The Form 1120S has less lines to fill out in the total income section than the Form 1120, but that doesn't mean it's easier to complete. S-Corporation tax code dictates that certain income items such as interest, dividends and capital gains are reported differently than C-Corporations. They are separately stated based upon your ownership percentage in the S-Corp.
Because of this, S-Corp returns are a little tricky to do yourself. While it's always good to have a basic knowledge of how your tax returns are prepared and some returns are well within the ability of the business owner to complete, I recommend that you seek advice from your accountant or hire a tax preparer for the Form 1120S preparation.
Using the Profit and Loss for Metropolitan Arts & Crafts as your example (shown on Page 1 of this tutorial), here's how to fill out the income section of Form 1120S line-by-line:
- 1a:Enter Craft Show Income - Other for $75,600
- 1b:Enter Sales Returns & Allowances for ($465)
- 1c:Enter Total Craft Show Income for $75,135
- 2: Cost of Goods Sold for $38,754
- 3: Enter Gross Profit for $36,381
Report on line four the gain or loss if you sell any asset used in your business (except inventory).
Line five Other Income is any income that doesn't logically belong on any of the other lines. Remember from my discussion above, this does not include interest, dividend or captial gains income.
Add and substract each line as appropriate. Congratulations! You've figured your S-Corporation Total income.