Fill out a 1125-E Compensation of Officers Form

FACTS Firm & Staff Preparing the Form 1120 You work for a CPA firm by the name of Paid, Penalty & Paperwork (PPP). Your preparer identification number (PIN) is P00319575. Paid, Penalty & Paperworks address is 175 Compensation Drive, Hacienda, CA 91745, its email address is preparer_name@ppp.com, and its phone number is (213) 535-7895. The firms EIN is: 77-7268503. The Clients Background USI is a retailer of consumer goods from brands with a demonstrated commitment to sustainability and the overall welfare of the environment. USI is a C corporation for federal and state purposes. It is a calendar year taxpayer, files federal Form 1120 and utilizes the accrual method of accounting. USI files as a single entity for U.S. federal income tax purposes; it remained a single entity for tax year 2021. USI paid federal estimated tax payments over the course of tax year 2021, and has indicated that it wants any overpayment of federal tax to be refunded. USIs address is 18 Patagonia Way, Hacienda, CA 91745 and its phone number is: (213) 123-4567. Its Employer Identification Number is 56-2358793. It was incorporated in California on June 1, 2015. It is a privately-owned (non-public) corporation that is not a subsidiary in an affiliated group or a parent-subsidiary group. The only shares of USI are in the form of common stock; there are no preferred shares. The President of the corporation and only corporate officer authorized to sign its tax returns is Natalie McAugh, who is a citizen of the USA. Her social security number is 897-36-2872 and Natalie owns 55% of the shares of the corporation. She has owned 55% of the shares since the corporation incorporated. She spent 2,320 hours working for the corporation and was paid gross wages of $120,000 in 2021. She received no bonuses or other incentive-based compensation in 2021. The $120,000 of wages is comprised entirely of her base salary. Natalies home address is 138 Gilman Road, Hacienda, CA 91745. The Chief Financial Officer, Treasurer and Secretary of the USI is Jane Chambers. She also works as the corporations head salesperson at the companys largest store. She spent 2,632 hours working for the corporation and was paid gross wages of $92,000 in 2021. Janes social security number is 854-72-4923 and her home address is 8 Yarkley Way, Hacienda, CA 91745. Jane does not own any shares in the corporation. She is a citizen of the United States. There are no other officers for the corporation. Tiffany Lyons and Jeremy Hiller are the two other shareholders in the corporation. Throughout 2021, Tiffany owned 40% of the common stock and Jeremy owned 5%. They have each owned the same percentage of the corporations stock since it was incorporated. Both Tiffany and Jeremy are U.S. citizens. Tiffany and Jeremy did not work for the corporation at all in 2021; they are only investors. Tiffanys social security number is 732-63-9811 and her home address is 282 Solatare Avenue, Aptos, CA 95003. Jeremys social security number is 285-60-9302 and his home address is 162 Convue Court, San Mateo, CA 94010. 2021 Income Statement Revenues Gross sales1: 825,000 Dividends: 10,000 Bank Account Interest: 350 Interest on U.S. Treasury Bonds: 420 Santa Clara County, CA Bond Interest: 180 Cost of Goods Sold2 Inventory as of 1/1/18 of: 100,000 Inventory purchased during 2021: 283,487 Inventory as of 12/31/18 of: 220,000 Other Expenses Store rent: 36,000 Advertising Services: 59,438 Office Supplies: 8,732 Repairs and maintenance: 7,240 Depreciation: 2,100 Entertainment: 2,000 Employee meals (on business trips): 5,400 Charitable Contributions: 9,500 Wages (Natalie): 120,000 Wages (Jane): 92,000 Wages (other employees)3: 108,888 Federal Withholding: 58,330 Other Income (Expense) Loss on sale of Debt Investments4: 500 Gain on the Sale of Business Assets5: 650

ADDITIONAL IMPORTANT INFORMATION USI rents its store from Tyler Park, whose address is 899 Claremont Street, Claremont, CA 97025, and his tax ID is: 252-73-6789. USI hires EZ Ads for all of its advertising services. EZ is a general partnership. Its tax ID is 22-5544330, and its address is: 123 Jingle Drive, Hacienda, CA 91745. On June 5, 2015, USI purchased 800 shares in Real Food Inc., a U.S.-based corporation that specializes in the production of food products from quality, mostly certified organic ingredients from farmers and other suppliers who use fair labor practices for $15,000. Real Food Inc. had 3,200 shares outstanding throughout 2021. On June 9, 2021, USI received a $10,000 dividend check; Real Food Inc.s Employer Identification Number is 77-8735555. On February 15, 2021, USI sold a fixed asset, a cash register computer system that it originally purchased for $3,500 on April 19, 2017, for $650. It was fully depreciated for both book and tax purposes prior to 2021. On January 2, 2021, USI purchased and placed into service a new computer sales system for $10,500. $2,100 of financial accounting depreciation was taken on this fixed asset for 2021. USI elects to take the maximum cost recovery on this asset in 2021 under IRC Sec. 179, and if applicable, first-year bonus depreciation. Maintain, LLP performs all of USIs repairs and maintenance. It is located at 888 Main Street, Salinas, CA 95076; (408) 559-7329; EIN 79-5421138 The entertainment expenses were for cost of regular seats to San Jose Sharks games to take out its current vendors where they discuss business matters with USI sales representatives. USI Corp. made $10,000 of cash distributions in 2021: $5,500 to Natalie, $4,000 to Tiffany and $500 to Jeremy. All cash distributions were paid on December 3, 2021. With its corporate formation, USI issued common stock to its three shareholders. Each shareholder paid the following amount for their stock: $55,000 for Natalie; $40,000 for Tiffany and $5,000 for Jeremy. All three shareholders in USI remained the same throughout the year and their ownership interests did not change during the year. All wages paid to shareholders are ordinary, necessary and reasonable in amount, with none being disguised dividends. None of the wages are includable in cost of goods sold. All expenses including wages paid to shareholders - are ordinary, necessary and reasonable, with none being disguised dividends. None of the entertainment expenses are lavish or extravagant. USI has no NOL or capital loss carryovers from prior years. All of USIs municipal government bonds owned either at the beginning of the year or at the end of the year mature more than five years after the end of the 2021 tax year and USI does not expect to sell them or convert any of them into cash until they mature. The small sale of these bonds in 2021 was unexpected. All amounts contributed to charitable organizations for the year were made in cash, all the charities were IRS-qualified charities and the charities all provided the client with the required documentation in a timely manner. No tax payment was sent with the USIs Form 1120 extension (Form 7004). For Schedule K of Form 1120, the answers to question nos. 14, 17, 18 and 19 are no and the checkbox to no. 8 is to be unchecked. For Schedule J, skip lines 3; 5a, 5b, 5d, 5e; 9a-9f; 10; 20a-20d and 21. Any other parts that are applicable in Schedule J must be completed. If there is an amount due for the year on the Form 1120, the client (as a corporation) will need to pay the IRS electronically (i.e., not via check). However, for purposes of this tax return project, if tax is due for the year you do not need to prepare any payment documentation simply show the amount due on the appropriate line(s) of the Form 1120 tax return accordingly. Also, if tax is due for the year, you do not need to calculate any penalties or interest just the base tax due. But, if there is a refund due to the client on the Form 1120 tax return for the year, the client wants to receive the refund in the form of a check (i.e. they do not want any portion of the refund credited to next years Federal income taxes). USI has asked you to file its return with the least number of required schedules with its Form 1120 as possible and given you permission to discuss its tax return with the IRS.

Fill out a 1125-E Compensation of Officers Form