The Business Tax Return screen is where Business Tax Returns are created, prepared, edited, and processed. The following instructions will guide you through the entire process of business tax preparation, including electronic filing of the Return. Chapter 6 will show you the different ways you can access different functions, along with introducing you to a few functions not mentioned during the Tax Preparation and Electronic Filing directions.
Different areas of the Tax Return screen will be open and available depending on whether you are in the Tax Return Lookup screen or working within an actual Tax Return. When a Return is opened or a new Return is created, the Tax Return Screen opens. This screen looks as follows:
The Navigational Tabs are located at the top of the screen. These tabs allow the User to move between Individual 1040 Returns, Business Returns, and the Website swiftly by simply clicking on the appropriate Tab.
The Tax Return Menu is located along the top of the screen. It includes most of the functions of the normal Menu Bar, along with additional functions for preparing Tax Returns. There are three additional Menu Bar items: Return, Form, and Print. These Menus items are covered in detail in the next chapter.
The Tax Return Toolbar is located directly underneath the Menu bar and contains all of the basic functions you will need in the preparation and filing of a tax return.
This black bar shows the Business EIN number, along with the date the Return was created. Note: If an asterisk (*) appears next to the taxpayer`s name, a change has been made in the return, but the return has not been saved.
This screen located on the left hand side shows all of the Forms associated with the Return, including documents that are not sent as part of the Return, such as the Invoice. To open a Form from this screen, double click on the particular Form and it will open in the Form screen to the right.The Attached Forms screen is divided into either two or three separate sections:
· General-This screen shows general information concerning the preparation of the Tax Return.
· Federal-This screen shows Forms and Worksheets related to the Federal Tax Return that will be sent to the IRS and/or should be held as a record relating to the Tax Return.
· State-This screen shows Forms and Worksheets related to the State Tax Return if this Return has an associated state return file.
This screen located on the right hand side shows the Form, Worksheet, or other document currently open. When a Return is created, the first open document is the Client Data screen. When you open any document to view or edit it, this is where the document will open and where you will be working.
The first step in creating a new Business Tax Return is gathering all of the appropriate paperwork. This includes financial statements, receipts, asset records and any other documentation, such as Forms Misc-1099, that will be required to file the return. This step is essential to accurately prepare the Tax Return. Most of the data entered into the program should come from the financial statements.
Follow these steps to create a Business Return:
3. Re-enter the same employer ID number next to Confirm Entry. An alert will appear if the number is not exactly match the previous entry.
4. Select the type of Business Entity from the choices as follows, and click OK.
a. Select 1065 if you are preparing a federal Return of Partnership Income. This form should be used if more than one individual has engaged in a business activity, and those individuals have not officially incorporated or are an LLC that has not properly requested an S-election status. If there is only one taxpayer engaged in the business activity, file Schedule C with the personal return instead.
b. Select 1120S if you are preparing a federal S Corporation Tax Return. This form should be used if the business entity has incorporated or organized as an LLC, and the business entity has properly requested an S-election status.
c. Select 1120 if you are preparing afederal Corporation Income Tax Return. This form should be used if the business entity has incorporated and has not properly requested an S-election status.
This step allows you to open a Business Return you have already created to continue preparation of the Business Return. Note: This function also allows you to add a new Return by filling in the Employer ID number in the Return Lookup screen and clicking Add.
To open an existing Return:
1.
Click on
2. Under Search Criteria, next to Business Name or EIN, or select the search criteria you want to use from the dropdown list.
3. Enter the data that corresponds to the search criteriaof the Business and click Go, and only Businesses with that search criteria will appear.
4. Or, click Go without entering any search criteria, and a list of all Business Returns will appear, or to use other Search Criteria, see page 148.
5. Double click on the correct Return after scrolling down to find it, and the selected return will open.
The next step in preparing a Business Return is entering general information into the Client Data screen about the Business. To move from field to field within the Client Data screen, use either the Enter or Tab key on the keyboard. To delete information, use either the Delete or Backspace key on the keyboard. It is not necessary to fill in every field in the Client Data screen, however, filling in as many fields as possible will make it less likely you will experience errors during Verification, Transmission, and IRS Acknowledgment. Please note that the following directions only assist in where to enter the proper information. Please consult professional tax guides in determining what the proper information should be.
Entry
of the Client Data Screen
There will be fields in the Client Data screen where helpful
information at the bottom of the screen will be available. For example, when
the Filing Status field is highlighted, the code for each filing status will
appear. To move from field to field in the Client Data Screen, press Enter or
Tab on the keyboard.
To fill out the Client Data Screen:
1. Next to Transcription Mode, enter “X” only if you want to disable the calculation engine and make every field a data entry field only. If an “X` already appears, this Login Account has been setup for Transcript Mode by default. Delete the “X” to disable Transcript Mode. Transcript Mode can be established as a default setting for all returns for a specific Login Account. For details, see page 47.
2. Next to Prep ID, click the Choices button at the bottom of the screen to open the Paid Preparers window, click the Prep ID for this user, and click OK. The Prep ID will be entered into the field. To set a default Preparation Shortcut ID for this user, see page 47.
3. Next to Site ID, click the Choices button at the bottom of the screen to open the Site ID window, click the Site ID for this location, and click OK. The Site ID will be entered into the field. A Site ID is not a required field and can be left blank. To set a default Site ID for this location, see page 64.
4. Next to Receipt #, if a receipt number does not already appear, enter the receipt number. This is not a required field and can be left blank. To set up the program to automatically assign receipt numbers, see page 23.
5. The Created by field is read only, and the name of the user for this Login Account will appear. In the blank field next to the Created by field, enter an “X” to limit the access of this return to only this Login ID and Administrators.
6. Under the Client Information section the entity organization type will be selected. This information is read only and was set on the previous screen when creating the new Business Return.
7. Next to EIN, the Business`s Employer Identification Number will already appear.
8. Next to Business Name, enter the business name of this entity exactly as it appears in its application for an EIN. This field will be highlighted in white when the screen opens. When you press Enter or Tab on the keyboard after entering the Business Name, the next field to be highlighted will be the business control name and it will auto populate with the first 4 characters of the business name.
9. Next to Name 2/DBA, enter the alternate name under which the company is doing business as, if applicable.
10. Next to Office or Partner, enter the First and Last Name of the Officer (S-Corp), Partner (Partnership) or Manager (LLC) who is responsible for preparing this return, who must also be authorized by the business entity to sign the return. Press Enter or Tab on the keyboard. The next field to be highlighted will be Officer/Partner Phone.
11. Next to Officer/Partner Phone, enter the phone number of the Officer, Partner, or Manager entered. Press Enter or Tab. The next field to be highlighted is Title.
12. Next to Title, enter the title of the Officer, Partner, of Managerwhich establishes their authority to prepare this Return on behalf of the business. Examples: President, Managing Partner, Secretary, Treasurer, Director, Managing Member. Press Enter or Tab. The next field to be highlighted is Email.
13. Next to E-Mail, enter the Business`s email address that is used for official, confidential correspondence. Press Enter or Tab. The next field to be highlighted will be Text Message.
14. Next to Text Message, mark an “X” in the box if the Business wants to receive information from the User by Text Message on their cell phone. Note: The Cell Phone number must be entered to use the TextLink feature.
15. Next to Cell Phone Carrier,
a. Click on the Choices button at the bottom of the screen to bring up a window including all of the TextLink supported cell phone carriers.
b. Click to highlight the Taxpayer`s cell phone carrier. Click OK. The Choices window will close and the cell phone carrier and code will appear in the Client Data screen.
16. Next to Preferred Contact, enter “E” for email, “T” for text, or “P” for phone, depending on the business`s preferred method of contact. These choices will appear at the bottom of the Client Data screen for quick reference.
17. Next to Preferred Language, enter the business`s preferred language for communication.
18. Under Address Information, if the business has a domestic address,
a. Enter the Business`s mailing address and press Enter or Tab.
b. Enter the Business`s additional mailing address information on line 2, such as a suite number or a separate departmentif applicable.
c. Next to C/S/ZIP, the highlighted field will move either to the Zip Code or the City, depending on what you have entered during Setup.
i. Enter the City if the highlighted field moves to the City field, press Enter or Tab, enter the two digit State code, press Enter or Tab, and enter the Zip Code.
ii. If the highlighted field moves to the Zip Code field, enter the Zip Code. The City and State fields should automatically appear.
19. Under Address Information, if the taxpayer has a foreign address, move the cursor to the empty field next to Foreign, click in the field to mark an “X”, and press Enter. The Address Information will change to reflect fields for a foreign address.
a. Enter the foreign address information, as applicable.
20. Under Business Information,
a. Enter the Date organized/Incorporated, if applicable, for a corporation or LLC.
b. Enter the State of organization, if applicable, for a corporation or LLC.
c.
Enter the NAICS
code, or click on
d. Enter the Principal business activityunless it was already entered automatically with the NAICS code.
e. Enter the Principal product or serviceof this Business.
f. Enter the Fiscal year beginning date if it differs from January 1st.
g. Enter the Fiscal year ending date if it differs from December 31st.
h. Enter the Service Center where the business return will be filed if it differs from what has been automatically added.
i. Select the Accounting Method by placing an “X” in the box next to Cash, Accrual or Other. Enter a description for Other, if applicable.
j. Check the applicable boxes as follows:
i. Initial Return if this is the first time this business is filing a tax return.
ii. Amended Return if this is an amended return of the original return that has already been filed.
iii. Name Change if the name of the Business has changed from the previous year`s tax return.
iv. Final Return if this is the last Return the business will be filing.
k. Address Change if the address listed on this Return is a different address from the one on last year`s Return.
l. Check any of the boxes designating a more specific accounting method, if applicable.
m. Enter the Nameof the custodian of books and records and check the box if this is the same name as an Officer.
n. Enter the Addressof where the books and records are located and check the box if this is the same address of the entity.
o. Check to force Schedules L, M1 and M2 if the Taxpayer wants to prepare these documents even if they are not required to be filed.
p. Check to load allocation and apportionment worksheet if the Business operates in more than one state.
q. Check to Answer “No” if the answer to all the questions on the Other Information section will be no.
r. Check to use tax information reported on asset worksheets to use this data to complete all of the information where this data is applicable in the return, such as the balance sheet and the income statement.
s. Check to load Form 3115 if applicable to this return.
t. Check the box next to 1065/1120s Filers Onlyto enter rental income and expenses directly on Form 8825 instead of the income statement for the individual return.
21. If the business will be using Direct Deposit,
a.
Next to Bank
Name, enter the Taxpayer`s bank`s name, or click on
b. Next to Routing Number, enter the Bank`s Routing number unless it was already entered automatically with the bank`s name.
c. Next to Account Number, enter the Business`s account number at that bank and press Enter or Tab.
d. Next to Account type, select Checking or Savings, to designate the type of account.
22. Under Preparer Information,
a.
Next to Preparer`s
name,
enter the Preparers Name and additional
required information, or click on
23. To track how you are growing your client base,
a.
Under Client
Referral and next to Referral Type,
enter the type of referral or click
b. Next to Description, enter additional information to help you track your referrals. (Example: Name of existing client who referred new client.)
24. The Client Data screen is now finished, and you are ready to move to the next step, Adding Forms. It is not necessary to exit this screen.
If your client needs to file an Extension for time, rather than a Return, add Form 7004 after the Client Data screen has been completed, according to the general directions below for adding Forms. Form 7004 can be printed or electronically filed.
If the Extension is being electronically filed, it is not necessary to add Form 8879, Electronic Filing Authorization, as directed below for E-filing Returns. During Verification and Transmitting, an Error will appear that Form 8879 has not been attached. This error can be ignored and you can continue the processes.
The next step is the completion of the Financial Statements, a required step that is designed to improve the speed and accuracy of entering the organization`s income and expenses according to the books and balance sheet data. The data can be manually entered based on the organization`s financial records or by importing the data from QuickBooks. See Appendix 6 for the QuickBooks Import directions.
Add data to the Financial Income Statement:
1. While the Return file is open, under the Attached Forms list, General section, double click Financials – Income Statement. The Financial Statements – Income Statement window will open.
2. Check the first box to elect to use the tax information reported in the Asset Manager to complete the fields pertaining to depreciation, amortization, auto expenses and sales of assets. If this box is not checked, the User will need to enter this data manually.
3. Enter all applicable information into the Revenue and Expenses sections or alternatively import the business data from QuickBooks according to the directions in Appendix 6.
Add the Financial Balance Sheet:
1. While the Return file is open, under the Attached Forms list, General section, double click on Financials – Balance Sheet. The Financial Statements – Balance Sheet window will open.
2. Check the first box to reconcile differences in assets and liabilities in the equity accounts. If this box is not checked, this reconciliation will not occur unless the User manually enters the information.
3. Check the second box to elect to use the tax information reported in the Asset Manager to complete the fields pertaining to depreciation, amortization, auto expenses and sales of assets. If this box is not checked, the User will need to enter this data manually.
4. Enter all applicable information into the Assets, Liabilities, and Owners` Equity sections or alternatively import the business data from QuickBooks according to the directions in Appendix 6. If the import has already been completed, the data will already appear.
It is now time to add any additional, required Forms and Worksheets to the Return, with the exception of Schedule K-1s, which are addressed in the next section. See page 102 in Chapter 4 for adding Forms, which are added and completed in the same manner as a personal return.
Using the K-1 Manager
The K-1 Manager is used to create a Schedule K-1 for each Business Owner. A Schedule K-1 created in the K-1 Manager can be imported into the Taxpayer`s Personal Return. See page 104 for details.
To create K-1s for Business Owner:
1. While the return file is open, under the Attached Forms list, General section, double click on K-1 Manager. The K-1 Manager window will open.
2. Check the box next to Display k-1 forms in the navigation panel to list the newly created Schedule K-1s under the Federal section in the Attached Forms list.
3. Click the Add button to create a new Schedule K-1. The Schedule K-1 worksheet will open.
4. Enter any applicable data into the Form Schedule K-1 worksheet in the same manner as the Client Data screen. Most of the data on the right side of the worksheet will already be calculated from the Financial Statements and other Forms and Worksheets based on the amount of percentage of ownership entered on the left side of the worksheet. General rules for filling out worksheets are as follows:
a. The field is ready to have data entered when it is highlighted.
b. Use the Enter or Tab keys on the keyboard to move between fields.
c. Darker areas have been auto populated from other fields in the Return.
d. A calculated field which has been overridden (i.e. the calculation has been ignored and another value has been entered) will appear in red.
5. When the first K-1 worksheet is finished, add and complete additional K-1s for all Business Owners.
After all of the tax data has been entered into the business return, the following steps ensure the proper completion of the return.
Finishing the return after all tax data has been entered:
1. After you have completed all of the forms, worksheets, and Schedule K-1s, open the Business Return by double-clicking on RET 1065, RET 1120, or RET1120S, as applicable, under the Federal Section in the Attached Forms list.
b. Review the Business Return making sure all of the information is complete and fill in any additional information that must be entered into the Business Return directly.
2. Open Form 8879 which will be automatically added to the return file under the Federal section of the Attached Forms list.
a. The cursor will now move to the PIN section. If the PIN is not set up to automatically generate, enter a 5 digit number selected by the Business` authorized representative. It cannot contain all zeros. To set the program to automatically generate business` PINs, see page 25.
b. The cursor will move to the Signature date which will auto fill based on when the pin was entered.
c. The cursor will move to the ERO/Paid Preparer PIN. Enter a 5 digit number selected by the ERO or Paid Preparer. It cannot contain all zeros.
d. The remainder of the information should be autopopulated. However, if it is not, continue to hit Enter or Tab and move through the rest of the Form and enter information where it is missing.
3. The Return is now ready for the Verification Process. Verify, E-File, and Print the Return. See directions below.
4. If you are adding a State Return, it is helpful to run the Verification of the Return without the State Return, then add the State Return, and run the Verification process again.
This program allows you to create an electronic file of the entire return, including all source documents and any other paperwork associated with the return. The scanner allows you to take pictures of the documents that can be viewed in the Document Archive and printed at a later date if necessary. This step helps you create a paperless office and still meet your due diligence requirements. You can also import files into the Return File and attach documents to the electronic Return that is sent to the IRS.
This function works in the same manner as Personal Returns. See page 114 for details.
The next step is Verification of the Return. The program examines every field in the Return to determine whether there are errors that must be fixed before the Return is sent to the IRS. The Return should be verified even if the Return will be filed by mail.
This function works in the same manner as Personal Returns. See page 116 for details.
This program allows you to easily electronically file your Clients` Business Returns. The Returns are queued to be Transmitted from within the Return after the Return has been prepared. Returns that are queued are shown on the 1040 WIP Summary in the Transmit Queue. During Transmission from the 1040 WIP Summary, the Returns are sent to Central Site, which then sends the Returns to the IRS and any applicable state agencies, for States that support e-filing and are listed in Appendix 2. Note that Form 8879 and the proper State filing Form must have been attached during Tax Preparation. Please see page 132 for further directions if this step has not been completed. If you are not e-filing a Return, skip this step and move to the next step, Printing the Return and other Related Forms.
This function works in the same manner as Personal Returns. See page 117 for details.
The final step for preparing every Business Return is Printing all of the necessary copies of the Return. (This step may have already been completed as part of the Verification process.) If a paper Return has been created, it can be printed at this time. There are other options available for printing separate parts of the Return. See page 146 for further directions.
This function works in the same manner as
Personal Returns. See page 118 for
details. Every
item chosen in Business Return Printing during Printer Setup will Print. To change the list of Items that will be
printed, see page 38.