Requirements for Tax Return Project
You are working as a paid tax preparer for a Portland accounting firm. Your supervisor has asked you to prepare the 2021 Tax Return for ABC Corporation.
The information needed to complete the 2021 Tax Return can be found in TaxReturnProblem.docx
Deliverables
- 2021 Tax Return. You should upload one PDF or Word file (total of 8 pages) including:
- Form 1120 (6 pages including Schedules C, J, K, L, M-1, and M-2)
- Form 1125-A Cost of Goods Sold
- Form 1125-E Compensation of Officers
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- Enter your 4- digit codes (6789) in Paid Preparer’s block (PTIN) on page 1 Form 1120. You should sign and date the return (penalties for tax preparers are stiff). You will be penalized if you do not give the Paid Preparer’s PTIN of 6789.
- Due on Tuesday, February 22nd. The Project should be submitted on Canvas.
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Comments on IRS Forms
Form 1120 (6 pages)
Use Form 1120, U.S. Corporation Income Tax Return, to report the income, deductions and to figure the income tax liability of a corporation.
Form 1125-A
Use Form 1125-A to calculate and deduct cost of goods sold for certain entities.
Form 1125-E
Certain entities with total receipts of $500,000 or more use Form 1125-E to provide a detailed report of the deduction for compensation of officers.
Tax return project
Prepare Form 1120 for ABC Corporation.
ABC Corporation was formed on January 2, 1978. ABC is in the business of retailing custom fireplaces and accessories and is located at 150 Clerk Road, Newtown, OH 45105. The corporation’s business code is 442299 and its employer identification number is 88-0022330.
Stock ownership and officer compensation are as follows:
S. Reed # 347-54-1212 50% $60,000
E. Reed #379-12-5447 25% $20,000
J. Reed #406-23-4567 25% $20,000
S. Reed devotes 100% of his time to the business; E. Reed and J. Reed together devote 50% of their time to the business.
The corporation made cash distributions of $50,000 on March 15, 2021, and $78,000 on September 15,2021. The distributions were made in proportion to stockholders.
The corporation’s purchase of additional office equipment at a cost of $10,000 was the only asset transaction during the year.
Estimated tax payments of $6,250 each were made on April 14, June 14, September 14, and December 14.
Additional data include:
|
Sales
|
$538,262
|
|
Sales returns
|
20,000
|
|
purchases
|
205,000
|
|
Dividend income*
|
1,000
|
|
Interest- city of Chicago bonds
|
1,500
|
|
Wages
|
30,000
|
|
Advertising
|
18,000
|
|
Repairs
|
800
|
|
Bad debts
|
2,000
|
|
Rents
|
15,000
|
|
Taxes
|
8,000
|
|
Charitable contributions (nonpolitical)
|
1,400
|
|
Depreciation form 4562 (not shown)
|
20,000
|
*Dividends from less-than-20%-owned domestic corporation.
|
Financial Balance Sheet
|
Beginning of Year
|
End of Year
|
|
cash
|
$41,200
|
$35,700
|
|
Account Receivable
|
65,000
|
53,062
|
|
Inventories
|
40,000
|
45,000
|
|
Investment
|
10,000
|
10,000
|
|
Depreciable assets
|
198,000
|
208,000
|
|
Accumulated depreciation
|
(20,000)
|
(40,000)
|
|
Account Payable
|
30,000
|
35,000
|
|
Capital Stock
|
150,000
|
150,000
|
|
Retained Earnings
|
|
|
|
Unappropriated
|
154,200
|
?
|
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