2017 S CORPORATION TAX RETURN PROBLEM

Facts

William Spicer (SS# 123-45-5789) owns 80 percent of the stock in Bills Market, an accrual basis gourmet food market operating as an S Corporation. It is located at 387 Spring Street, Raleigh,

NC 29288. Williams wife, June (SS# 987-65-4321), owns the other 20 percent of the outstanding stock of the corporation but she is not active in the business. The Markets EIN is

79-7979797 and its business code is 445290. It was incorporated on July 15, 2006 an elected Corp status on that date.

During 2017, the Market had the following results from its operations:

Gross sales ($1,300,000 from credit card sales) $3,700,000

Merchandise purchases 2,480,000

Expenses:

Advertising $40,000

Charitable contributions 2,000

Cleaning/maintenance 12,000

Depreciation (MACRS pre-2017 purchases) 3,000

Section 179 expense (2/1/17 display case) 5,000

Payroll taxes (excluding FICA on Williams salary) 18,000

FICA on Williams salary 10,247

Williams salary 200,000

Health insurance 15,000*

Insurance (excludes health) 18,000

Interest expense 1,000

Licenses/fees 4,000

Meals/entertainment 10,000

Office expenses 14,000

Rent 120,000

Salary/wages 210,000

Travel 8,000

Utilities 32,000

*Includes $3,000 for health insurance for William and his family.

The Market sold a unique piece of equipment for $13,000. It had originally cost $5,000 when purchased on March 5, 2013; it had an adjusted basis of $3,000 when sold on August 15, 2017.

The Market also sold a display case for $1,000 on December 12, 2017, that had cost $12,000 when purchased on June 6, 2012; it had an adjusted basis of $4,000 when sold. The gains or

losses on these asset sales are the same for tax and financial accounting. The business complies with all Form 1099 requirements.

Information specific to the corporate form:

The S Corporation made estimated payments for its own State of North Carolina taxes of $10,000 and withheld $45,000 from Williams salary for income taxes. For financial accounting, the corporation does not expense the new display case but deducts $1,000 of depreciation expense. It has a beginning balance of $200,000 in its retained earnings account and made a $25,000 distribution to its shareholders on December 31, 2017.

The corporations beginning and ending accrual-basis balance sheets for 2017 are shown below:

Jan. 1, 2017 Dec. 31, 2017

Assets:

Cash $62,000 $ 224,753

Acc Rec 37,500 332638

Inventory 340,000 340,000

Tax Refund 5,462

Plant, Prop&Equip $80,000 $68,000

Less: Acc Deprec. 62,000 59,000

18,000 9,000

Total Assets $457,500 $911,853

Liabilities and Equities:

Accounts Payable $20,000 0

Deferred Tax Liability 0 $600

Note Payable 12,500 12,500

Common Stock 225,000 225,000

Retained Earnings 200,000 673753

Total Liab.&Equities $457,500 $911,853

Note that any unaccounted for differences between Financial Statement Income and Taxable Income should be considered timing differences from depreciation methods for Schedule M.

you'll nedd to file the tax for s corporatioin.

Please download the necessary forms.

1120s, form K-1, form 941 and form 940

THIS FORMS AREAVILABLE ONLINE FOR DOWNLOAD.