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• The part of business gifts over $25.
• Expenses of an individual over $2,000, which are allocable to conventions on cruise ships.
• Employee achievement awards over $400.
• The cost of entertainment tickets over face value (also subject to 50% limit under section 274(n)).
• The cost of skyboxes over the face value of nonluxury box seat tickets.
• The part of luxury water travel expenses not deductible under section 274(m).
• Expenses for travel as a form of education.
• Other nondeductible travel and entertainment expenses.
For more information, see Pub. 542.
Line 7, Form 1120 (Line 6, Form 1120-A)
Include as interest on line 7 (line 6, Form 1120-A), any exempt-interest dividends received as a shareholder in a mutual fund or other RIC.
Paperwork Reduction Act Notice. We ask for the information on these forms to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103.
The time needed to complete and file the following forms will vary depending on individual circumstances. The estimated average times are:
Copying, assembling, and sending the form to the IRS
8 hr., 2 min.
5 hr., 5 min.
1120 1120-A Sch. D (1120) Sch. H (1120) Sch. N(1120) Sch. PH (1120)
70 hr., 47 min. 43 hr., 45 min. 6 hr., 56 min.
5 hr., 58 min.
3 hr., 35 min. 15 hr., 18 min.
Learning about the law or the form
42 hr., 1 min.
24 hr., 34 min.
3 hr., 55 min. ' 35 min.
1 hr., 7 min.
6 hr., 12 min.
Preparing the form
72 hr., 56 min.
49 hr., 3 min.
6 hr., 3 min.
3 hr., 6 min.
8 hr., 35 min.
32 min. 32 min.
If you have comments concerning the accuracy of these time estimates or suggestions for making this form and related schedules simpler, we would be happy to hear from you. You can write to the Tax Products Coordinating Committee, Western Area Distribution Center, Rancho Cordova, CA 95743-0001. Do not send the tax form to this address. Instead, see Where To File on page 3.
Instructions for Forms 1120 and 1120-A
Figure A.12 (Continued)
Form 1120S, U.S. Income Tax Return for an S Corporation
This form looks much like the tax form for C corporations, and it is. The difference is how the $36,000 of ordinary income on line 21 is handled. As we are dealing with the ordinary income of an S corporation, the corporation does not pay tax on it, but the stockholders pay tax on the $36,000 whether or not those earnings are paid over to the stockholders.
In this case, the stockholders not only receive forms W-2 for their salaries of $40,000 each, but they also receive a Form K-1 reporting $12,000 of additional income on which they get to pay income tax. (Only one Form K-1 is reproduced here, but as each of these three stockholders own 33.3 percent of the corporation, each would receive an identical Form K-1.) There is some savings on Social Security tax, however. While the wages are subject to Social Security tax, the stockholders do not pay Social Security tax on the additional $12,000 each, whether or not they actually receive that in cash payments.
The S corporation also made a $1000 contribution to an eligible charity. This item is not deducted in computing the income shared by the stockholders, but one third of that amount is listed separately on the K-1 that each stockholder receives. That stockholder then lists that $333 contribution on his or her individual income tax return as an itemized deduction. (If the stockholder does not itemized deductions, the tax benefit of the charitable contribution is lost to that stockholder.)