4 Steps to Prepare Corporate Tax Return
Corporate taxes have complicated structures. To add to that, if you want to prepare corporate tax return, you're taking on more difficult task. It is a responsibility of every business to prepare tax return for the year, or hire corporate tax service to perform this job. Tax consultants have the required skills and experience of preparing returns for different kinds of businesses. They're more than aware that you wouldn't want to pay high taxes. Therefore, business tax consultant will identify tax credit opportunities for you and prepare your return with due diligence.Corporate returns largely depend upon previous year's return as compared to typical individual return. It takes many factors into consideration, such as:
" Net Operating Losses
" Accumulated depreciation
" Prior year's information from balance sheet and P&L statement
Furthermore, you also need to send out K-1 forms and 1099-Div forms to corporate offices and shareholders. As far as the paperwork is concerned, corporate returns requires massive paperwork. Then you need to perform a lot of calculation to balance out your return completely.
" Prior year returns
" Form 1120 or 1120S
" Current and previous year Balance Sheets
" Current and previous year Profit and Loss statements
" Assets purchased in current year
" Assets worksheet from previous year
Follow these steps
1. Current Year's Documents
First of all, calculate the total income accumulated in the current year. For that you need current years documents. Enter the following information in the form 1120
" Gross sales from P & L statement in the box 1a
" Return and allowance in box 1b
" Put the difference of 1a and 1b in box 1c
" Cost of goods sold from profit and loss statement into line 2 and you will get gross profit in line 3
" Rest of the portion belongs to other income generated by your business through interest, dividends, royalties, rents and capital gains or losses. Put their total in line 11.
2. Taxable Income
Now you need to calculate your expenses from profit and loss statement.
" Mention each expense in the second section of 1120
" Add all expenses and write the total in line 27
" Difference between line 11 and line 27 is your current year's taxable income.
" In case of Net Operating Loss, put the figure in box 28
" Now use the tax rate schedule (available in the form) to calculate tax owed and put it in line 31.
Check for overpayments or tax owed in last year's return. Tax consultant Canada can help you calculate your taxable income.
3. Balance Sheet
You will need current and prior year's balance sheet to complete this balance sheet.
" Turn to Schedule L of the form 1120 (schedule A through K serve as worksheet)
" Fill the beginning balances for current year in columns a and b, on the left side.
" Fill column c and d with current year's information available in the balance sheet.
Reconcile your income in the form with that of in your books. Use Schedule M-1 and fill income based on P&L statement vs. income on tax return.