How to complete 2020 Form 1120S page 1: Deductions?
Do you need to Complete Form 1125-E Compensation of Officers?
If you are an S corporation and file Form 1120S, you would need to complete Form 1125-E if you pay compensation to your officers and your total revenues for the year is $500,000 or more.
Check page 1 of Instructions for form 1125-E Total Receipts to determine the income to factor in the calculation of total receipts.
If you are not required to complete Form 1125-E, you don’t need to attach it either to form 1120S.
Line 7: enter the amount paid to officers as salaries or compensations
Line 8: enter the amount paid to your staff members that are not officers
Chances are a partner or shareholder that works in the business would be an officer. Therefore, the salary would be on line 7.
If you make distribution to your partners that work in the business, these distributions must be treated as salaries or wages for the service they performed in the business up to a certain point that is presumed reasonable amount for the work they performed, before you can treat the remaining distribution as distribution that is not wages and not subject to social security and Medicare Tax.
If it is you the only owner of the business or the only one that works in the business, you could use “Federal Tax Withheld Record Spreadsheet” from our Free Downloads to track and record your compensation during the year to make your tax completion easier.
If you claim CARES Act Employee Retention Credit, you would deduct amounts on line 7 and 8 by the credit. But read more in the instructions for Form 1120S.
Line 12: Taxes and Licenses: Page 17 or Instructions for Form 1120S for detail
Line 13: Interest: Page 17 of 2020 Instructions for Form 1120S for more detail.
Line 14 Depreciation. Do not include Section 179 on this line. It would go on Schedule K and Schedule K-1.
Example of how to track depreciation deductions for business assets placed in service in prior years:
If you placed assets in service in 2020 and would depreciate them, you need to complete Form 4562 Depreciation and Amortization.
How to deprecate assets placed in service during the year:
To learn how to complete Form 4562 Depreciation and Amortization or how to depreciate your business asset, would you please check our category How do You Depreciate a Business Asset.
Do you need to enter your business revenue on Form 1120S? Would you check the process: 2020 Form 1120S-1
The video is an example of how to complete 2020 Form 1120S
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