
4. Use the ES screen available from the Miscellaneous tab or from a link on screen 4 to enter federal and state estimated taxes paid in 2014 If the return was updated in Drake from 2013 this information is carried over Note that this information will be overridden by any entry in the Current year estimated tax payments field on screen 4 Use the ES screen for 2015 estimated payments Future year amounts appear on the ES SUM worksheet generated with the return To enter the amount to be credited use the OP to 2015 field Note that this information will be overridden by any entry in the Amount to be credited to next year s estimated tax field on screen 4 Payments with Extensions To make a payment with an extension request enter the amount being paid in the Amount paid with extension field at the bottom of the 7004 screen available from the Other Forms tab or from a link on screen 4 If an extension was previously requested and a payment was made then enter the amount paid on screen 4 line 23b Tax Year 2014 Drake Software User s Manual Supplement S Corp Direct Deposit of Refunds Tax Paid on Fuels Use screen 4136 to enter information for Form 4136 Credit for Federal Tax Paid on Fuels Note that this screen consists of two screens with lines 1 through 8f on the first screen Press PAGE UP or PAGE DOWN to go from screen to screen Underpayment of Estimated Tax For underpayment of estimated tax complete all applicable fields
5. Information For Automatic Change Request 1 Enter te 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 reg uested change has no designated automate De method Ta number Hier and ias beth a description ofthe change and citation of the I S guadanca ceoulding instruct a ChangeNo b Othe X Description r4 Doanyotfe scope lmitabons described in sechorm esg D EI unavailable for the applicant s requested change lires atach an explanation sr hhhrrhhhhhnua Note Complete Part I belowand then Part I and also Schedules A through E of this form if applicable Figure 44 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 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 F1 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 cha
6. Figure 31 on page 50 see also Figure 34 on page 51 49 Importing Trial Balance Information Drake Software User s Manual Supplement S Corp Y ye a noe ter uude UU 5 gs v Salari s and wages shareholder employees Waste removal i 0 1 E r Income Loss Schedule M 1 line 1 l 100 600 gt 2 d Goas 0000 ooo oll saso LOUT OF BALANCE al 0 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 oome data cannot be imported with the trial balance and must be NOTE entered directly into the data entry fields within the program For more on these categories of data see Special Conditions on page 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 and are not gray Detail Some cells require more detail than can be entered on a single line These cells are Worksheets indicated by buttons If these cells do not work you may need to enable them see the Note in Opening a Template on page 49 Schedule K lin detail required t detail requ
7. For an extension to include payment information screen 4 may also need to be completed Figure 28 Disable autobalance in the Calculations and Other Options section of PRNT screen Force Schedule L By default the program does not display the balance sheet amounts on the return if the entity does not meet the filing requirement If this 1s the case you must override the default setting in order to have the amounts shown on Schedule L To force the Schedule L amounts to be printed go to the PRNT screen and select the Force print Schedules L and M 1 box Items to Print W Force print Schedules L and M 1 PrintForm 4562 Printnext year depreciation listing Print inactive return Figure 29 Force Schedule L box for 1120S package e Check for Detail Worksheets The trial balance import allows only those detail worksheets required by the IRS Check updated returns for detail CTRL W worksheets that are not required For example the IRS does not require a detail worksheet for the Gross receipts field on the INC screen if a return has a detail worksheet for that field the trial balance will not be imported correctly into the return Detail worksheets are indicated by red shading as shown in Figure 30 Income and Common Schedule K Items Form 1120 5 Income da Gross receipts or sales ROREM EE RERO A ERREUR 243210 1b Returns and allowances plus any cash back included on line Taw 2 CSE DENNIS SENT
8. or if it was a pre 1983 S corporation By design Drake does not allow negative numbers in col umn c If a corporation becomes an S corporation and has net operating losses NOLs the NOL is not generated for the return because it cannot be carried to an 1120S the IRS does not want the NOL to be used by the shareholders to offset income it either runs out within the years allowable for the NOL by statute or is used if the S corporation terminates its S status within those years Rental Activities Income and expenses for rental real estate properties appear on Form 8825 Rental Real Estate Income and Expenses of a Partnership or an S Corporation To make entries in Drake use the 8825 screen If there are multiple 8825 properties press PAGE DOWN for a new 8825 screen Use one screen per rental property If a return has more than one 8825 screen the program reports each property s information on a separate column of the Properties section of Form 8825 up to eight properties can be included on a form Data from all 8825 screens are transmitted to the IRS when the return is e filed NOTE opecial steps are required if using the trial balance worksheet for multi ple rentals See Rental Expenses on page 55 Line 14 Depreciation If the program is calculating depreciation entered on the 4562 screen for the property listed on Form 8825 do not enter the depreciation on the 8825 screen Depreciation should be entered only if it i
9. Leave blank any lines that aren t required for the entity s application NOTE Exclude amounts not attributable to the change in method of account ing for example amounts that correct a math or posting error or that correct errors in calculating tax liability The IRS requires a worksheet for lines la Ic 1d le and 1f of Schedule A When you enter an amount on any of these lines in Drake a CTRL W worksheet is 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 NOTE 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 e Line 1 Request change to the deferral method for advance payments from sec tion 5 02 of Rev Proc 2004 34 e Line 2 Request change to the deferral method for advance payments from sec tion 1 451 5 b 1 11 See IRS Form 3115 instructions for more information on making these requests This section has two parts e Part I General LIFO Information This section is made up of attachment links If any of the conditions on lines 1 6 match the entity s
10. STM ELXX where XX is the number of the election For example election 01 General Election Statement is generated as State ment ELO1 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 Safe Harbor Elections New Options on ELEC Screen Tax Year 2014 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 as entered in the Description field will be included in the election statement NOTE 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 39 Making Changes on the Fly Drake Software User s Manual Supplement S Corp Sec 1 263 a 1 f de minimis safe harbor election Sec 1 263 a 3 n Election Election statements are generated with the return Figure 21 Names as shown on return William amp Amelia Carter 400 00 6665 have filed Form 4361 and r
11. a 1 for the form in the Multi form code box For more information on Form 8825 see Viewing Rental Activity Information following Line 15 Other Expenses list Enter meals and entertainment subject to 50 limit in the appropriate field on line 15 of the 8825 screen To enter additional other expenses begin typing into the Addi tional other expenses field to open a Detail CTRL W Worksheet Enter descriptions and amounts on this worksheet A statement from each 8825 property is printed with the return and is submitted to the IRS when the return is transmitted Tax Year 2014 35 Rental Activities Drake Software User s Manual Supplement S Corp PELLI r mm I Total expenses for each property Add lines 3 through 15 17 Income of Loss from each property Subtract line 18 from line Z 12 345 2 Jaani arossconis Aldd ouossieegts fram line Segolgemnafi theaugbll O oa ih mnt his a Figure 16 Other expenses are listed on accompanying statement in this instance STM 8825 02 Use the K1P screen to enter rental income the S corporation receives on a K 1 This amount is carried to Form 8825 lines 20a and 20b No entry is required on the 8825 screen Viewing Rental Activity Information Rental activity data is viewed on the 8825 forms and accompanying statements e 8825 Forms The two page Form 8825 can contain information for up to eight rental activities Each Form 8825 in View mo
12. go to the FAQ screen and click Attaching Form 2553 as a PDF Document dnd tene then emt na deno no fl cee O i M OPT a Aere teen wee t MP te gu AM THE me adsint il nte FT Figure 27 EF Message 46 Tax Year 2014 Drake Software User s Manual Supplement S Corp Importing Trial Balance Information As shown in Figure 27 on page 46 the EF Message states that attachments are required You would then need to obtain or complete the statements scan them into the computer save them as PDF documents and attach them to the return Importing Trial Balance Information Drake s trial balance import feature allows data to be imported into an 11208 return from a trial balance worksheet The trial balance template and importing function has the following benefits e Eliminates the need to duplicate entries e Reduces data entry errors by automatically importing data to the correct fields e Allows preparers to merge basic accounting functions with tax preparation NOTE A flow chart of the trial balance importing process is available as an appendix at the end of this manual Preparing to Use Trial Balance Import 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
13. is to be withdrawn on the return due date To indicate otherwise com plete the Requested payment date override field for the applicable payment If the return is e filed on or before the due date the requested payment date cannot be later than the due date If the return is transmitted after the due date the requested pay ment date cannot be later than the current date Required Information A Withdrawal selection item 1 in Figure 8 is required if the program is to direct tax authorities to withdraw funds from the taxpayer s account Federal Account and State if same as Federal 1 Withdrawal selection Federal selection State city selection M ame of financial institution RTN Account number Type of account 2 Pn Checking Savings Repeat Account Information Checking Savings eb diss Abs A m ta Federal Federal payment amount Requested payment date Daytime phone number Payment is for State State payment amount Requested payment date Daytime phone number Figure 8 Required fields on PMT screen withdrawal selection 1 account information 2 specified return 3 The name of the financial institution routing number RTN account number and account type are required As with the DD screen the RTN Account number and Type of account data must be entered twice item 2 in Figure 8 16 Tax Year 2014 Drake Software User s M
14. or less of the corporation s stock Do not include with these amounts anything that 1s an incidental part of a pension profit sharing etc plan or amounts reported elsewhere on the return Report amounts paid on behalf of more than 2 shareholders on line 7 Officer com pensation or 8 Salaries and wages whichever applies A shareholder is consid ered to own more than 2 of the corporation s stock if that person owns on any day during the tax year more than 2 of the outstanding stock of the corporation or stock possessing more than 2 of the combined voting power of all stock of the corpora tion Note that the field for line 17 is an adjustment field An amount entered in here adjusts the amount flowing to Form 1120S from Schedule F line 17 Other Deductions Enter all other deductions on the DED screen Drake incorporates the total into line 19 Other deductions on Form 1120S The following deductions credits adjustments and exclusions also flow to line 19 e Amortization from Form 4562 e Credit adjustment from Form 8820 Orphan Drug Credit e Exclusion from Form 8873 Extraterritorial Income Exclusion e Credit from Form 8941 Credit for Small Employer Health Insurance Premiums Tax and Payments Screen 4 has fields for completing the Tax and Payments section of Form 1120S Note that some fields are overrides Press F1 to view more information on a field Net Passive Income Line 22a Excess net pass
15. 6765 Credit for Increasing Research Activities 37 Form 7004 Application for Automatic Extension of Time to File 16 Form 8050 Direct Deposit of Corporate Tax Refund 14 Form 8820 Orphan Drug Credit 37 Form 8825 Rental Real Estate Income and Expenses of a Partnership or an S Corporation 34 36 Form 8844 Empowerment Zone and Renewal Community Credit 37 Form 8845 Indian Employment Credit 37 Form 8846 Credit for Employer Social Security and Medi viii Drake Software User s Manual Supplement S Corporations care Taxes Paid on Certain Employee Tips 10 37 Form 8864 Biodiesel and Renewable Diesel Fuels Credit 8 36 Form 8873 Extraterritorial Income Exclusion 12 Form 888 Credit for Small Employer Pension Plan Start up Costs 37 Form 8903 Domestic Production Activities Deduction 24 Form 8912 Credit to Holders of Tax Bonds 36 Form 8912 Credit to Holders of Tax Credit Bonds 37 Form 8916 A Supplemental Attachment to Schedule M 3 30 Form 8932 Credit for Employer Differential Wage Pay ments 37 Form 8941 Credit for Small Employer Health Insurance Premiums 37 Form 8941 Credit for Small Employer Health Insurance Premiums 12 Form T Forest Activities Schedules 12 G gains and losses 8 gross receipts 7 H header information 5 import trial balance 46 56 inactive returns 40 42 income 7 8 increase to basis 27 instructions for filing 40 insurance proceeds income from 8 interest e
16. Corporations Index Numerics 52 53 week year returns 41 A accounting method changing 56 67 entering 6 accumulated adjustments account Schedule M 2 32 address change of 6 e mail 20 entering on Form 11208 5 foreign 23 on K 1 letter heading 26 out of state 5 adjusted basis worksheet 26 40 adjustments depreciation 30 section 481 8 to income and expenses 36 advertising expenses 12 amended 1120S returns 6 17 K 1 letters 26 amortization 12 28 analysis of accounts Schedule M 2 31 34 asterisks on K 1 codes 22 attachments binary PDF 43 46 Form 8825 statements 36 to Form 3115 56 62 auto balance 29 B bad debts 8 10 basis 26 27 see also adjusted basis worksheet binary PDF attachments 4 book to tax differences Schedule M 1 29 30 business activity codes 6 C calendar year returns 5 cash accounting method 60 Change in Accounting Method 56 63 Tax Year 2014 Index change of name or address 6 charitable contributions 21 Client Communications Editor for letters 26 codes business activity 6 error reject 42 K 1 22 40 miscellaneous screen 1 5 multi form 34 64 65 state 19 compensation of officers 9 compensation of shareholders 9 contact information for state returns 20 cost of goods sold see Schedule A Cost of Goods Sold cover letters K 1 25 coversheets 40 credits 36 Ctrl W detail worksheets 7 8 47 61 D data entry for state information 18 importing
17. Fiscal year begins and Fiscal year ends dates Use MMDDY Y YY format as shown in the example in Figure 22 2 Mark the 52 53 week tax year box If nat calendar year Fiscal year begins 09 24 2014 Fiscal year ends 103 350 2015 i 52 53 week tax year ELEC Screen Figure 22 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 NOTE and 2 of this process An entity that has never filed a return before must continue with steps 3 through 6 3 Click the ELEC link to open the Election Options screen Figure 23 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 2 The day of the week on which the tax year always ends The date the tax year ends Figure 23 Elections for 52 53 week tax years 4 For line 1 select the month in which the 52 53 week year ends for the current fis cal year 01 January 02 February etc 5 For line 2 select the day of the week the tax year always ends 6 For line 3 enter the actual date that the tax year ends the same date entered in the Fiscal year ends field on screen 1 Once a 52 53 week year is selected the entity must use that account NOTE ing period every year To change accoun
18. In addition take these actions to ensure the trial balance import works properly e Activate Macros The trial balance import function uses macros in Microsoft Excel Check your Excel settings to ensure that macros are activated and that macro settings are set to Disable all macros with notification To do so go to File gt Options in Excel and select the Trust Center tab Click Macro Settings and select Disable all macros with notification then click OK In Excel 2007 click the Office button in the upper left and then click the Excel Options button at the bottom of the window In Excel 2010 and 2013 click the File tab then select Options from the menu on the left NOTE Next select Trust Center from the list at left then click the Trust Cen ter Settings button Select Macro Settings from the list on the left then choose Disable all macros with notification Click OK and then OK e Disable Autobalance optional When autobalance is disabled the program is prevented from automatically adjusting the year end retained earnings or capital amounts thus allowing you to see any discrepancies in the balance sheet To dis able autobalance go to the PRNT screen and select Turn off autobalance Tax Year 2014 47 Importing Trial Balance Information Drake Software User s Manual Supplement S Corp Calculations and Other Options i Turn off autobalance Calculate Form 2220 penalty Prepare Form 7004 based on screen 1 data
19. Lil Form 3115 Schedule D Part Ill Method of Cost All Section A amp Allacation and Capitalization Methods 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 2C 1 Direct material Bici iiei cm Eme F tn i i enr ai sPC Figure 45 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 is not required for the entity s situation Tax Year 2014 63 Importing Trial Balance Information Drake Software User s Manual Supplement S Corp 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 46 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 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
20. 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 1s displayed in Microsoft Excel Whenever a new template is opened the tax software assigns it a default file location and name Trial balance templates are saved in the TB folder of your Drakel14 soft ware 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 NOTE youre storing it The program automatically looks in the default direc tory The trial balance template consists of three title rows and six columns The Entity Name and Year End title rows can be edited double click a row to change the title Columns are described in Table 4 Table 4 Trial Balance Template Columns Column Description Account Title Title of account Debit Credit Debit and credit amounts Import to Screen and line in Drake to which the debit or credit amount is imported Reported on Location of the amount on the printed return 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 a cell showing whether or not the bal ance sheet is out of balance and 1f applicable the out of balance amount
21. Tax exempt Securities Other Current Asseta k Loans to Shareholders Mortgage and Real Estate Loans STATEMENT CO fs Ch ee 6 Cash E Trade Notes and Accounts Receivable io Other Investments STATEMENT l a Buildings and Other Depreciable Assets Dis Bgm mn nc a a rl Viol RR matt aient Qeon 1 ag aar 0m mpm FLA 3 iwntes ec 10 2 4 US govenmentobligationg 5 Tax exempt securities see instructions 6 Other current assets attach statement 7 Loansto shareholders Tm P 8 Mortgageandrealestateloans e 9 Other investments attach statement dn s cus unc Ct geal alls ego cies a tein Figure 14 Data entered on the Other current assets line will be attached as an e fileable statement and referenced on the applicable line of the return Typically one or more SCH2 detail screens are needed for Schedule L items If you are using Drake s trial balance worksheet feature be aware that data for the SCH2 screens cannot be entered directly into the trial balance worksheet and it cannot be imported into the data entry The SCH2 detail screens must be created apart from the trial balance worksheet When the return is produced Schedule L reflects both the amounts imported from the trial balance worksheets where direct entry was allowed and the totals of the SCH2 screen amounts For more information see SCH2 Detail on page 54 Autobalance forces Schedule L to balance fo
22. Year Initial Return on page 42 If the S corporation uses a fiscal year where the year begins in the current calendar year and ends in the next specify the beginning and ending dates in the If not calen dar year section of screen 1 An entity may have a short year return if changing accounting periods with IRS approval Form 3115 or if this 1s 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 These fields should not be used if the entity 1s filing a full calendar year return If filing a short year return other than an initial or final return you will need to pro vide an explanation To do so go to the ELEC screen accessible from the Miscella neous tab and select an explanation from the Other short year reason drop list The explanation will be displayed at the top of the first page of the tax return If you do not select an explanation an EF message will be generated with the return and the return will not be eligible for e file For more information on short year explanations see IRS Pub 4163 NOTES The program may not correctly calculate depreciation gains or First Year Returns losses for a short year return Depreciation for a short year return can be entered on screen 4562 and screens 6 7 8 and 9 An S corporation filing a first year return m
23. Year 2014 V Table of Contents vi Drake Software User s Manual Supplement S Corporations This page intentionally left blank Tax Year 2014 S Corporations 1120S The basics of data entry for an S corporation 1120S return are the same as for a 1040 return Field and screen level help shortcut keys and navigation throughout data entry all function as they do in the 1040 See the Drake Software User s Manual Tax Year 2014 for the basics of using the program What s New in Drake for S Corporations Drake programs its tax software according to the latest IRS rules and regulations The 2014 program reflects all changes to credits and deductions including discontinua tions For details on the new regulations for the 2014 tax year see the IRS instructions for Form 11208 The following changes have been made to the 1120S in Drake Form 3115 Change 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 57 for details of using the Drake screens to file this form Schedule L and M 2 Schedule L and Schedule M 2 reconciliation totals are displayed on screens L and M2 to facilitate reconciliation of the balance sheet item 1 in Figure 1 on page 2 Tax Year 2014 What s New in Drake for S Corporations Drake Software User s Manual Supplement S Corp Schedule L Balance Sheet Note Use the SCH2 screen for required detai
24. activity and product or service on screen 1 This information flows to lines 1 and 2 of Schedule B 18 Tax Year 2014 Drake Software User s Manual Supplement S Corp Additional Information Use screen B to answer questions 3 through 13b of Schedule B If the answer to question 3 is Yes complete screen B1 If the S corporation owned directly 20 or more or owned directly or indirectly 50 or more of the total stock issued and outstanding of any foreign or domestic corporation click the B4A Screen link on screen B to enter information about the domestic or foreign corporation owned You can enter information for up to 10 lines corporations per B4A screen to add more press CTRL PAGE DOWN If the S corporation owned directly 2096 or more or owned directly or indirectly 50 or more in the profit loss or capital in any foreign or domestic partnership including an entity treated as a partnership or in the beneficial interest in a trust click the B4B Screen link on screen B to enter information about the domestic part nership owned You can enter information for up to 10 partnerships per B4B screen to add more press CTRL PAGE DOWN State specific Information Resident The program automatically generates a return for the corporation s resident state Use State screen 2 to enter company information as it should appear on the state return The company information fields on screen 2 apply for the resident NOTES state on
25. does business in another select the state in which the corporation does business from the Resident State drop list e Drake Codes and Overrides Screen 1 includes fields for miscellaneous codes invoice numbers and several overrides See Listing a Different Firm Pre parer or ERO on a Return in Chapter 2 and Miscellaneous Codes in Chapter 5 of Drake Software User s Manual Tax Year 2014 for more information Header Information Screen 1 contains fields for the general information that is printed in the top section of page of Form 1120S Name and Address Use screen 1 to complete the corporation name and address section of Form 1120S For state purposes only if the corporation has an alternate address such as a P O box you can enter that address on screen 2 in the Address Line 2 field at the bottom Tax Year 2014 5 Header Information Tax Year Drake Software User s Manual Supplement S Corp of the screen Access screen 2 from the States tab or enter 2 in the selector field and press ENTER The software uses the calendar year as the default period for all corporate returns no date entries are required on screen 1 for a December 31 tax year end The program adjusts calculations for depreciation and for gains and NOTES losses on sales of assets based on the entity s tax year Fiscal and Calendar Years Short Year Returns For information on filing with a 52 53 week year see Electing a 52 53 Week
26. domestic corporation or group of corporations that reports on Schedule L of Form 1120S total assets at the end of the S corporation s tax year that equal or exceed 50 million must complete and file Schedule M 3 instead of Schedule M 1 If the S corporation is required to file or voluntarily files Schedule M 3 it must file Form 1120S and all attachments and schedules including Schedule M 3 The Schedule M 3 section of the Data Entry Menu provides direct access to the fol lowing screens e M3 M32 and M33 for Parts I IL and III of the Schedule M 3 e M3S for supplemental statements e SCH3 for subsidiary schedules for Schedule M 3 and Form 8916 A e 8916 for Form 8916 A Supplemental Attachment to Schedule M 3 Certain income deductions gains and losses flow from the 11208 to the M 3 in the program but all other M 3 data must be entered manually on the M3 screens Parts Il and IIl of Schedule M 3 reconcile financial statement net NOTE income loss for the U S tax return per Schedule M 3 Part line 11 The SCH3 Screen Tax Year 2014 to total income loss on Form 11205 page 3 Schedule K line 18 The SCH3 screen is similar to the SCH2 screen and is used to provide detailed infor mation for Schedule M 3 and Form 8916 A It can be used in place of the actual M3 and 8916 screens For more information on using this type of screen see The SCH2 Screen on page 28 3l Schedule M 2 Analysis of A
27. ee eee eee ees 5 Boxes A lncuMm 6 Income and Deductions 0 ccc nnns 7 GLOSS TR CCCINIS 245 54 acea bes E PV seta ey enbaes ORTOS UI pq Rub poe SU eere ees 7 Cost of Goods Sold Form 1125 A 0 0 es I Ordinary Gains and LOSSES s xd acod amer ien dr n EEE ndr Ren ESEN A 8 Une Icone 088 ouest eae a P3 dad goto end oo oars eee SE eee oe NEUE EN es 8 Compensation and V des 1e uet rio RO RR UE SERT URSACHEN teg a ac etu eS Es 9 Compensation of Officers Form 1125 E l ullllllllllleeeeee rr 9 Repairs and Maintenance 1 eer s 10 pad COIS eers AE PPP TE 10 pin ek oo oe a Hw ee ee ge ee we re ee de ee Ooh A a es ae G 10 Taxes CURE TRERROEISESTECIQTS nee eee ee Gad TERTIUM 10 Ite De Sb gan dtocre taco oh hoe ea oes eee oe oe de baa daa bed Rd ew ead au ned twee du er d 11 Dopo O sour oen AEE Ee E EEEE ENES EARE E 11 IDE PICHON i ear ie S a ee eae a e E ean eee ae E es 12 PON CHISING M EE oe EENE EE EEE E tee EE ees eee 12 Pension and Profit Sharing sassis ereerirersen eee A a e aaa a a aa 12 Employee Denelits PFOS AUIL 4545 x eb ea E RERO RS EE EEEE qao 12 tier Dedic OS s oou sut EAT RTG UC EADUEPPPIPIATIPMLPEUIARNERNERE PIOS MEI eee ee wee EE 12 Tax and Payments TETTE TIOLIELOOT 21072752 7 7 751121071 2727270212 5 17 T T0 T 13 Net Passive MiCOMc osos ro aT PCS STET PORUS a Wb aces ete nese resets by eae ene esceneoe
28. expense charitable contributions etc maintained The program also tracks the amount of debt applied to losses and the total amount of loss carryforwards NOTE If a K1 screen is marked as final none of the related screens for that shareholder are updated for the next year Schedule L Balance Sheet Per Books Schedule L is required if the corporation s total receipts for the tax year or its total assets at the end of the year are greater than 250 000 To force the program to print Schedule L even if not required mark the Force print Schedules L and M 1 box on screen L or on the NOTES PRNT screen With the Trial Balance Import feature you might not need to use screen L at all See Importing Trial Balance Information on page 47 Tax Year 2014 27 Schedule L Balance Sheet Per Books Drake Software User s Manual Supplement S Corp Flow of Information Many of the entries made elsewhere on the return flow automatically to the generated Schedule L for example inventory information from Form 1125 A Depreciable asset information from the 4562 screen and intangible assets and amortization also flow to Schedule L The SCH2 Screen 28 Statements The SCH2 screen is used to provide detailed information required by the IRS for cer tain lines on Schedule L This screen can be used in place of the actual L screen in Drake In other words if you use this screen for all applicable lines on Schedule L you do not need to ma
29. 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 crano 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 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 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 1s 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 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 unde
30. line select Deprecia tion or amortization or Financial products and or financial activities If request 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 NOTE for ENGINES 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 I following From the drop list on line 1a 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 provisions of the IMPORT ANT 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 Tax Year 2014 Drake Software User s Manual Supplement S Corp Importing Trial Balance Information If any of the scope
31. listed on line 5 e Reduction of AAA Once these adjustments are made the AAA is reduced by ordinary distributions on line 7 but not less than zero Thus if the distribu tions are 20 000 but the net amount on line 6 1s 10 000 line 7 1s limited to 10 000 If line 6 is a negative number then line 7 will be zero in this exam ple To allow an amount on this line would take the AAA to a larger negative number That is even more below zero than it really is Schedule M 2 Item Amount Line 1 Balance at beginning of tax year 11 785 Lines 2 amp 3 Ordinary income and other additions 58 440 Lines 4 amp 5 Loss and other reductions 489 Line 6 Combine lines 1 5 46 165 Line Distributions total 60 000 45 155 Lines Balance at the end of tax year 0 The rules from the preceding chart apply when the net adjustment for lines 2 through 5 is positive When the net adjustment for lines 2 through 5 is negative the ordering rules are switched and AAA is decreased by ordinary distributions but not below zero before the net negative adjustment for lines 2 through 5 sch M 2 Item Amount Line 1 Balance at beginning of tax year 11 786 Line 6 Net negative adjustment lines 2 5 57 951 Line 7 Distributions total 60 000 11 785 Line S Balance at end of tax year 57 951 Important A corporation can make distributions greater than the amount on line 6 of the M 2 but Note about those distributions could be taxable to the s
32. trial balance into 46 56 dates of incorporation 6 payment changing 15 tax year 5 decrease to basis 27 deductions 9 12 depletion 12 depreciation 8 and auto balance errors 29 expense 11 for cost of goods sold Schedule A 7 of rentals 34 on short year returns 6 printing Form 4562 40 trial balance business returns only 54 detail Ctrl W worksheets 7 8 47 61 direct debit of balance due 15 16 direct deposit of refunds 14 distributions 31 domestic production activities deduction 24 due dates 15 vii Index E e filing Form 1120S 41 PDF attachments 43 46 statements 28 Elections Safe Harbor 39 elections 37 Safe Harbor 37 statements 38 electronic funds withdrawal 15 16 signatures PIN 16 employer identification number EIN 6 envelope coversheets 40 error codes 42 ES Screen 3 Estimated Taxes 3 estimates 2008 tax 13 underpayment of 14 expenses 9 12 exporting K 1 data 23 extensions 16 F filing instructions 40 final return 6 fiscal year returns 5 foreign addresses for shareholders 23 transactions 15 21 Form 1125E 40 Form 2553 Election by a Small Business Corporation 4 6 Form 3115 Application for Change in Accounting Meth od 56 67 Form 4136 Credit for Federal Tax Paid on Fuels 14 Form 4562 Depreciation and Amortization 34 40 Form 4797 Sales of Business Property 8 Form 5884 Work Opportunity Credit 37 Form 6478 Alcohol and Cellulosic Biofuel Fuels Credit 8 36 Form
33. 040 with the excep tion of bankruptcy returns which must be paper filed An S corporation with 10 million or more in total assets that files 250 or more returns a year is required to e file its Form 1120S returns NOTES Every 1099 W 2 940 and 941 form that is filed is counted as part of the 250 return threshold For example if a corporation filing an 11208 return also files 150 W 2 forms each W 2 would count as a separate return within the 250 return threshold Calendar year returns are due on March 16 2015 Fiscal year returns are due on the 15th day of the third month two and a half months after the S corporation s year end Returns can be e filed after these dates however if an extension has not been filed penalties and interest are applied 41 Electronic Filing Drake Software User s Manual Supplement S Corp Additional Return Types Short year returns 52 53 week year returns and inactive returns can all be e filed using Drake For information on how to indicate a short year return in Drake see Short Year Returns on page 6 Information on e filing 52 53 week returns and short year returns 1s provided in the following sections Electing a To elect a 52 53 week year a new entity one that has never filed a return must enter 52 53 Week data on both screen 1 and the ELEC screen Year Initial Return To elect a 52 53 week year for any entity 1 In the If not calendar year section of screen 1 enter the
34. Click Browse 6 Browse to the proper folder select the PDF file to attach and click Open or dou ble click the file name Repeat for all documents with a red X When all documents have been attached to a completed return recalculate to clear the EF Message The return is now ready to be e filed Printing Generated Documents In some instances Drake generates a document that must be printed signed and scanned back into the computer to be attached to the return For example if Form 2553 Election by a Small Business Corporation is present in an S corporation return and the Attaching Form 2553 as a PDF document check box is marked on screen 1 EF Message 1513 is generated when the return is calculated 1513 ATTACH FORM 2553 The check box for Attaching Form 2553 as a PDF document on screen 1 has been marked but no Form 2553 has been attached Form 2553 must be prepared and attached before the return can be e filed To prepare Form 2553 for attachment Ensure that the 2553 screen has been completed in data entry Calculate the return In View Print mode select and print Form 2553 Have all shareholders sign the form mWhYe To attach the signed Form 2553 to the return 1 Scan the signed form and save it as a PDF document 2 Go to View mode of the return 3 Attach the scanned PDF document to the return using the PDF icon at the top of the screen For detailed instructions on attaching this form to a return
35. DHUECHUHUHPHUNUHUBURCHOHESUHDHUEUEDHUHEEUEUHUBUHCHOHEUHPHUECHUHUHEHUHUHUSUEDHOHEHUEPHUECEUHUHUSUHOHISUEUHDHEHUHDHIHCEHUHUHESUHUHUEUECHUHESUEDHUBUHCHUUPHUNUHUHUECHUHESUEDHUBCHOHUHENSUHUHUHUHUHDHISUEDHUBUEHCHUHENUHUHUHUEUHUHUUEDHUBCHPHUHEBUHUHUHUHUE 990 990 EZ or 990 PF return Prepare to use Trial Balance Import Enable Excel macros Disable autobalance Force Schedule L Delete unnecessary detail worksheets pun Populate Trial Balance Template Import Trial Balance Import direct entry data cells with 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 S
36. EN Drake suene S CORPORATIONS 1120S Support DrakeSoftware com gt 828 524 8020 Drake Software User s Manual Tax Year 2014 supplement S Corporations 1120S Support DrakeSoftware com 828 524 8020 Copyright Trademarks Drake Software User s Manual Supplement S Corporations The 2014 Drake Software Manual Supplement S Corporations Drake Tax Software and any other related materials are copyrighted material All rights are reserved by Drake Enterprises LTD including all ownership rights This document associated software and related material are the property of Drake Enterprises LTD Drake Enterprises LTD hereby authorizes you to download display print and repro duce the material in this document in an unaltered form only for your personal non commercial use or for non commercial use within your organization Copyright trademark and other proprietary notices may not be removed 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 Microsoft Corporation in the United S
37. Entry Menu open screen K1G Global Supplemental Information and enter the informa tion in the Supplemental Information text box This information will appear on all printed shareholder K 15 To add supplemental information to an individual K 1 open a shareholder s K1 screen and click the blue Supplemental Info link at the top of the window In the Supplemental Information text box Figure 11 enter information pertinent to this shareholder When the return is printed this information will appear on only this shareholder s K 1 Kil Basis Wks Supplemental Info K15 K 1 Supplemental Information Statement Enter global supplemental information for all K 15 on the K1G screen Enter specific information for a single K 1 here This information is added to the global supplemental information entered on the K1G screen a a rr s P ams r Bera ais mean api A Refuse Figure 11 In this example the information entered on the K1S screen will appear on only the K 1 of the shareholder with SSN or EIN of 010101010 Domestic Production Activities 24 An S corporation does not take the deduction for Form 8903 Domestic Production Activities Deduction Because the deduction is subject to income limitations this information must be reported on shareholders individual returns Shareholders use the pass through amounts to calculate their eligibility for the deduction Tax Year 2014 Drake Software User s Manual Supplement S Corp Sched
38. S uus bud sued Ue Ge ei E Died cms w Rada zssdu lue pue Ec mU s Eus iE d 31 Schedule M 2 Analysis of Accounts 0 0 cc eee eee 31 Entering Distributions sitsa ma m ee eo eee ri eee ane yan eee eee ee eee SU POSUER ee 31 Column A Accumulated Adjustments Account 0 0 0 0 0 0 006 ccc s 22 Column B Other Adjustments Account 0 0 0 0 00000 ee e 33 Column C Undistributed Taxable Income Previously Taxed 0 0 0 0 eens 33 Rental ActivitieS 000 cee es 34 Line 14 IDeprCcianOi 6 vewca cate cue gues o wont es see DE IESUS dri EROR adus cie ee es 34 Laine 15 Other Expenses list 2a da 644 Roe FEE OS ERE OO SERS Oe Yee hea ene oe REGES 35 Viewing Rental Activity Information hn 36 Credits and Adjustments leeeeee eren 36 1V Tax Year 2014 Drake Software User s Manual Supplement S Corporations Table of Contents cnni TIC E E E E A E E E E E 37 Salo arbor E lecon seers can Gor En dete te E indian Re qc og EAS 37 Making an Election in DEAE 04 04 urat norm 9 59 E edat pi eR ed een eve ded EEEE my a 38 Blectton Statements 22 22e deer xo dos ee dca 9 Rate d XAR ee eae eden a P dope od d E Road 38 pate Harbor BleeUOllSa aao 9 1209399 oo a epochs 219 39a EE ou DU QS RE PEIUS TS IUS Pa NN ed a 39 Making Changes on the Fly 0 0 ccc es 39 Suppressing Forcing Nomie us ban coc nese ene ca Sul etna o datas bee heed ar ERO c3 Rie up pde 40 Overriding Other Setup Options s n na
39. activity 1 Restaurant activity 2 Gift shop activity 3 Museum SS 5 5 ZE memes a Tana oa Unallocated Sch K1 Total dca EFT NUT NN qne ros E Loss 1 949 1 611 1 559 1 147 151 1 152 270 3 OtherNet Rental income Loss 989 18 321 9289 J 4 Interest Income oes Os 177 1 07 f 5a Ordinary Dividends O a 0 282 528 5 S10 Vers aja a C NER UA ED Lm EvVRCTTXN Alt iatis A dime adt a a Figure 2 Business Activity Statement Rounding Shareholder By marking a check box on screen K1 you can now select which should be the rounding shareholder That shareholder will be listed last on the list of shareholders and will be the one who receives any balancing amount on Schedule K 1 when the return is calculated ee i ian mu aot ot tes a z y T p Y MO sonent o Qmm eL utrum cum 400002222 Type Make this Shareholder the Rounding Shareholder William Carter ae H 234 Main Street Franklin NC 28734 Resident state Inc t lick to Access 282 828 2822 arm mmm num mum um eS Ss aM A SRM aaao Al n agissent me iil ma M m Figure 3 Marking the rounding shareholder on screen K1 If you do not make a selection the program designates as the rounding shareholder the last shareholder you entered If you select more than one rounding shareholder the program g
40. anation Enter the statement explanation If the explanation requires more than 900 characters press PAGE DOWN for a second screen If the explanation requires more than seven screens only the first 6 500 characters of the explanation are transmitted with an e filed Form 3115 There is no character limit for paper filed returns The ATT screen has a separate section to be used only for Part II line 10 The IRS requires that the attached statement in addition to providing an explanation include the taxpayer s name and ID number Enter the name and ID number and indicate if the ID number is an EIN in the applicable fields at the bottom of the ATT screen Figure 50 on page 67 Tax Year 2014 Drake Software User s Manual Supplement S Corp Importing Trial Balance Information Far STM 2 10 Part ll line 10 statement ONLY Hame Pn ID number EIN Figure 50 Special section for entering taxpayer name and ID number for Part II line 10 located at bottom of the ATT screen PDF Some Form 3115 items require the attachment of documents that cannot be created in Attachments Drake Software for example line 4d of Part II requires written consent from a direc tor You can however attach such a document to the form as a PDF See the PDF screen for directions on generating and attaching PDF documents Click the Screen Help button for directions on converting other types of documents into PDF Do not enter data on the PDF scr
41. 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 on the PIN screen If it 1s prepared by an employee or officer of the cor poration open screen 1 and select NONE in the Firm and Preparer fields To have the preparer s name and address information displayed on the printed return e Ifthe return preparer and ERO entered in Setup gt ERO are the same Go to Setup gt Preparer s and ensure that the Alternative Electronic Signa ture box is marked for the preparer Complete the PIN screen for the return Amending a Return Drake Software User s Manual Supplement S Corp 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 for e file For information on N OTE how to complete this setup window see Drake Software User s Man ual Tax Year 2014 See the IRS instructions for further details on sig nature requirements Amending a Return Amende
42. anual Supplement S Corp Filing an Extension Finally the PMT screen must indicate the return to which the payment data applies item 3 in Figure 8 on page 16 Put a check mark in the box of the applicable return type Withdrawal from Multiple Accounts Only one account can be designated for direct debit of funds for payment of federal or state taxes To have state amounts withdrawn from an account other than the account indicated for federal payments complete the fields in the State Account sections of the PMT screen NOTE Neither the federal nor the state balance due can be paid from more than one account Filing an Extension Calendar year returns are due on March 16 2015 By filing Form 7004 an S corpora tion 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 their tax year Form 7004 extends the deadline six months To file an 1120S extension use either of the following options e Go to the 7004 screen in Drake and select Generate an extension Complete any other applicable fields on the screen e Go to the PRNT screen and select Prepare Form 7004 based on screen 1 data Signing the Return Tax Year 2014 Electronic PIN signatures are required for e filed returns All fields on the PIN screen must be completed to e file a return including the title and signature name of the officer signing the return An 1120S return must be signed
43. ass e auaaw ab aber iy Fruor mg ved pre e vedas qox RN das 40 Electronic Filing cae RETTTTTTTITTTLITITTOTTOTT TI TT 41 Additonal Return TYPES E ETEA 41 Common Eror COJE lt cath agen tk A ore wre WoO ey wg eo Be es A eek tod no 42 Binary Attachments 0 0c cee ees 43 The PDF Attachment Process es cnsdedaenss Rete un Oe EEE Sees OU CAS ees hase ad RS PEDE RP 43 Printing Generated DOCUMICHIS 5 oue aciei cos acidic waged FACE GARE ERS ewe ads eee E de 45 Importing Trial Balance Information Les 46 Preparing to Use Trial Balance Import 0 0 0 0 0 0 0 0 es 46 Preparing Financial Data for Import 0 0 0 0 00 e 48 Euterims Financial Dala 5 kuge ens Re STREET REP bee ee ob MERE es OEE eee eee EF ENEAN ESTONAT 49 Davie dui er ee oe ee ee bee eee ae eee ae wees pee ees 5 Importuns Data into 4 Ie DE es arare derive 2 98 Oba OS oboe tas ov becouse er nese eer s quce de dq 5 Special C OBdIBORS um ace opu opener dg oe Oa due E qa ipu dup na d heren shea awe 584 E qe raadoksdunsud S 52 Form 3115 Application for Change in Accounting Method 0 cc ccc ene 56 vem 63 AUACHIMGINS osos dox a iode dud ac edid iR enka dc Ec I S guber d ed dane db do eu dos edt dod d dide dot 64 Appendix A Trial Balance Import elseleleeress A 1 lii P CP CP seen een ousaeeveuseceuecsens Gueeeueunceeeeaes T vii Tax
44. but had not yet received an ID number Drake auto fills the ID field Type F into the ID field and FOREIGNUS is entered or type A and APPLD FOR appears in the ID field For electronic payments on extensions the program now produces Form 8878 A the IRS e file Signature Authorization for Form 7004 Fields added to the 8941 screen allow you to complete the two new lines at the top of Form 8941 Credit for Small Employer Health Insurance Premiums These new lines added by the IRS determine if an employer provided health care coverage for its employees as mandated by the Affordable Care Act and determines if the business is eligible to use Form 8941 Before You Start Actions you might need to take before starting an 1120S return in Drake include Updating a prior year return if you prepared the tax return last year Electing as an S corporation if the corporation was not an S corporation last year Updating a Prior Year Return in Drake A prior year return can be updated in three ways As a single return updated one at a time using Last Year Data gt Update Clients 2013 to 2014 recommended When you open the return for the first time in the 2014 program and are prompted to update it With all other returns in the program using Last Year Data gt Update Clients 2013 to 2014 not recommended When you update an 1120S return that was previously marked as final the program informs you that the return was marked final befor
45. can be overridden on line I of screen 1 Enter accounting method at the bottom of screen 1 NOTES The Client information fields at the bottom of screen 1 are for reports only and not included in the e file record Income and Deductions Gross Receipts Tax Year 2014 Income and deductions are entered primarily on the INC Income and Common Schedule K Items and DED Deductions screens For information on the Schedule K items at the bottom of the INC NOTE screen see Schedule K Shareholders Pro Rata Share Items on page 21 Enter gross receipts or sales Form 1120S line 1a and returns and allowances line 1b on the INC screen The program calculates gross receipts or sales after returns and allowances based on gross receipts sales and any direct entry on line 1b The IRS does not require a detail CTRL W worksheet for gross receipts therefore if you are using the trial balance import feature do NOTE not include a detail worksheet for this line or for any other line that does not require a detail worksheet For more on the trial balance worksheet see Importing Trial Balance Information on page 47 Income and Deductions Drake Software User s Manual Supplement S Corp Cost of Goods Sold Form 1125 A For cost of goods sold COGS complete screen A Form 1125 A Cost of Goods Sold On screen A items 9a through 9f are direct entry fields and follow the NOTE format of IRS Form 1125 A For more inf
46. ccounts Drake Software User s Manual Supplement S Corp Schedule M 2 Analysis of Accounts NOTE On an 1120S return unlike an 1120 return Schedule M 2 is not a reconciliation of retained earnings For an S corporation return Schedule M 2 is the analysis of the Accumulated Adjust ment Account Schedule M 2 information can be entered on the M2 screen and else where in the program but most information is carried to the M 2 automatically See Entering Distributions following Schedule M 2 represents a corporate picture of the income losses and distributions to shareholders and tracks tax free distributions and helps determine if excess distribu tions might be taxable to shareholders If a shareholder receives more in distributions than he or she has in basis the result might be taxable Entering Distributions Code Section 6037 states that an S corporation return must report the amount and date of distributions made to each shareholder The DIST screen is used for entering date and distribution amounts for Schedule K line 16d Distributions In addition to line 16d the total from the DIST screen may flow to Schedule M 2 line 7 subject to lim itations and to the Schedules K 1 based on the shareholder s ownership percentage Schedule K 1 distribution information is displayed on the K1 DIST worksheet pro duced with the return NOTE The DIST screen is available from the General tab of the Data Entry Menu or enter DIST in the se
47. creen 2 also has fields for the name title mailing address e mail address ID num ber and telephone number of the S corporation s contact person Access screen 2 from the States tab or by entering 2 in the selector field and pressing ENTER Schedule K Shareholders Pro Rata Share Items Navigation Tax Year 2014 Screen K which consists of two screens can be used to enter data for Schedule K Shareholders Pro Rata Share Items Note that the K fields are primarily adjustment fields Press F1 inside a field to see what amounts are adjusted from elsewhere in the program Press PAGE UP and PAGE DOWN to navigate back and forth between the two K screens e Shareholders Pro Rata Share Items Income and Deductions e Credits amp Credit Recapture amp Foreign Transactions The most commonly used Schedule K items can be answered on the TIP INC screen If these amounts are entered on the INC screen they do not need to be entered on the K screens Because charitable contributions are separately stated to the share holders there is no Charitable Contributions line on the 1120S NOTE return Charitable contribution information belongs instead on the Schedule K Enter charitable contributions in the bottom section of the INC screen or in the line 12a Contributions fields of the K screens Any contribution limitation is made at the shareholder level 21 Schedule K 1 for 1120S Shareholder Information Drake S
48. ctivate cal culation and printing of the K 1s while working on the Form 11208 This option which eases the process of reconciling the 1120S is available by going to the PRNT screen and marking the box under K 1 Items to Suppress Figure 10 K 1 Items to Suppress I Suppress Sch K 1 K 1 letter K 71 ATT and WkK_SBAS Do NOT check amended box on Sch K 1 from screen 1 Suppress K1 DIST Figure 10 Check box for suppressing K 1 items located on PRNT screen When the return is ready to be filed return to the PRNT screen and remove this check mark before calculating the return Override Fields It is not possible to override the calculations for a single shareholder To override cal culated data it is necessary to override the calculated amount on all K 1 schedules Shareholder overrides should not be done for an S cor IMPORT ANT poration except in certain circumstances such as owner ship changes Foreign Addresses If the shareholder has a foreign address enter Province state country postal code information on the Foreign address line of the Shareholder Name and Address Information section along with the street address and city in the Address and City fields Do not enter anything in the U S State or ZIP fields Conversely for a U S address do not enter anything into the foreign address fields The Foreign fields are locked when a return is opened Click in one NOTE of the fields to unlock them throughout th
49. d 1120S can be e filed using Drake Software When you amend a return in Drake the amended information replaces the original in the data file Before amending a return CAUTION you should archive the original to avoid losing previously 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 To file an amended 1120S return 1 Go to screen 1 and select Amended return in section H 2 Make changes as applicable to forms and schedules 3 Go to the EF screen and mark the Amended 1120S check box on the left side of the screen Type AMD or X 4 Goto screen X Amended Return Changes and list the changes that have been into the selector made along with an explanation for each change Use a different X screen for field and press ENTER each line of the 1120S Press PAGE DOWN to open a new X screen If amending just the K 1s go to each applicable K1 screen select Amended K1 and make needed changes When amending an 1120S return all K 1s are amended and the NOTE Amended K 1 box on the return marked by default To override this default go to the PRNT screen and mark Do NOT check amended box on Sch K 1 See Figure 10 on page 23 Additional Information This section covers Schedule B Other Information state specific information and some program overrides Schedule B Enter the accounting method principal business
50. de contains up to eight rental activities If more are entered a second Form 8825 is created TI2DSEF lt 11205 11205 PG2 11205 PG3 11205 PG4 goza agen STATMENT wE M2 FOLDA FILEINST LETTER PRIMACY BILL SUMMARYS COMPARES Rental activities 1 6 Rental activities Starting at 9 IEEE IEEE Figure 17 Multiple 8825 pages are created 1f more than eight rental activities The Form 8825 in View mode consists of one or more pages depending on the number of rental activities listing up to four rental activities per page If more than four rental activities are entered scroll down to the second page of the Form 8825 when viewing e 8825 Statements Statements are titled STM 8825 XX where XX equals the instance of the 8825 screen For example the statements for the first and second 8825 screens would be labeled STM 8825 01 and STM 8825 02 respectively There are also 8825 attachments 8825 ATT for other report ing information 36 Tax Year 2014 Drake Software User s Manual Supplement S Corp Credits and Adjustments Credits and Adjustments Elections Access the ELEC screen from the Miscellaneous tab of the Data Entry Menu Tax Year 2014 Certain credits require an adjustment to either income or expenses The program car ries the required adjustments to the appropriate line of the return and to either Sched ule M 1 or Schedule M 3 Manually reducing the expenses or deductions or increasing th
51. document provide instructions for completing the vari ous screens for Form 3115 including Schedules A through D Parts and Ill Use the Parts I III screen to complete the following sections of Form 3115 e General Information e Part I Information For Automatic Change Request Tax Year 2014 57 Importing Trial Balance Information Drake Software User s Manual Supplement S Corp 58 General Information Part e Part III Information For Advance Consent Request NOTE Information should be entered in either the Part section or the Part Ill section but not both Complete all applicable fields in the General Information section Note that the fields for business activity and tax year change are override fields Figure 41 Com plete these fields only if you want to override the equivalent information entered on screen 1 or screen K Parts M Parts il IV ABC D lll D II Form 3115 Application for Change in Accounting Method General Information Principal business activity code number eannan Tax year of change begins Tax year of change ends A Ae AA Name of applicant if different from fil Y ID number of applicant if different from fil aS Name of contact person ce noone Contact person s telephone number ee ee Feel i igo uaa tr re pe Figure 41 Override fields in the General Information sections of the Parts I III screen On the Type of accounting method change being requested
52. does not provide an equivalent detail worksheet or the trial bal ance will not be imported correctly Totals Totals are displayed at the bottom of each worksheet If credit and debit columns are out of balance the worksheet highlights the out of balance amount Figure 34 Wee ee og ILLE ae ee IT Wh xe fe uat ger Lu gr s Ar Totals OUT OF BALANCE H SBS TB At 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 NOTE The data cannot be imported if the worksheet is out of balance Tax Year 2014 5 Importing Trial Balance Information Drake Software User s Manual Supplement S Corp Saving a File To save a file click the Save icon or select File gt Save from the menu bar In Excel 2007 and 2010 click the Office button in the upper left corner and select Save In Excel 2013 click the File tab then Save To re name a file when saving select File gt Save As For more information on file names in the trial balance program see Nam ing Convention on page 49 Importing Data into a Return ix Import 52 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 N
53. drop list at the top of the screen You can also use screen A rather than the DED screen to enter depreciation claimed on Form 1125 A An entry on screen A adjusts any entry on line 14b of the DED screen and is calculated into the total deductions for page 1 of Form 1120S If there is an entry on line 14b but not on screen A only the line 14b amount will be calculated into total deductions Enter depletion amounts on the DED screen If the corporation claims a deduction for timber depletion complete and attach Form T Forest Activities Schedules Attach as PDF to e filed returns See The PDF Attachment Process on page 44 Do not deduct depletion for oil and gas properties Each shareholder should figure depletion on these properties under section 613A c 11 Enter advertising expenses on the DED screen Pension and Profit Sharing Enter pension and profit sharing expenses on the DED screen Press F1 for informa tion on what expenses to enter The software reduces the expense based on the credit amount calculated from Form 8881 Credit for Small Employer Pension Plan Startup Tax Year 2014 Drake Software User s Manual Supplement S Corp Tax and Payments Costs Note that this is an adjustment field the software uses any amount entered here to adjust the amount flowing from Schedule F to the 11208 Employee Benefits Program Enter on the DED screen amounts for fringe benefits paid or incurred on behalf of employees owning 29
54. e 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 Fuels Credit e Form 8912 Credit to Holders of Tax Credit Bonds interest income Adjustments are made to the appropriate deduction or expense for the credit amounts for the following credits Form 5884 Work Opportunity Credit e Form 6765 Credit for Increasing Research Activities e Form 8820 Orphan Drug Credit e Form 8845 Indian Employment Credit 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 Form 8844 Empowerment Zone Employment Credit e Form 8912 Credit to Holders of Tax Credit Bonds e Form 8932 Credit for Employer Differential Wage Payments e Form 8941 Credit for Small Employer Health Insurance Premiums The ability to make certain tax elections is included in the business packages Elec tions are selected from the Return Elections section of the ELEC screen Figure 18 on page 38 37 Elections Drake Software User s Manual Supplement S Corp Return Elections EINE ooo os Desaipiion 1 Cost basis amount years Date or year ending Other cost basis or amount Other date or year ending Se TT n de
55. e prompting you to proceed Tax Year 2014 Drake Software User s Manual Supplement S Corp Header Information Indicating an S Corporation If the corporation is electing as an S corporation for the first time it is necessary to indicate this in the program S Corp Onscreen 1 in the General Information section line A enter the date of election as Election an S corporation On line E enter the date incorporated On line G mark the check box First year as an S corporation Form 2553 Election by a Small Business Corporation is required if the entity is mak ing the election with the return In Drake use screen 2553 accessible from the Other Forms tab or by clicking the Form 2553 link on screen 1 If attaching a signed Form 2553 to the return as a PDF mark the NOTE Attaching Form 2553 as a PDF document box on screen 1 If not sent as a PDF the form must be mailed separately to the IRS before filing the tax return See Form 2553 instructions at www irs gov Changing To change a C corporation to an S corporation 1120 to 1120S File Type Go to Tools gt File Maintenance gt Change File Type Enter the EIN of the entity Click Continue Select the new return type Sub S Corp 1120S Click Continue to save changes Click OK pr OM Se qe n Other Information and Overrides Use screen 1 to enter the following additional information e Resident State If the corporation has a mailing address in one state but
56. e return To relock the unused Foreign fields close and then reopen the return K 1 Export Take the following steps to export a K 1 from an 1120S return into a 1040 return 1 Ensure that K 1 data is entered in the 1120S and that the 1040 return has been cre ated The K1S screen in the 1040 does not have to be created beforehand 2 In the 1120S return go to View mode Tax Year 2014 23 Schedule K 1 for 1120S Shareholder Information Drake Software User s Manual Supplement S Corp 3 Click K1 Export in the View toolbar If any K 1s are not eligible to be exported that list appears Click Next to continue otherwise the Export K1s window is opened containing a list of K 1s eligible for export 4 All SSNs in the list are eligible for export Remove the check mark from the box to the left of any SSNs you do not wish to export 9 Click Export The K 1 data will be displayed in the 1040 return in the program Basis information for individual shareholders should be entered in the NOTE 1040 package in Drake this information cannot be exported from the 1120S package to a 1040 return Such an import would override lim itations and carryovers calculated in the 1040 program Supplemental Info Two types of supplemental information can be added to Schedules K 1 e Supplemental data for all K 1s in a return e Supplemental data for a single K 1 in a return To add supplemental information globally to all K 1s from the Data
57. e top of the K1 screen for a shareholder Figure 13 Access the K1 screen from the Data Entry Menu K1 supplemental Info Schedule K 1 Shareholder s Share of Income Credits Deductions etc Shareholder Name and Address Information D ID number NERO CREE 123123123 TYPE E Ma m amp n Dante Alighieri Care oM FHORIBA nsns nn i Ti ier E E Ee NUES dana ee 1234 La Principale Via Lie SERRE een eee cnet Re an REOR RENE Florence U S E ENS Sn rte tee Sie ee ere Y Resident state Foreign Province state country postal code Tuscany IT Phone number 0 123 456 7890 1 lt MUT enm TO CE naa ae mU MT Figure 13 K1 screen tab for accessing the Adjusted Basis Worksheet Increases Jncreases to basis can include additional stock purchases and capital contributions and separately stated income including tax exempt income and depletion in excess of Decreases basis of property Decreases to basis can include distributions of cash or property to shareholders sepa rately stated losses and deductions nondeductible corporation expenses and credit adjustments Annual When the program is updated to the next tax year the end of year basis and share Update of holder loan amounts are automatically updated to the beginning of the new year Any Shareholder loss deduction carryover is updated to the beginning of the year and its character Information ordinary loss section 179
58. eceived 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 UT TR bm ilf gomma b t 2 ai nitidi o n asta eme agis Ada S pnan Son NP d Sa no O A ciis am Figure 21 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 program defaults Suppressing Forcing Items To suppress the printing or production or force the printing or production of certain documents go to the PRNT screen and select the desired options Many on the fly changes override the options established in Setup 1120S Items These items can be forced forcing the program to generate the item on a return 1125E Officer Information Schedules L and M 1 Form 4562 Depreciation and Amortization Next year depreciation listing Inactive return printed on first page of the 1120S Preparer and officer signature on printed copy of return The following 11208 items can be suppressed kept from being generated on a return 40 Schedule M 2 WK M2 Retained Earnings Reconciliation Worksheet Tax Year 2014 Drake Software User s Manual Suppleme
59. eciation screens in data entry Figure 3 Depreciable Assets 4562 Depreciation Detail Item 6 4562 Part 1 T 4562 Parts 2 and 3 8 4562 Parts 4 5a and 6 J 4562 Parts 5b and 5c 10 Additional Depreciation Elections Figure 38 Enter depreciable asset data on a 4562 detail screen or enter the total depreciation on the override screens screens 6 7 8 and 9 Entering the remainder of the depreciation on the trial balance work sheet helps ensure that the balance sheet balances and provides a way to check that the amount on line 1 of Schedule M 1 is correct Compare NOTE the calculated line 1 at the bottom of the trial balance to the equivalent line on Schedule M 1 of the calculated return If the depreciation amounts match but the line 1 amounts differ an M 1 adjustment could be required Rental The following information applies only to S corporations with multiple rental proper Expenses ties The S corporation trial balances include lines for rental income and expenses Figure 39 on page 56 Both rental expense items require a trial balance detail work sheet Tax Year 2014 55 Importing Trial Balance Information Drake Software User s Manual Supplement S Corp Account Title Cash Trade and accounts receivable Allowance for bad debts ee ew Y D ER 7 inca n T ere esa T Lett Tax exempt interest Gross real estate rental income Total real estate rental expenses Gross other rental
60. ect code you must contact the IRS to correct its database or paper file this return Reject Code R0000 90501 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 11208 return type This should be done at the IRS website Review publication 3112 for details Reject Code F1120S 239 01 Filer s TIN and Name Control in the return header must match data in the e file database unless Form 1120S Item H 2 Name Change box is marked Binary Attachments Tax Year 2014 Binary or PDF files can be attached to certain tax forms These attachments are gen erally signature or third party documents such as a copy of a signed lease or a signed appraisal statement In some instances the IRS requires that a document be attached to an e filed return in other instances a document can be attached voluntarily to sup port or explain an entry in the return In either case a document must be printed and scanned into the computer or saved as a PDF document and attached to the return in order to be e filed with the return 43 Binary Attachments Drake Software User s Manual Supplement S Corp You can attach PDF files to federal S corporation 11208 returns for e filing The PDF Attachments screen is accessible from the Data Entry Menu The PDF Attachment Process Three
61. ed if the balance sheet s total assets at the end of the year equal or exceed 10 million and Schedule M 1 and pages 1 3 of Schedule M 3 are required if the total assets equal or exceed 50 million Schedule M 1 shows all items of income and expense that are not subject to tax plus those accounting items that are not income tax items When required taxpayers must reconcile book income with taxable income Use the 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 unfavorable Examples of both kinds of differences are shown in Table 2 Table 2 Examples Book to Tax Differences for Schedule M 1 Permanent Book or tax items that will never be Meals amp entertainment 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 The program may make an adjustment for book to tax depreciation or amortization differences The calculation is done as described in the following steps This proce dure refers to depreciation throughout but i
62. eees 13 vgnbmEMTMTu 13 Estiinated Tax toned so eeaat hes qoe dH eed TOEOBUS oOo 4 EER ORO EEE OOS Ed REO didis nu md a 13 Payments with Extensions seassa erame raa heb Foe SSeS HS EI AUR RI UR RACR EUR ER tee eee een dna 14 Tax Paid on PHels 2a 2rd dero a ES EeRA P odd eek a qd Ee Ri deditos qx EE TIS 14 Underpayment of Estimated Tax 2 dese stb bar 144 ao 04 S D YU 44 4e4es e4 be qd sgg 14 Late Vili Penalty 206 doe acq dod S eR RERO TRUE oR EE eS ee SORE a OR pudo eas 14 Tax Year 2014 ill Table of Contents Drake Software User s Manual Supplement S Corporations Direct Deposit of Refunds 0 0 0 cc eee 14 International ACH Transactions 0 cece eee ee eee rs 15 Electronic Funds Withdrawal Direct Debit 15 Program Defaults and Overrides 0 0 nen s 15 Required Mormaers ar EErEE STERENN Abas ee eee Gee eses Ss Sess here aeae RP ERSTE 15 Withdrawal from Multiple Accounts 0 0 0 0 0 060 ee e 16 Filing an Extension 62 9645 aoc eo die deoa b do e OE d e eee 4 eae eee 16 Signing the NeIUFT 222 c cs cencsesaddedirdesedcevekesesdicdadcasddens lt 16 Amending a Return ee ee RC ee 17 Additional Information 00 000 cece eee ee es 18 Scliedule B scs ra Re ESSISO RenERDgNASSANERMSANEGR RES RE ke bo hes Poe E EEG wae IE 18 Stale specrtie InforrdllOll sauseuengacaccRreraieR ke oes 1 RR tq ed Os be Ke hee E TEATS PIE 18 Sc
63. een itself If using the directions pro vided on that screen skip Step 2 of the Completing the PDF Screen section which instructs you to fill out the columns at the bottom of the NOTES PDF screen A PDF document may be attached using any filename When you attach the document the program automatically assigns it the filename required by the IRS When the return is generated an EF Attachments worksheet is produced See Figure 51 This worksheet shows in table format the Reference section of Form 3115 the Description and the IRS required Filename of each required PDF docu ment This worksheet is displayed as EF PDF in View mode KEEP FOR YOUR RECORDS EF Attachments 1 Nane of corparation T E2zsBeeEss t Filename 3115 lIII Line 70 Proposed Change Documents ProposedChangeDocuments pdt 3115 II Line 4d Consents From Operation Div Dir ConsentsFr mOperatinglivisionDirectoar pdf Multa A tm pud dup iim FT SSS vm ad am Www ditm hte s A amm cs Figure 51 Example of an EF Attachments worksheet Notices of Inaddition to Form 3115 and related schedules and statements the program produces Missing EF Messages as applicable when the return is calculated All forms schedules EF Attachments messages and worksheets are accessible from View mode EF Messages for Form 3115 provide information about required attachments includ ing PDF attachments that are missing from the return Some messages l
64. enerates a Return Note informing you that you ve chosen more than one informs you that the first shareholder you entered will be used as the rounding share holder and lists all those you have included as rounding shareholders Safe Harbor Elections Tax Year 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 as entered in the Description field will be included in the election statement See Safe Harbor Elections on page 39 for more Before You Start Drake Software User s Manual Supplement S Corp 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 Other Changes Following are other changes to the 1120S package for 2014 If the shareholder or owner had applied for an SSN or EIN
65. equested will be marked and a note indicating that multiple automatic change requests MULTI AUTO CHNG RQST have been made 1 in Figure 44 on page 61 and the designated change numbers of the requests appear in the Description field of Part 1 2 in Figure 44 on page 61 Tax Year 2014 Drake Software User s Manual Supplement S Corp Importing Trial Balance Information Check the box to indicate the type of applicant Checktheappropriate box to indicatethe type L indiidual Cooperative Sec 1381 of accounting method change being requested Corporation Partnership C Controlled foreign corporation C 5 corporation Depreciation or Amortization Sec 857 Insurance co Sec 816 a Financial Products and or Financial Activities of L 10 50 corporation Sec 904 d 2E Insurance co Sec 831 Qualified personal service Other speci P E Other specify corpor ation Sec 448 0 2 MULTI AUTO CHNG ROST 1 Exemptorganizaton EnterCodesecton ee Caution To be eligible for approval ofthe requested change in method ofaccouning the ta 1j Bn relevant to the taxpayer or to the temppayer s requested change in method ofaccountin ig This ini dui uges all information reg vested on his orm 3115 including its instructions as well as anyother information that is not specifically request The taxpayer must attach all applicable supplemental statements requested ier this form
66. er Information 18 Schedule D Capital Gains and Losses and Built In Gains Parts I IIL and III 13 Schedule D Form 3115 61 Schedule K Shareholders Pro Rata Share Items 20 21 Schedule K 1 Shareholder Information 21 27 Schedule L 40 Schedule L Balance Sheet per Books 27 29 Schedule M 1 29 40 Schedule M 2 31 34 Schedule M 3 31 schedules on Form 3115 60 64 section 179 income limitations 9 481 adjustments 8 shareholders adjusted basis worksheet 26 27 compensation of 9 foreign addresses for 23 multiple 22 number of 6 Schedule K 1 21 updating data annually 27 short year returns 5 signatures electronic 16 state address 5 codes 19 specific information 18 tax refunds 8 14 statements elections 38 tax and payments 13 14 on fuels credit for 8 returns see returns years fiscal vs calendar 5 taxes and licenses 10 termination of S election 6 Index trial balance import and depreciation 8 and Schedule L 27 29 instructions for using 46 56 U underpayment of estimated tax 14 undistributed taxable income previously taxed 33 updating an 1120S return 4 shareholder data annually 27 V vouchers 13 W wages 9 Drake Software User s Manual Supplement S Corporations Tax Year 2014
67. er deductions or losses you auta p o REE ade DER All ORS ipe Pinte di ul eee Oe Figure 12 K1 8903 attachment Review the screen level help on screen 8903 and the 8903 instructions accessible through the Screen Help button on the 8903 screen to determine when the K1 8903 in needed Line 11 Income limitation of Form 8903 is not applicable for the o corporation because the income limitation is calculated at the NOTES shareholder level Form W 2 wages on the 8903 screen refers to the corporation s W 2 wages paid that are applicable to the Domestic Production Activities Deduction K 1 Cover Letters K 1 cover letters can be produced to accompany each Schedule K 1 in a return You can set up the global option to produce K 1 cover letters for all returns containing K 1 schedules or you can choose the option on a per return basis Producing To have the K 1 cover letters produced automatically with all applicable returns from Letters for the Home window of Drake go to Setup gt Options Under the Optional Documents All Returns tab mark the box labeled Include K 1 letter with returns The signature on the return can be indicated in one of two ways e By completing the Signature and Title fields on the PIN screen e By completing the Name and Title fields in the KIL screen available on the Miscellaneous tab Entries here override entries on the PIN screen Producing Ifno default has been set to produce K 1 cover le
68. ere E bibs tue oe DLP occ oro orc x Other information Exyanalio oo LN CMT T PEE UN Pu nm agente aio dm abe dl ani alio on anal hit n AME Figure 18 Return Elections portion of ELEC screen Safe Harbor Elections 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 as entered in the Description field will be included in the election statement NOTE 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 Making an Election in Drake To indicate that the S corporation is making an election 1 Open the ELEC screen accessible from the Miscellaneous tab of the Data Entry Menu 2 Make a selection from the Election drop list See Figure 19 Return Elections Ee on 01 General Election Statement 02 Capitalize and Amortize Circulation Costs over 3 Years Cost basis amount years 03 Capitalize and Amortize Research and Experimental Expenditures 04 Capitalize and Amortize Intangible Drilling and Development Desciption sss Date or year ending 2E EE o T Capital j za and morti ze Mining Dewsedcamcps COSAS ms manta il Figure 19 Election drop list 3 Complete all other fields as applicable Pre
69. f ownership may change even if the share holder s number of stocks owned does not all shareholders are listed on the work sheet IRS K 1 Codes A code sheet can follow the printing of each Form 1120S K 1 to help interpret the var ious codes used on Schedule K 1 In Drake this is the 11208K 1 PG3 sheet To have this sheet printed with all K 1 schedules from the Home window of Drake go to Setup gt Options gt Form amp Schedule Options tab and mark the Print Page 2 of Schedule K 1 check box The codes can also be printed for a specific return by mark ing the applicable box on the PRNT screen and are available from Tools gt Blank Forms Codes sheets are not displayed in View mode If the 1120S K 1 is NOTE selected for printing it is printed first followed by the statements per taining to that 1120S K 1 These are followed by the code sheets The generated Schedule K 1 may include asterisks with letter codes 22 Tax Year 2014 Drake Software User s Manual Supplement S Corp Schedule K 1 for 1120S Shareholder Information An asterisk with a letter code indicates that multiple items have that code An asterisk at the bottom of a group indicates that there are more items than can fit in the space provided for that group and that a statement is attached or that the statement is required as in the case of other amounts Multiple Shareholders For returns with a large number of shareholders you have the option to dea
70. from the trial balance worksheet and the totals of the amounts entered on the SCH2 screen See The SCH2 Screen on page 28 for more details on using the SCH2 screen S corporation returns can have up to four components of total depreciation e COGS e Real estate rental e Rental other than real estate e Any remaining depreciation Tax Year 2014 Drake Software User s Manual Supplement S Corp Importing Trial Balance Information For trial balance purposes enter depreciation amounts directly into the appropriate fields on the trial balance worksheet Note that for 1120S trial balances rental expense detail worksheets are required for 8825 and RENT depreciation Enter 8825 and RENT depreciation amounts in the detail work NOTE sheets for importing purposes but be aware that the 8825 and RENT screens in the program will have to be edited if 4562 detail screens see Figure 38 are used When the trial balance is imported the COGS depreciation expense amount flows directly to the appropriate line of Form 1125 A of the return and the rental deprecia tion expense amounts flow directly to the appropriate lines of the 8825 and RENT screens as applicable Because the remaining depreciation can comprise any number of assets the amount entered on the trial balance does not flow to the return To ensure that each component of the total remaining depreciation is calculated into the return each asset must be entered on the applicable depr
71. gt Communications Editor The Client Communications Editor is displayed 2 From the icons on the toolbar select Open gt S Corporation gt Sub S K 1 Cover to view the template of the S corporation K 1 letter 3 Make any desired changes to the template 4 Click Save For an amended return the K 1 letter automatically refers to the NOTE amended K 1 To edit the letter for an amended K 1 from the toolbar select Open gt S Corporation gt Sub S K1 Amended and follow steps 3 and 4 of the previous procedure Shareholder s Adjusted Basis Worksheet Basis information for individual shareholders should be entered in the NOTE 1040 package in Drake this information cannot be exported from the 1120S package to a 1040 return Such an import would override limita tions and carryovers calculated in the 1040 program Use the Shareholder s Adjusted Basis Worksheet Basis Wks screen to calculate a shareholder s new basis after increases and decreases are made during the current year The basis of S corporation stock is adjusted on an ongoing basis unlike for a C cor poration where stock basis remains constant unless additional stock purchases are made or stock 1s sold A shareholder s beginning basis in S corporation stock 1s the original capital contribution 26 Tax Year 2014 Drake Software User s Manual Supplement S Corp Schedule L Balance Sheet Per Books The Basis Wks screen is accessible by clicking the Basis Wks tab at th
72. hareholders Enter distributions on the the AAA DIST screen this way the amounts flow automatically to Schedules M 2 and K 1 but are limited based on the rules described previously For more information on the DIST screen see Entering Distributions on page 32 Line 7 is limited to the lesser of the amount for line 7 or the positive amount from line 6 If line 6 is negative line 7 is then limited to the positive amount on line 1 If line 1 and line 6 are both negative line 7 is completely disallowed on the Schedule M 2 Distributions are entered on the DIST screen to be reported to the shareholders Tax Year 2014 33 Rental Activities Drake Software User s Manual Supplement S Corp regardless of the Schedule M 2 limitation The AAA cannot be negative as a result of distributions but it can be negative if it arises from losses Column B Other Adjustments Account Use column b Other Adjustments Account of screen M2 to enter any amounts you want printed in the corresponding column of the printed return Officer life insurance and applicable tax exempt income flows to Schedule M 2 column b Other adjust ments account line 5 All other amounts such as expenses must be entered manu ally on the M2 screen Column C Undistributed Taxable Income Previously Taxed The total of column c cannot be negative This column is active in an 1120S only if the entity was ever a C corporation thus having earnings and profit E amp P
73. he RTN account number and type of account to verify If receiving refunds from different state tax authorities use the State Account sec tions on the DD screen to indicate where other state refunds should be deposited Tax Year 2014 15 Electronic Funds Withdrawal Direct Debit Drake Software User s Manual Supplement S Corp International ACH Transactions In 2009 state taxing agencies added foreign account questions to their forms to com ply with NACHA rules regarding International ACH transactions LAT however processing IAT is not yet supported by any federal or state tax authority If you were to indicate that the account was outside the U S the state tax authority would automati cally ignore the account information and either issue a refund via paper check or con tact the corporation requesting the payment of a balance due via check or domestic bank account If you indicate that an account is located outside of the U S Drake Software generates an EF message instructing you to choose an account located in the U S For more information see Screen Help on the DD screen and PMT screens Electronic Funds Withdrawal Direct Debit 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 the Amount owed line of Form 11205
74. hedule K Shareholders Pro Rata Share Items 20 lp ub InIPMRERTTCPE 20 Schedule K 1 for 1120S Shareholder Information 21 crisis BICI EREREDCTTTETETTE TOTO CORTO TITIO hh Pees pos eee ed 21 PRS Well COGS ooo ead nh od wknd mda dde be Ced Ead e bebe bed duit dide NER 22 IuduplesShdre olde FRE i auc u uiii boo bok G RR GREE Ee AeA eh ccu dba cd oe ee UD E ece hae 22 Rounding POttHe ses aris pac es ee oar ns Aer be eerie dq by ba usd Boe Gam aed Ga eee eee 22 Override Fields 2 0 0 ccc cc ec ce cc Ree ertt 23 Foreign ACUUCSSCS ester neces by Kd a d E SEES ERO OE SEE ER Supe di Her P AUR s Eee oe dogs 23 Kad q IM T 23 Supplemental Info s ua 4 60 04 oe ed bee be bode SORT d Sede 9 oe ee OS Scc Dod ER ce ERR OR d 24 Domestic Production Activities ces 24 ESDLCOVSFLOBHBSIS a secco huie wd ee ee ee Oe eee OR ORE es RES CREE PET RE EE ES 25 Shareholder s Adjusted Basis Worksheet 0 0 0 0 0 ccc eee eee eens 26 Schedule L Balance Sheet Per Books 27 Flow of Information 0 0c cc ccc cc eee eee eee een e ene nee neneeeeneeeees 27 The SC H2 SOFeell uoces der Bec DIE Raya ERI WE EX SCRIP A hens sd debates sees RUE ob ead es 28 Autobalance cese 29 Schedules M 1 M 3 Reconciliation of Books Return 29 Schedule M 1 ceeeeee rehenes 29 Schede NI
75. income Total other rental expenses Gross royalties Capital gains or losses u 0 T a A Eo c apr m we ro wr p oe Wer L line 1 cal d Form 11205 Sch L line 1 cold L line 2a cal c Form 11203 Sch L line 2a cal c L line 2b cal c Form 11205 Sch L line 2a cal c M ee ET TL F A IU ee ee ee ee Ae ee BO k line 15a PK line 158 h l 1 Line 8825 line 2 Form 8825 line 2 Real Etsate Rental Exp E00 requires detail Rent Line 1 RENT line 1 0 Cther Rental Exp requires detail 600 K line 6 Schedule K line 6 2e al T tal lon ae E am Figure 39 Rental expense rows on an S corporation trial balance worksheet When imported the rental expense data entered on the trial balance worksheet appears on either the 8825 screen if real estate rental or the RENT screen if rental other than real estate Because the trial balance worksheet has only one detail screen per rental type the importing function does not accommodate entities with multiple rental properties or expenses however the following procedure allows the trial balance to remain in bal ance if there are multiple rental properties or expenses To accommodate entities with multiple rental properties or expenses 1 2 e NOTE NOTE 56 Calculate the totals for both types of rental expenses Enter the income totals on the trial balance sheet and the expense totals on the applicable detail sheets Figure 39 E
76. ine 14b on the DED screen is for Form 4562 depreciation that is not entered on screen A or elsewhere on the return Importing Ifusing the trial balance import feature see Importing Trial Balance Information on Trial Balance page 47 enter depreciation amounts directly into the appropriate fields on the trial to Form balance worksheet not into the fields in data entry When the trial balance is imported 1125 A the COGS depreciation expense amount flows directly to the appropriate line of Form 1125 A and is calculated accordingly Ordinary Gains and Losses The amount on line 4 Net gain loss from Form 4797 Part II line 17 of Form 11208 flows from Form 4797 Amounts can also flow from screen 4562 but only if that screen shows assets sold and property type 8 Tax Year 2014 Drake Software User s Manual Supplement S Corp Income and Deductions Other Income Loss Enter all amounts for line 5 Other income loss on the INC screen INC screen data is displayed on attached statements in View mode Amounts from the following screens also flow automatically to line 5 e 6478 Form 6478 Biofuel Fuels Credit e 8864 Form 8864 Biodiesel and Renewable Diesel Fuels Credit Additional fields on the INC screen include e Amount of credit for tax on fuels e Interest income on receivables e Recoveries of bad debts e Section 481 adjustments e State tax refund Income from insurance proceeds To enter income or loss fro
77. ired P E ASL quires detail s so Other Income quires qup ee pe _pequires detail A line 2 Form 1125 4 lij Figure 32 Example of cells that require worksheets Click a worksheet button to open a worksheet in a new tab Figure 33 on page 51 shows an example of the Other Income worksheet 50 Tax Year 2014 Drake Software User s Manual Supplement S Corp Importing Trial Balance Information Statement Required Other Income Form 11205 page 1 line 5 INC line 5 Amount 1 Amount of credit for tax on fuels Form 4136 P INC line 5 2 Interest income on receivables INC line 5 3 Recoveries of bad debts deducted in earlier years INC line 5 4 Section 481 adjustments INC line 5 5 State tax refund cash basis INC line 5 6 Taxable income from insurance proceeds Heine T Other i Other Income Detail Total other income Click to return to TB MK SBS TE Other Income a lia Figure 33 Trial balance worksheet for Other Income To return to the previous worksheet click the SBS TB tab labeled 1 in Figure 33 or click the Click to return to TB button above the worksheet tabs labeled 2 in Figure 33 Note that a detail tab the Other Income tab in the lower left of Figure 33 might include one or more detail worksheets labeled 3 in Figure 33 Do not create detail worksheets in data entry if the trial balance work NOTE sheet
78. is box is applicable if the return contains more than one Schedule E A separate 311E screen should be used for each property Assign each property a separate code in its Multi form code for Sch E This code enables you to associate any attachments with the correct Schedule E property See Attachments following If the return contains more than one Form 3115 and multiple instances of Schedule E both multi code fields should contain numbers Figure 48 shows that the third instance of a Schedule E 1s to be associated with the second Form 3115 in the return Form 3115 Application for Change in Accounting Method Schedule E Change in Depreciation or Amortization Year property was placed in S mvice Prapert s use in trade or business or income Schedule E Line 4a Type of property T E a E A TU HG D Figure 48 Example of third instance of a Schedule E to be associated with the second instance of a Form 3115 Completing The 311E screen consists of four sections Schedule E e Schedule E Line 4a Enter information on the type of property the year it was placed in service and the property s use e Schedule E Change in Depreciation or Amortization This section covers all Schedule E items other than lines 4a and 7 Note that lines 5 and 6 are links to required attachments e Schedule E Line 7 Present Method and Schedule E Line 7 Proposed Method For the line 7 sections enter i
79. ist all state ments required for a particular section but do not indicate which statements specifically are missing To best understand which attachments are still required Tax Year 2014 67 Importing Trial Balance Information Drake Software User s Manual Supplement S Corp compare the ATT screen and the EF PDF worksheet to the list on the EF message page All EF Messages must be eliminated before the return is eligible for NOTE e file EF Messages for Form 3115 attachments are eliminated when all required statements have been attached to the return 68 Tax Year 2014 Drake Software User s Manual Supplement S Corp Importing Trial Balance Information This page intentionally left blank Tax Year 2014 69 Drake Software User s Manual Appendix A Trial Balance Import Tax Year 2014 The trial balance import allows data to be imported into a corporation tax return from a trial balance worksheet Drake s specially designed trial balance template and importing function has the fol lowing benefits e Eliminates the need to duplicate entries e Eliminates data entry errors by automatically importing data to the correct fields e Allows preparers to merge basic accounting functions with tax preparation See next page for a flow chart describing the use of the trial balance import EHUHUSUHUHUBUESHUIHUHUS HIBUEDHUHUUHPHUBUBUHUSUHUHUHISUEDHUHESYMDHUEUEUHUHUHVUUHUBUEDHUHESVHDHUECHUHUHEHUUUHIBUEDHDHEHEHDHUEUEUHUHIHUSUHIBUEDHOHIHUH
80. ituation 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 NOTE 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 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 Figure 45 to attach a description of the present and proposed methods used to capitalize direct and indirect costs Parts Lil ParsliV ABC D
81. ive income or LIFO recapture tax could apply to an S cor poration if it was formerly a C corporation or if it engaged in a tax free reorganiza tion with a C corporation Tax Year 2014 13 Tax and Payments Schedule D Drake Software User s Manual Supplement S Corp To determine if the corporation must pay the tax complete the worksheet fields on the lower half of screen 4 If completing the IRS worksheet enter the worksheet results on screen 4 Enter LIFO recapture directly on screen 4 NOTE To force the line 22a worksheet to be printed select the applicable box on screen 4 Use screen 8949 to enter capital gains and losses The net gain from screen 8949 is carried to lines 7 and 8 of Form 1120S page 3 Schedule K Use screen 8949 to enter data for Parts I and II of Schedule D Form 1120S Capital Gains and Losses and Built in Gains Use the D2 screen for Part III Built in Gains of Schedule D Form 1120S For information on using the 8949 import feature in Drake see Form 8949 Imports in Chapter 5 of the Drake Software User 5 Manual Tax Year 2014 Estimated Tax The 1120S does not have a federal estimated tax voucher Estimated tax payments are required only in certain situations An S corporation must make electronic deposits of employment excise and corporate income taxes using the Electronic Federal Tax Payments System EFTPS NOTE Most states do not allow estimates outside of the EFTPS system
82. ke any entries on the L screen All line selections are carried to the SCH2 screen in next year s pro gram when the returns are updated Line descriptions are updated NOTES with the year end amounts carried to the beginning of year column To access the SCH2 screen from the L screen click one of the SCH2 Screen links To create a statement for a line select a line from the Line Number drop list and enter descriptions and their corresponding amounts Once the information is entered press PAGE DOWN to access a new screen If more detail is required than can fit into a Description field press PAGE DOWN and on the new SCH2 screen select the same line number and then add to the description The total amounts entered on the SCH2 screen appear on the L screen in the BOY Totals and EOY Totals columns They are also printed on the return as applicable with references 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 Note that an e fileable STATEMENT is referenced in the return as shown in the example of Figure 14 on page 29 Tax Year 2014 Drake Software User s Manual Supplement S Corp Schedule L Balance Sheet Per Books SCH2 and Trial Balance Autobalance Tax Year 2014 Line Number R3 Mi p Ey op Allowance for Bad Debts Inventories U 5 Government Obligations
83. l on lines 6 9 18 21 and 25 The amounts entered there flow to the appropriate lines when the return is calculated NOTE The retained earnings account can be automatic however it is also used as the balancing account If an amount is entered it is compared with the computed amount If no amount is entered no checking is done and the balance sheet is forced to balance by the program NOTE Auto balance can be turned off from the PRNT screen v Force print Schedules L and M 1 Iv Force print final end of year 2 Beginning of Year a b e i 54321 54321 0 2a Trade notes amp accounts recv 2a 2b Less allowance for bad debts 2b 1111 3 KENeNDEOS n MR 4 U S government securities 5 Tax exempt securities SCH2 Screen tenet c Figure 1 Beginning and End of Year totals displayed on L screen 1 force printing end of year totals 2 Note that the totals from the balance sheet s subsidiary schedule SCH2 screen also appear 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 TIP To speed up calculation of returns that contain multiple states open screen 1 and select 0 from the Resident state drop list Force Printing Schedule M 3 Page 1 of Schedule M 3 is required if the balance sheet s total asset
84. lector field and press ENTER Column A Accumulated Adjustments Account The Accumulated adjustments account column of Schedule M 2 generally reflects the S corporation s accumulated undistributed net income after 1982 Non dividend distributions flow to Schedule M 2 from Schedule K line 16d An entry in the Non dividend distributions field line 7 of the M2 screen adjusts the amount from the K screen subject to limitations see balance sheet examples on the following page See the field help for line 7 for more details Distributions reported on line 7 flow differently from the amount entered on the DIST screen See the previous section Entering Distributions The distributions are lim ited following the ordering rules under Reg 1 1368 2 TIP See Form 1120S instructions for more details and examples These rules are for Schedule M 2 column a 32 Tax Year 2014 Drake Software User s Manual Supplement S Corp Schedule M 2 Analysis of Accounts e Line 1 balance The balance at the beginning of tax year line 1 is either zero or the balance carried forward from line 8 of the previous year Due to prior year net losses and reductions the amount on line 1 can be negative e Changes to AAA The Accumulated Adjustments Account AAA is increased for ordinary income from page 1 line 21 line 2 and other additions listed on line 3 The AAA is then decreased for any loss from page 1 line 21 line 4 and other reductions
85. ly Click the screen 2 link from the States tab or enter 2 in the selector field and press ENTER Company information includes the type of return that applies for state purposes con solidated composite controlled group multi state and state specific dates and num bers for identification Other States Data for other states must be entered manually in state data entry To access state data entry select the States tab from the Data Entry Menu and choose a state or enter the two letter state code in the selector field and press ENTER Multi State Enter sales payroll and property factors on the APPT Multi State Apportionment Appor screen Figure 9 on page 20 This screen provides one central location for entering all tionment 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 The individual state apportionment screens will continue to be available in Drakel4 but will be used to override data entered on the APPT screen No state apportionment related screens will be updated from Drakel12 to Drakel4 Tax Year 2014 19 Additional Information Drake Software User s Manual Supplemen
86. m a partnership estate or trust use screen K1P or KIF Click the screen links on the INC screen or access them from the Other Forms tab To enter additional sources of income not shown use the Other Income itemize field on the INC screen An entry in this field creates a CTRL W worksheet Compensation and Wages Enter shareholder compensation and employee wages on the DED screen Drake has two fields each for officer compensation and employee salaries wages one for non shareholders and one for shareholders The Salaries and wages to non shareholders field is an adjust ment field An amount entered here is combined with any amount NOTES entered in the Labor hired field on screen F The shareholder fields are used for calculating section 179 income limitations see the WK S179L worksheet in View mode Credit A credit adjustment is made for the following forms Adjustments e Form 5884 Work Opportunity Credit Form 8844 Empowerment Zone and Renewal Community Employment Credit e Form 8845 Indian Employment Credit The adjustment is indicated on Form 1120S with the ATT SSW literal Figure 5 on page 10 Actual adjustments are shown on the ATT SSW worksheet in View mode Tax Year 2014 9 Income and Deductions Drake Software User s Manual Supplement S Corp oi omn ath ations PR Bie em oT EUM en ee Total income loss Add lines 3 through aaa aaa ee Figure 5 ATT SSW literal on Form 1120S Compensati
87. main steps are involved in the PDF attachment process in Drake 1 Creating a PDF document to be attached 2 Informing the program that a PDF document will be sent with the return 3 Attaching the PDF document for e filing These steps are described in the following sections Creating a To create a PDF file PDF File 1 Scan the document to be attached to the return TIP Its a good idea to use the DDM scanning feature for this step 2 Save the document to your client s DDM file your computer s desktop or any where you can readily find it Many types of documents for instance documents created in Microsoft NOTE Word can be printed or saved as PDF documents if you have a PDF printer such as Adobe Reader installed Adding PDF To indicate in the software that a PDF document will be sent with the return Documents in Drake 1 Open the return in Drake From the Data Entry Menu click PDF Attachments or type PDF in the selector field and press ENTER See Figure 24 24 a le ee co K Shareholders Pro Rata Share Items ae a ee Uv us So cT ae Electronic Filing i DIST Distributions PIN e File Signature DD Direct Deposit K1 Schedule K1 Shareholder Information PMT Electronic Funds Withdrawal KlG Global Supplemental Information EF EF Selections OWN Shareholder Ownership Changes PDF Attachments Schedule L Balance Sheet FAQ Frequently Asked Questions L Asset
88. marked N A personal property produced oF property acquired ror T sare ander section 263A or alleed vo T 7 ermec rir amp ts under setin 7 7777 ee ee 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 IIT NE 5 prre genes aye x N A Willd oa cons eee EU M RTPERTEOS ELLE x wa mH o ee ee ee ee ee eee NX N A 4 Officers compensation not including selling activities Requires N A 5 Pensionand otherrelatedcosts 2 statement ZNAN N A B EI Lors ace doncc dian Ou o Hop ce Ros oen oe erbe Son ard me NA I N A 7 Indirect materials andsupplies Not applicable l wl wa 8 Purchasing costs 2 llle tothisreturn NNA N A eO angling processing assembly AM repackaging COSIS pesa gute ec ae add Banin Figure 46 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 47 A single statement may contain all necessary explanations for sections B and C Parts Ill Parts Il IV AB C D Parts Il D Part Ill Form 3115 Schedule D Part Ill Me
89. may differ depending on which method of accounting cash or accrual is used Tax Year 2014 11 Income and Deductions Drake Software User s Manual Supplement S Corp Interest Depreciation Line 14 Depreciation Depletion Advertising Using the 1120S instruction guidelines 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 Enter depreciation on the 4562 screen Select a form from the For drop list to associ ate the depreciable item with the correct form or activity Data from the 4562 screens is calculated and carried to Form 1120S and or to the selected schedules or forms For more information on depreciation and the 4562 screen in Drake see the Drake Software User 5 Manual Tax Year 2014 Line 14 of Form 11208 is reserved for depreciation that 1 is from Form 4562 and 2 is not claimed on Form 1125 A or elsewhere While the program pulls data from the 4562 screen for this line it also provides field 14b on the DED screen specifically for depreciation that is claimed elsewhere Both lines 14a and 14b on the DED screen are adjustment fields Line 14a See field level help for further instructions and information on how this field ties in to Form 4562 Line 14b Drake recommends entering depreciation on the 4562 screen and then selecting COGS from the For
90. nformation on the Present Method and Proposed Method in the supplied text boxes and choose the applicable conven tion from the Applicable Convention drop list Options are as follows e HY Half Year e MM Mid month e MQ Mid quarter e S L Straight line Attachments Attached statements are required for many Form 3115 items Depending on the nature of the attachment you will attach statements to the form in one of two primary ways From data entry The ATT screen is the most common screen for attaching statements to Form 3115 The ATT2 screen is used for Part II line 12 and Part Tax Year 2014 65 Importing Trial Balance Information ATT Screen Attachments 66 Additional ATT Fields Drake Software User s Manual Supplement S Corp III line 23b See the Parts I and III on page 57 and Parts II and IV on page 61 sections for more information on completing the ATT2 screen for these items From View mode Used for PDF attachments There are two ways to access the ATT screen in Drake NOTE From the Data Entry Menu In the Change in Accounting Method section of the Other Forms tab click ATT From the line that requires an attachment As shown in Figure 49 some lines have attachment links Click an attachment link to open the ATT screen Schedule C Changes Within the LIFO Inventory Method Part C1 a thru C1 h attachments Chahging within the LIFO inventory methad
91. nge 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 following for details NOTES Applicants filing Form 3115 should refer to Rev Proc 2015 13 for general automatic change procedures and to Rev Proc 2015 14 for a list of automatic changes to which the automatic change pro cedures in Rev Proc 2015 13 apply 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 Parts II IV Form 3115 Parts II and IV e A B C Form 3115 Schedules A B and C e D I II Form 3115 Schedule D Parts I and IT e D III Form 3115 Schedule D Part III As shown in Figure 40 you can access these 3115 screens by clicking a link at the top of any other 3115 screen Pars M Partsil IV ABC O LIl D M Form 3115 Application for Change in Accounting Method General Information Principal business activity code number Tax year of change begs o ue Tax year of change ends z E TUE e Vie Eran oe ee ANS mano Figure 40 Tab links on 3115 screen The next few sections of this
92. nge 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 F1 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 43 If requesting multiple automatic accounting method change requests on one Form 3115 go to screen 3115 and in the Part 1 Information for Automatic Change Request section make a selection from the drop list on line 1a then use the drop lists below line la see Figure 43 to select account method changes being requested Enter information in either Part or Part Ill Part Information for Automatic Change Request 2 Do any of the scope limitations of section 4 02 of Rev Proc 2008 52 apply woe OP b Figure 43 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 r
93. nging 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 Schedules A Use the A B C screen to complete the following sections of Form 3115 B and C e Schedule A Change in Overall Method of Accounting screen covers Part 1 Change in Overall Method e Schedule B Change to the Deferral Method for Advance Payments e Schedule C Changes Within the LIFO Inventory Method screen covers both Part I General LIFO Information and Part II Change in Pooling Inventories Schedule A Part II Change to the Cash Method for Advance Consent NOTE Request requires attachments and is not addressed on the A B C screen Tax Year 2014 61 Importing Trial Balance Information Drake Software User s Manual Supplement S Corp Schedule A Schedule B Schedule C Schedule D Parts and II 62 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
94. nsure that the balance sheet is in balance Import the trial balance worksheet into the return The applicable screens in data entry now contain the figures entered on the trial balance worksheet Enter the amounts on additional screens that require details For more informa tion on data that cannot be imported see Special Conditions on page 53 Compare the M 1 line 1 amount on the trial balance to the M 1 line 1 amount on the calculated return to ensure that they match If the amounts do not match review the imported amounts to ensure that all data was imported If the data appears to have imported cor rectly an M 1 adjustment could be necessary Complete all 8825 or RENT screens in data entry as applicable for the individual rental properties or items Delete the 8825 and RENT screens that were imported from the trial balance the screens reflecting the total rental expenses To delete a screen in data entry open the screen and press CTRL D If a multiple forms list appears ensure that the screen to delete is selected then click Delete Tax Year 2014 Drake Software User s Manual Supplement S Corp Importing Trial Balance Information 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 item New for 2014 Form 3115 Application for Cha
95. nt S Corp Electronic Filing K 1 Items e Form and worksheet references Form and worksheet references are for the benefit of the preparer and client but are not required for the tax return References appear NOTE on tax forms to clarify which worksheets available in View mode cor respond to which calculations and which forms screens certain amounts are carried from The following K 1 items can be forced forcing the program to generate the item on a return e Shareholder s adjusted basis worksheet WK SBAS e K I codes page 2 of the Schedule K 1 The following K 1 items can be suppressed kept from being generated on a return e Related documents Schedule K 1 K 1 cover letter K1 ATT worksheet for K 1 statement overflow and shareholder s adjusted basis worksheet WK SBAS e Marking of Amended K 1 box on printed Schedule K 1 e KI DIST worksheet Overriding Other Setup Options Filing instructions and envelope coversheets can be either forced or suppressed from the PRNT screen to override the global setting in Setup gt Options gt Optional Docu ments tab The PRNT screen also includes options to disable autobalance see Autobalance on page 29 calculate the Form 2220 penalty and prepare an extension Form 7004 based on the data entered on screen 1 See Filing an Extension on page 17 Electronic Filing Tax Year 2014 Steps for e filing Form 1120S are the same as for e filing Form 1
96. oftware User s Manual Supplement S Corp Schedule K 1 for 1120S Shareholder Information Use the K1 screen to enter data for Schedule K 1 Shareholder s Share of Income Deductions Credits etc The program calculates percentage ownership based on the number NOTE of shares owned This amount can be overridden on line F of the K1 screen using the Shareholder s of stock ownership field how ever this not recommended Ownership Changes Ownership changes are entered on the OWN screen which is accessible through the OWN Screen link on line F of the K1 screen or from the General tab of the Data Entry Menu To use the OWN screen e Enter the date of ownership change at the top of the screen e Select the applicable shareholder from the Shareholder s ID Number and Name drop list in the Change in Shares section The drop list consists of the names and ID numbers entered on the K1 screens and is updated automatically e Enter the change in ownership as a positive amount for an increase and a negative amount for a decrease See field level help for more information e To enter additional ownership changes press PAGE DOWN NOTE oee FAQ item P in the program for more information on entering ownership change information Printed Data A Summary of Stock Ownership worksheet WK SOWN is generated listing all shareholders and the numbers of stocks owned along with the changes in ownership Because a shareholder s percentage o
97. on of Officers Form 1125 E 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 7 of Form 11208 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 1120S but not Form 1125 E For privacy reasons you can truncate SSNs on Form 1125 E by enter ing only the last four digits of the officers SSNs in the ID number field INGE RS fce ecce Cam en epe nde final four digits of the SSN Press CTRL F to force the program to accept the number For example enter SSN 123 45 6789 as 000 00 67898 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 does not affect the federal return unless there is no PIN screen 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 Preferred Enter the percentage of prefer
98. on screen 2220 Note that this screen also consists of two screens Late Filing Penalty Drake does not calculate a late filing penalty You can choose to enter a late filing penalty on screen 4 line 24 Estimated tax penalty If you enter a late filing penalty on screen 4 line 24 then IMPORT ANT Form 2220 Underpayment of Estimated Tax will not be included in the e file transmission Direct Deposit of Refunds The IRS requires that Form 8050 Direct Deposit of Corporate Tax Refund be submit ted with an e filed return in order for a corporation s refund to be directly deposited To complete this form in Drake use the DD screen Figure 7 Federal Account and State if same as Federal Deposit selection Federal selection c m Statefaty selection z Name of financial institution RTN Account number Type of account Checking Savings Repeat Account Information Checking Savings Figure 7 Federal section of DD screen also 8050 screen When filling out the DD screen e Ifthe federal refund is to go to the account listed select Yes for the Federal Account selection otherwise select No Default is Yes e Jfa 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 t
99. ormation on completing these fields press F1 or consult the IRS instructions Inventory Inventory amounts entered on lines 1 and 7 of screen A automatically flow to Sched ule L line 3 Inventories Note that the Inventories fields on screen L Assets Liabilities and Equity are overrides Anything entered there overrides the inventory data that flows from screen A Line 5 Other Line 5 of Form 1125 A is designated for any applicable costs not entered on the previ Costs ous lines In Drake two fields on screen A are provided for line 5 one for other costs excluding depreciation and one for depreciation Figure 4 Additional section 263A costs Other costs excluding depreciation Depreciation Inventory at end of year Figure 4 Other Costs and Depreciation In the Depreciation field enter any depreciation that relates to the cost of goods sold unless the amount is flowing from the 4562 Detail screen with COGS selected from the For drop list Note that this field on screen A is an override field an entry here overrides the calculations from the 4562 screen Amounts entered in this field auto matically adjust the total depreciation that 1s carried to page 1 of Form 11208 For Other costs excluding depreciation use a CTRL W worksheet The depreciation amount is included on the statement for other costs and should not be included in the Other Costs worksheet NOTE L
100. ot all trial balance data can be imported directly into a return For information on program limitations see Special Conditions on NOTES page 53 If you are already in the Trial Balance Import tool for the selected return go to the Trial Balance Import window in Drake and start at Step 3 of the following procedure To import a trial balance into a return i 6 T Open the return to which you will import the trial balance information Click Import gt Trial Balance Import from the menu toolbar The preliminary Trial Balance Import dialog box is opened Click Next Enter or select the trial balance file to be imported If necessary click the button to the right of 1 Import File Name to browse to the proper folder By default each trial balance file is an Excel xls file showing the client name and ending in TB for trial balance as shown in the example in Figure 35 See Naming Con vention on page 49 1 Import File Name CADRAKET3ATESCarter s L orpT B ALS Figure 35 Selected file to import Select the Trial Balance Additional Import Options See Additional Import Options following this procedure Click Next and wait for the import to be completed Click Finish The program returns to the Data Entry Menu for the open return 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 re
101. ption Form or Schedule may be required Non financial information must be completed in Drake in addition to the financial data entered in the worksheet All does not carry notes are accompanied by further instructions in the Import to column to the left of the Reported on column as shown in Figure 37 Typically a balance sheet subsidiary schedule SCH2 detail screen for Schedule L is required for an item marked does not carry on the trial balance r ae nan catt AIR Las RC LIZ0S Son L line 1 ege 2 MCI Jer pa n T pee amen 4 d Qd mm t gt mtm n wr Nemore a epar mrt e a m mm uum Tw Vs ofa up na nm S0 L line 4 col d Form 1120S Sch L line 4 col d S0 S0 S0 S0 S0 S0 L line 10a col c Form 1120S Sch L line 10a col c optional S0 L line 10b col c Form 1120S Sch L ip e 10b col c optional sa agito odi aka lini samai s T VP ah niie Apis o unit a tsm se te me tnt F Lamm am Figure 37 SCH2 screen required for do not carry items To complete an SCH2 detail screen in data entry 1 Open the SCH2 screen in the return 2 Select the line number from the SCH2 drop list 3 Enter the applicable item descriptions and beginning and end of year totals To enter details for additional lines of the Schedule L press PAGE DOWN and repeat steps 2 and 3 Data is saved automatically upon entry When the return is produced the Schedule L of the return reflects both the amounts imported
102. r 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 Ill Parts i IV A B C D LI D Ill Form 3115 Application for Change in Accounting Method Multi form code All applicants must complete Parts II and IV Part ll Information for All Requests E 3 Did or will the applicant cease to engage in trade or business to which requested change relates 43 Beginning Date Ending Date Angel acetal Sa ay c ctor LIC MR gh fe sann pitis n mh x Lug ft mm i m ani leit Figure 42 Automatic Change Request information NOTE Not all applicants are eligible to use the automatic change request pro cedures Tax Year 2014 59 Importing Trial Balance Information Drake Software User s Manual Supplement S Corp Part Ill Multiple Accounting Method Changes 60 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 cha
103. r both the beginning and end of year amounts The program adjusts the unappropriated retained earnings amount on Sched ule L by the difference between the total assets and the total liabilities and capital before the adjustment Example If Assets 1 000 and Liabilities and Capital 900 the program increases the unappropriated retained earnings by 100 The program makes the adjustment due to differences in the balance sheet These dif ferences can come from amounts entered incorrectly but are usually the result of one of the following causes e Anasset was deleted from the 4562 screen Depreciation Detail instead of being indicated as sold e Beginning inventory amounts were adjusted on screen A or ending inventory amounts were entered incorrectly e Amounts were erroneously deleted from or changed on screen L 29 Schedules M 1 M 3 Reconciliation of Books Return Drake Software User s Manual Supplement S Corp To reconcile the differences it is best to compare the corporation s beginning and end ing balance sheet amounts for the tax year To deactivate the autobalance feature for a specific return go to the PRNT screen and select Turn off autobalance Schedules M 1 M 3 Reconciliation of Books Return Schedule M 1 Depreciation and Amortization Adjustments 30 Schedule M 1 is required if the balance sheet s total assets at the end of the year are greater than 250 000 Page 1 of Schedule M 3 is requir
104. red 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 Repairs and Maintenance Enter repair and maintenance costs on the DED screen An amount entered there is combined with the amount if any entered in the Repairs and maintenance field on screen F 10 Tax Year 2014 Drake Software User s Manual Supplement S Corp Income and Deductions Bad Debts Use the Bad debts field on the DED screen to enter the total debts that became worth less in whole or in part during the year but only to the extent that such debts related to a trade or business activity Enter deductible non business bad debts as a short term capital NOTES loss on screen 8949 Sales and Other Disposition of Assets Cash method S corporations cannot take a bad debt as a deduc tion unless the amount was previously included in income Rents 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 NOTE combined with the amount if any entered in the Rent fields on screen F Taxes and Licenses Enter tax and license amounts on
105. s Liabilities and Equity PRNT Print Options SCH2 Balance Sheet Subsidiary Schedule Figure 24 Select PDF Attachments or type PDF into the selector field and press ENTER 44 Tax Year 2014 Drake Software User s Manual Supplement S Corp Binary Attachments Attaching Documents to the Return Tax Year 2014 2 Fill out the columns on the PDF Attachments screen See Table 3 for examples Table 3 PDF Attachment Window Columns Reference Source Name or number of regulation IRS Pub xxx 1 4 publication or form instruction that Form Instructions for 1120S makes attachments necessary 3 Exit the PDF Attachments window 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 Because you ve indicated that a PDF document is attached the program generates an EF message page regarding the attachment when the return is calculated To attach a PDF file to a return 1 From the toolbar click View If anything was entered in the PDF Attachments window see Adding PDF Documents in Drake previously there will be two PDF related items in the View Print window e An EF Message item 1 in Figure 25 e An Attach PDF button on the toolbar item 2 in Figure 25 7 SF v 7 V E e Sign Setup Archive Email Refresh Basic View K1 Expor
106. s at the end of the year equal or exceed 10 million and pages 1 3 of Schedule M 3 and Schedule M 1 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 corporation s assets do not equal or exceed 50 million and you wish to file the complete Schedule M 3 go to screen M3 and make a selection from the Force print M 3 drop list Choose to print just page 1 of Schedule M 3 or the complete M 3 See Schedules M 1 M 3 Reconciliation of Books Return on page 30 for more details on these schedules Force Printing Final End of Year Totals Normally if you mark Final on screen 1 Drake zeros out the EOY Totals column of Schedule L A check box has been added to screen L item 2 in Figure 1 to force those totals to be displayed in the EOY Totals column Schedule K Business Activities Statement A Business Activities Statement screen BAS has been added to the 1120S package This statement allows you to break down an S corporation s Schedule K items by business activity See Figure 2 on page 3 A K 1 statement by business activity is also provided 2 Tax Year 2014 Drake Software User s Manual Supplement S Corp What s New in Drake for S Corporations Business Activity Statement 2014 Keep for your records Sub Corporation Narre gl Ess Bee Ess 40 0001120 uim Dante Alighieri 123 12 3123 ACTIVITY NAME S
107. s figured outside of the Drake program and then the net 34 Tax Year 2014 Drake Software User s Manual Supplement S Corp Rental Activities results should be entered on screen 8825 The amount entered on line 14 is added to the depreciation calculated from the 4562 screens NOTE Form 4562 is required for assets placed in service during the year Carrying To indicate that the information should be carried to Form 8825 select 8825 from the Information For drop list on screen 4562 Figure 15 If there are multiple 8825 screens use the to Form 8825 Multi form code box For information on using the Multi form code box see the Drake Software User s Manual Tax Year 2014 Form 4562 41205 COGS 8825 RENT F 3 1 999 1 is assumed if left blank Date Description Acquired Cost Basis Irental units 01 01 2010 554433 i ONE LOT ON T E O TT c CN S E RE cem Figure 15 In this example the program will carry the 4562 information to the second 8825 screen created Any depreciation information entered on the 4562 screen is carried to the correct Form 8825 based on the form and multi form code selections at the top of the 4562 detail screens When selecting a multi form code note that the code should refer to an 8825 screen not the 8825 form For example data from the second 8825 screen will be gen IMP ORT ANT erated on the first Form 8825 To associate an asset with that information you would enter a 2 for the screen not
108. 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 e Part II Change in Pooling Inventories Enter the descriptions of the contents and the base years of the present and proposed pools If any of the conditions on lines 2 4 match the entity s situation click the corresponding attachment link to access the ATT screen where you can complete the required statement Use the D I II screen to complete the following parts of Form 3115 Schedule D Change in the Treatment of Long Term Contracts Under Section 460 Inventories or Other Section 263A Assets e Part I Change in Reporting Income From Long Term Contracts Tax Year 2014 Drake Software User s Manual Supplement S Corp Importing Trial Balance Information e Part II Change in Valuing Inventories Including Cost Allocation Changes If an entity is currently using a LIFO inventory method or submethod NOTE and is changing to another LIFO inventory method or submethod Part ll of Schedule D is not applicable Use Schedule C Changes Within the LIFO Inventory Method instead 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 s
109. ss F1 in any field to learn if a field is required for your selection and the type of information that may be needed For example the help text for the Other date or year ending field shows that the field 1s required only for election options 15 27 28 29 and 31 and it explains what specifically should be entered for each of these elections See Figure 20 38 Tax Year 2014 Drake Software User s Manual Supplement S Corp Elections Drake Software Data Entry Help Other Date or Year Ending direct entry Enter any additional date or year ending information required for the selected eletion Ihe description field is used on the following election statements for this package SIM Use 15 Date of Occurrence 27 Shareholder s signature date 26 Officer s signature date 29 C Corp tax return ending date 31 Shareholder s tax year LN XP ERA Tc T O Figure 20 Help text for Other date or year ending field on ELEC screen If the election option you selected is not listed in the help text for a field NOTE then that field should be left blank For example if you chose election 01 General Election Statement you would not need to enter any thing into the Date or year ending field help text in Figure 20 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
110. t S Corp Sales Payroll Property Additional Property State Apportionment Sales Factor Inc ME CT 123123 94321 112733 10203 State Selection Required field fw Zero Apportionment No Activity in State Sales Outside state to inside siete State drop lists Within state to within stal Within state to LI S Gove So Throwback nontaxable jurisdiction Zero apportionment Returns and Allowances Outside state to inside state Within state to within state m ie State tg Us Govern Mer Sane TURN Figure 9 APPT Multi State Apportionment screens Mark the Zero Apportionment check box Figure 9 to add a state NOTE but not include any apportionment data This will include the state on the apportionment summary worksheet SA SUM available through View mode APPT Screens The APPT screen is opened to the Sales tab Links at the top of this screen take you to the Payroll Property and Additional Property tabs for each state selected Figure 9 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 men
111. t applies for either depreciation or amor tization 1 The amount reported on Schedule L Beginning of Year accumulated deprecia tion line 10b column a is subtracted from the End of Year accumulated depre ciation line 10b column c This is the book depreciation amount 2 This book depreciation amount is compared to the tax depreciation amount The tax depreciation amount is calculated from the Forms 4562 including any section 179 amounts Tax Year 2014 Drake Software User s Manual Supplement S Corp Schedules M 1 M 3 Reconciliation of Books Return Schedule M 3 Accessing the M3 Screens 3 The difference between the book and tax depreciation amounts is carried to the appropriate form and line e Ifthe book depreciation amount is greater than the tax depreciation amount the difference is carried to one of the following locations Schedule M 1 line 3a Schedule M 3 Part III line 24 as a negative amount Form 8916 A line 21 as a negative amount for assets selected on the 4562 detail screen for COGS e Ifthe tax depreciation amount is greater than the book depreciation amount the difference is carried to one of the following locations Schedule M 1 line 6a Schedule M 3 Part III line 24 as a positive amount Form 8916 A line 21 as a positive amount for assets selected on the 4562 detail screen for COGS Any
112. t 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 NOTE screens in Drake14 will become the Beginning amount for property on the APPT screen when the client s return is updated next year in Drake14 You may enter up to four states on one APPT screen If you need more than four states press PAGE DOWN for a new APPT screen The same state can be entered more than once when additional fields are needed select OT Other Reconciliation from the State Selection drop list when using the reconciliation worksheet Not every item appearing on the federal return may be sub ject to multi state apportionment When you select OT the data entered becomes a reconciling adjustment amount to aid in tying to the federal return 20 Tax Year 2014 Drake Software User s Manual Supplement S Corp Schedule K Shareholders Pro Rata Share Items Contact Information Enter as much or as little detail as the states require If a state does not require any information to be entered no information will flow to that state s return If certain contact information required for state purposes is different from that entered on screen 1 use screen 2 for the alternative data for any of the following entities e Registered office e Principal place of business e Books in care of information S
113. tates 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 S Corporations Table of Contents Table of Contents What s New in Drake for S Corporations eee 1 FO NEXU CPRTTTTLTCTTTTT rrTTPTT l Schedule Land M2 s occu ao ween AERA eso E Eau EA d ES ESSE FERES SZ UPATAR EREE SE S l Force Printing Schedule MSS 3 u22 566440 EE ete enere GTI EEEE has S T PES RS CERE E S 2 Force Printing Final End of Year Totals anaana anaana 2 SCEE eeaeee e E E EER essen NERI 15 ERN EEEE E A 2 Safe Harbor PICCHONS s oes Ha dioe Rr SOEUR a ES EEE Sur Ra e e 3 PStimated axes DC ello cama 9a mE HER newee ERRARE SAQUE REPRE RAE ESI M EPI 3 Other t Manes oos ka cr Hee oor STE et deg ep RU ur Q0 NES Sp qutapQ ae UP DNUS Sq 9 Hannes a 4 3 sip Elc TIPP TUTTI 4 Updating a Prior Year Retumin Drake sias ere ERE RRRR ORG Rea ri 9d AH VU Rp de n 4 Indicatine an 9 Corpora ON ccs a i ooi ch 3 9 nom doom a ctn absque FR ered bead E eee ees 4 Other Information and Overrides s aces med Nee ERE RASEN RA d eS e ead Sup eme sews 5 rear IBIOHDSUO uuo du ado 2o rA E se ee AI EE A E RRAEAU RENE eases sae eaae Rd 5 Nane and a EesS 44 v nc cae wid onem esae Umque due TERT SP E SES PIU PAR TU RE 5 Tax Wedlaauncweesyeset eon eee E E ae meee nee aoa bah eee
114. the DED screen Amounts are combined and the sum generated on Form 1120S line 12 Taxes and licenses Note that credit from Form 8846 Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips should be entered on screen 8846 which is accessible via a link from the DED screen These amounts also appear on the Taxes and Licenses Attachment referred to on line 12 with the printed ATT STL reference Figure 6 y e Reyass and tanas nateo ru LT ro a puc ee oq Rer A oo JP ea ae 4B BaedHebb ino sono 4o nn dokn DROS G a E Re CURAE Re S SER E eas EGS 44 Reni 2 222 2 2 42 Taxesandlicenses K 11 457 4 MIES 26 se bk Oa os mcg meno AED EES ARE xRUNOE RUE EU E EV x 44 Depreciation nat claimed on Form 1125 or elsewhere on return attach Form 4562 a 45 Depletion Da not deduct oil and gas depletion ee a ae a ee ee P M ai um ain E E um ne cy wl Figure 6 Notification on line 12 of the 1120S return that the Taxes and Licenses attachment has been produced with the return To keep the notification from appearing on line 12 of the return go to the PRNT screen and select Suppress printing of form and attachment references State tax amounts income tax and franchise tax entered on the ES Estimated Taxes screen are carried to the tax computation ATT TAX worksheet The state tax amount carried from the ES screen
115. the return The Other Information column in the trial balance worksheet indicates special con ditions and additional information regarding certain rows Table 5 describes the most common notes in this column Table 5 Other Information Column Notes Note not included in totals does not carry optional include deficit as negative number import includes the calculated change in inventory Description The amount is required for importing purposes only but is not included in the totals shown on the trial balance Information cannot be imported and must be entered on the appropriate screen in Drake Screen is specified in Reported on column Amount is optional not required for import but could require direct entry in the software Some deficits must be entered as negative numbers Used for total purchases when calculating cost of goods sold COGS in the return the program takes the change in inventory into account for the Form 1125 A calculation 53 Importing Trial Balance Information SCH2 Detail M4 tmt ttr f U S government securities Tax exempt securities Other current assets Loans to shareholders Mortgage and real estate loans Other investments Buildings and other depreciable assets Accumulated depreciation delenie h Depreciation 54 Pr a rere Drake Software User s Manual Supplement S Corp Table 5 Other Information Column Notes Note Descri
116. thod of Cost Allocation Section A Allocation and Capitalization Methods D3 1 attachment Allocation and capitalization methods detail Multi form code m 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 lone demd c c o m Une rece erc mrs Ix m hs SX cr E E B hs x 3 Indirectlabor ae eon M M me PN in tenencia cu agmen suiit c atn nsi n iiin a iih ai nlt iie PETI EET i dae ede Figure 47 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 Schedule E Use screen 311E accessible from the Other Forms tab to complete Schedule E Change in Depreciation or Amortization If changing this method under the automatic change request proce NOTE dures see the List of Automatic Accounting Method Changes in the IRS Form 3115 instructions 64 Tax Year 2014 Drake Software User s Manual Supplement S Corp Importing Trial Balance Information Screen 311E Unlike the other 3115 screens screen 311E contains two multi form code text boxes Multi Form Codes Multi form code for 3115 This box is applicable if the return contains more than one Form 3115 Enter the code for the instance of the 3115 screen with which this 311E screen should be associated e Multi form code for Sch E Th
117. ting periods the entity must submit to the IRS Form 3115 Application for Change in Accounting Method 42 Tax Year 2014 Drake Software User s Manual Supplement S Corp Binary Attachments Inactive Returns In subsequent years only the 52 53 week tax year check box on screen 1 must be marked the program automatically updates the dates Entities that are inactive but are 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 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 required by the IRS in order for amounts to be properly included in the e file data NOTE All EF messages must be cleared in order to e file an inactive return For detailed instructions on e filing returns in Drake see Drake Software User 5 Man ual Tax Year 2014 Common Error Codes If one or more of the following IRS error reject codes is generated when e filing an 1120S return the preparer must contact the IRS for further information The IRS e Help Desk telephone number is 866 255 0654 e Reject Code R0000 900 01 The return type indicated in the return header must match the return type established with the IRS for this EIN If you get this rej
118. tters with all returns you can take the Letters for following steps to generate letters for a single return Single Return 1 Open the return and go to screen K1L Tax Year 2014 25 Schedule K 1 for 1120S Shareholder Information Drake Software User s Manual Supplement S Corp 2 Atthe bottom of the screen enter the name and title of the person who will be signing the K 1 cover letter 3 optional Mark Do not print entity information at the bottom of the screen in order to prevent the corporation s name and address from being generated in the header of the K 1 letter To have the corporation s name and address generated for K 1 let NOTE ters go to Setup Communications Editor Setup Letterhead Margins and Borders and select Use letterhead on letters The let terhead is derived from information entered on screen 1 Once the required signing information has been entered a K 1 cover letter will be generated for each shareholder receiving a K 1 Editing the As with other letters provided by the program you can edit the text to suit your office K 1 Letter needs and style Review the following sections of the Drake Software User s Manual T Tax Year 2014 before making changes to letter templates IP Introduction to Letters in Drake in Chapter 2 Installation amp Setup The Letter Keywords section of Appendix B Keywords To edit the text of the K 1 letter 1 From the Home window select Setup
119. turn If the program does not calculate the trial balance information as NOTE expected you can return to the trial balance worksheet make adjust ments and import the worksheet again Tax Year 2014 Drake Software User s Manual Supplement S Corp Additional Options Importing Trial Balance Information The program can import the following additional information when importing the trial Import balance data select the items to import or click Select All Buildings amp other depreciable assets Accumulated depreciation Land Accumulated amortization Goodwill amp other intangible assets 8825 Rent information Cost of goods sold depreciation Special Conditions Details for Preparers Tax Year 2014 Some items cannot be entered into the trial balance worksheet and must be typed directly into data entry Other items should be entered into the worksheet for balance purposes but are not imported to data entry these must be entered separately and the calculated results compared to the trial balance worksheet Most items go directly to the location indicated in the program and on the 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 4 Schedule L line 1 column d of the 1120S return L line 2a col c Form 11205 Sch L line 2a col c ml ons Fired UO Coles ea Hy cnl eo Figure 36 Indication of where an amount will go in Drake and on
120. ule K 1 for 1120S Shareholder Information On the 8903 screen if the Print K1 8903 for each shareholder box is not selected the amounts flow to the K 1 box 12 with codes Q and R When this box is selected the information flows to attachment K 1 8903 Figure 12 instead of box 12 on the K 1 Attachment K1 8903 is referenced on a statement Code P is printed on box 12 of Form K 1 which refers to domestic production activities information AllForms Sets EF Federal Worksheets Notes Messages North Carolina L K1 8903 5 K1 88257 Shareholder Amelia Carter Domestic Production Activities Deduction SSN EIN 243 24 3243 Percentage 50 Attachment b Attach to your tax return f See separate instructions Sequence No 143 A fentiting number EssBeeEss 40 0500600 Note Do not complete column 8 unless you have cil related a b production activities Enter amounts for all activities in column b Al Bgm including cil related production activities Oil related production activities activities 1 Domestic production grossreceipts DPGR 16 666 2 Allocable cost of goods sold If you are using the small business simplified overall method skip lines 2 and 3 s2 222 3 Enter deductions and losses allocable to DPGR see instructions I3 0 27 777 4 If you sre using the small business simplified overall method enter the amount of cost of goods sold and oth
121. ust use the fiscal year fields in the If not calendar year section of screen 1 if the date of election as an S corporation occurs after the start of the tax year if the date entered on line A of the General Informa tion section of screen 1 comes after January 1 2014 In the Fiscal year begins field enter the date of election as an S corporation In the Fiscal year ends field enter the end of the calendar year or the end of the fiscal year if not using a calendar year Tax Year 2014 Drake Software User s Manual Supplement S Corp Income and Deductions Boxes A through Enter most information for boxes A through I top of Form 1120S on screen 1 Note that boxes C M 3 attached and F Total assets are completed automatically by the program based on data entered elsewhere Other boxes are Box A S election effective date Box B Business activity code From screen 1 choose a code from the line B drop list or click in the line B field and press CTRL SHIFT S to search for a code Box D Employer Identification Number EIN program uses setup data as default Box E Date incorporated Item G Indicates first year as S corporation and inclusion of Form 2553 with return Item H Check boxes for final return name change address change amended return and S election termination or revocation Item I Number of shareholders during the year completed automatically based on the number of K 1s number
122. xpense 11 income 8 inventory 7 K K 1 Schedule for 1120S 21 27 L labor 9 letters K 1 25 maintenance costs 10 Multi State Apportionment 19 Tax Year 2014 Drake Software User s Manual Supplement S Corporations N name change 6 net operating losses NOL 34 next year depreciation listing 40 number of shareholders 6 O officer compensation 9 ordinary gains and losses 8 other adjustments account 33 costs Schedule A 7 income loss 8 ownership percentages 10 P passive income 13 PDF binary attachments 4 43 46 percentage stock and ownership 10 PIN electronic signatures 16 printing cover letter for K 1 26 K 1 items 22 line 22a worksheet 13 statements for Schedule L 28 suppressing forcing documents 40 R real estate 54 receipts 7 references to forms and worksheets 40 refunds direct deposit of 14 state tax 8 reject codes 42 rent paid on business property 10 rental activities 34 36 repair costs 10 retained earnings reconciliation worksheet 40 returns 52 53 week year 41 amended 17 bankruptcy 41 extensions for 14 16 fiscal and calendar year 5 inactive 42 short year 5 signing 16 tax exempt organizations 990 43 46 updating prior year 4 Tax Year 2014 Index revocation of S election 6 S S corporation changing to 4 electing as 4 termination of 6 Safe Harbor 39 Safe Harbor Elections 37 39 scanning PDFs for e filing 43 SCH2 screen for Schedule L 28 Schedule B Oth

1120S, S Corporation Supplement

Contents

Download Pdf Manuals

Related Search

Related Contents