ADVANCED TAX CONCEPTS
- Tax Planning - The graduate applies knowledge of tax laws for planning and compliance purposes.
- Taxation of Complex Corporate Transactions - The graduate determines the proper tax treatment for business transactions including formation, reorganization, distribution and liquidation.
- Tax Return Preparation - The graduate prepares federal tax returns with IRS forms, schedules, and related reporting requirements.
Task: Corporate Tax Return
Introduction:
A tax professional prepares various types of tax returns. When a client hires a tax accountant, it is a reasonable expectation that the accountant is well-versed in current tax laws for both planning and compliance purposes.
This task will allow you to apply your tax knowledge to a real-world tax scenario. To complete this task, you must generate and submit Form 1120S with all supporting forms, schedules, and statements. The tax forms needed to complete this task need to be retrieved using tax software, and you may use the "IRS Forms and Publication" web link below as reference only.
Scenario:
You are a local CPA that has been hired by Mrs. Smith to prepare a tax return for Endothon Company a local business. The firm manufactures widgets at their factory located in town. The business was incorporated on March 1, 2012, and filed a timely entity classification election and Selection on that date. The business uses the hybrid method of accounting for tax purposes. Mrs. Smith has provided you with the necessary information for the tax return, which is included in the "Client Organizer Task 1" attachment. Endothon Company properly accounted for all income in its bookkeeping system, including income that vendors did not report to the IRS.
The business's employer identification number is 12-3456789, both its mailing and physical address is 4801 South Commercial, Key West, FL, 33040, and its shareholders are Aerri Hawkins and Judith Smith. Their ownership details are provided in the "Client Organizer Task 1" attachment.
The business purchased a new lathe on July 15, 2014, for $250,000. Mrs. Smith informs you that she wants to deduct as much of the lathe's cost as possible on this year's tax return.
In response to the enactment of the Affordable Care Act, on January 1, 2014, the business created a group health insurance plan. The business has 10 full-time employees and 30 part- time employees (plus three officers). According to the payroll records provided to you by Mrs. Smith, the part-time employees worked a total of 34,320 hours in 2014. The firm pays 70% of the premium for single-only coverage for the 10 full-time employees and allows the part-time employees to participate in the plan if they pay their entire cost. The cost for single-only coverage is $480 per month. The business does not allow part-time employees to work more than 25 hours per week.
The business is in possession of two Work Opportunity Tax Credit certificates issued by the Florida Department of Economic Opportunity. One certificate is for Jane Frederick. The certificate indicates that Jane was hired on March 1, 2014, and certifies her as a "Veteran with a Service- Connected Disability." Mrs. Smith provides you a copy of Jane's W-2 that indicates she was paid $16,000 during the year, and Mrs. Smith informs you that Jane is a partially disabled Iraq War veteran who worked 1,300 hours last year as a machine operator but left the firm on January 5, 2015. The other certificate is for Stewart Lawrence. The certificate indicates that Stewart was hired on October 15, 2014, and certifies him as a "Designated Community Resident." Mrs. Smith provides you with a copy of Stewart's W-2 that indicates he was paid $22,500. She informs you that Stewart worked 380 hours last year as the plant superintendent and is continuing to work full time with the firm.
Requirements:
A. Submit a completed page 1 of Form 1120S using the information in the scenario and in the "Client Organizer Task 1" attachment, including all supporting forms, schedules, and statements but excluding worksheets.
1. Include the correct number for "Total Income (Loss)" on line 6.
2. Include the correct number for "Depreciation" on line 14.
3. Include the correct number for "Employee Benefit Programs" on line 18.
4. Include the correct number for "Total Deductions" on line 20.
5. Include the correct number for "Ordinary Business Income (Loss)" on line 21.
B. Complete Schedule K in Form 1120S using the information in the scenario and in the "Client Organizer Task 1" attachment.
1. Include the correct number for "Interest Income" on line 4.
2. Include the correct number for "Other Credits" on line 13g.
3. Include the correct number for "Nondeductible Expenses" on line 16c.
C. Complete Schedule K-1 for Mrs. Smith in Form 1120S, using the information in the scenario and in the "Client Organizer Task 1" attachment.
1. Include the correct number for "Ordinary Business Income (Loss)" on line 1.
2. Include the correct number for "Section 179 Deduction" on line 11.
3. Include the correct number for "Credits" on line 13j.
D. When you use sources, include all in-text citations and references in APA format.
Attachment:- Assignment Files.rar