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Drake Software User`s Manual Supplement

1. Select Forms to View Print EF Federal Worksheets Mnotes Messages Colorado FF U S Corpo Form 1120 P p For calendar year 2010 or tax year beginnin Department of the Treasury Internal Revenue Service 1 g 1120 PG A Check if Hame 1 1120 PG3 PATERSON AND E diuo cll neo lid ato dalles e Lagi ba Wm Figure 11 The red MESSAGES file and the Attach PDF button 2 Click MESSAGES file to view EF messages which provide information on how to attach the required documents to the return 3 Click the Attach PDF button in the toolbar at the top of the window The EF PDF Attachments window displays the information entered on the PDF Attachments window in data entry A red X means the document has not yet been attached a green check mark indicates an attached document Drake 7009 EF PDF Attachments x Required PDF Attachments The list below contains PDF Attachments that are required for electronic filing Select an item from the list and click Browse to locate the associated PDF file Items with a green check mark already have the PDF file Items with a red are missing the required PDF File Reference Description Required POF File ame e 3115 A LLine 3 Profit Lass Statements SCHAFARTIFROFITLOSSSTATEMEN e 3115 1 Form 970 for Farm 3115 FORMIF FORFORM3115 001 POF Ue A Rc u e ON ahb _ dir E arai 7 quet cm aah Figure 12 The EF PDF Attachments window 4 Click the row
2. or State Only Withdrawal selection Federal selection Mame af financial institution RTM Account number Type of account Checking Savings Repeat Account Information Checking Savings Federal Federal payment amoun Requested payment date Daytime phone number 3 Payment is for 1120 7004 Daytime phone number State State payment amount Requested payment date Figure 5 Required fields on PMT screen withdrawal selection 1 account information 2 specified return 3 The name of the financial institution RTN account number and account type are required As with the DD screen the RTN Account number and Type of account data must be entered twice item 2 in Figure 5 Finally the PMT screen must indicate the return to which the payment data applies item 3 in Figure 5 Mark the box of the applicable return type 1120 or 7004 Withdrawal from Multiple Accounts Only one account can be designated for direct debit of funds for payment of federal or state taxes To have state amounts withdrawn from an account other than the account Tax Year 2010 13 Filing an Extension Drake Software User s Manual indicated for federal payments complete the fields in the State Account sections of the PMT screen NOTE Neither the federal nor the state balance due can be paid from more than one account Filin
3. uiua dedero dra Ree Rede ios nai CR bee CRT de 13 IScguited InforfidllOB cues sane ced var dt a TES DOOR e Eq ea a qd ed uq cot ea 13 Withdrawal from Multiple Accounts 0 000 eee nee eee e eens 13 FIDO aN EXIBHBSIDE siirron 39739 ane ee ee ee oe ee eee 14 Signing the REIN sac nee eee ee ober see cree sey ren PEE EU aes 14 Amending Return uasa a0 Ha ewe anne nee caw aga sce ss 15 SCHEONIE de see nme nee canes spe keteeyeeeGeurecs abe owueuseecens 16 Schedule K EL Sic aan en ea ob aes sd ee a ose ren a eee oats ee Reet aes 16 SC MCCUIC r HMC Geiss ore en oss be een ae de ee ae ee eee ae eee ed 16 Sehed le I Line Dias o eae oe ese habe Sou eae eben eal ee we nese eum ETE Ear ee ook 17 Schedule K Line 7 u ode darse ea a aa uuo AG gus ERR ae oe Dhow od c2 a d sed ume 9 4 nee ae 17 Schedule k Line 3 eonim Erden d mand perd e bu dues bod Geese be abe ONU PF CIE Mmi ds 18 State Specific Information 0 0 0 0 ee 18 Ice side Hb ONC ee eed E eee wos Shea PU ee eee Eq a3 reed 18 Other DIAS oo wich sa oa hdi ne apt bob ook cede nee P deis EX Pire eie Ib god 18 Contaci IntormiditOHlo coa aces cosas T TP Sd eee POPE Pied Vd p Megs BU Hanes QUU Nd qs 19 Other Information and OverrideS 2 0 0 cece es 19 Schedule L Balance Sheet per Books ee 19 Flow Or LHormalon our geese oer done ees pane a hae Ses Era es eed SPON be E dO Pd PE RE 19 The SOH2 S O Nise ae OES IATER DIESE ae ee ee ee ee AS RE ME PL E Ie
4. Reconciliation of Books with Return 21 26 Schedule M 2 Unappropriated Returned Earnings 23 26 Schedule M 3 Reconciliation of Books with Return 22 Schedule O Consent Plan amp Apportionment Schedule for a Controlled Group 24 section 1245 property 1 1250 property 1 263A costs 6 481 7 short year returns 4 signatures electronic PIN 14 signing the return 14 state codes 18 tax refunds 7 stock ownership 16 18 subchapter T cooperatives 27 T tax alternative minimum AMT 24 and payments 11 exempt interest 6 on fuels credit for 7 to book difference 21 years fiscal vs calendar 4 taxes and licenses 9 trial balance import 6 19 20 33 40 troubleshooting the M 2 23 Tax Year 2010 Index U underpayment of estimated tax 12 updating a prior year return 3 V Vista Windows operating system 33 vouchers 12 W wages 8 Drake Software User s Manual Tax Year 2010
5. Refer to the contribution limitation carryover worksheet WK CNTRB for calculation of allowed amount Contribution carryovers from prior years are entered on the LOSS screen Depreciation Enter depreciation on the 4562 screen Select a form from the For drop list Figure 3 to associate the depreciable item with the correct form or activity Data from the 4562 screens is calculated and carried to Form 1120 and to the selected schedules or forms Form 4562 zol 1120 COGS F Use F3 to E Corporation Main Form or 1120H ue schedule 4 Cost of Goods Sold Description Schedule F Profit or Loss From Farming Delivery Truck p1 O1 2009 15757 i Hor d euo ue ee WE amnem ont ee Feder a o o a n SLOL a en AMT gpa PETS T c Figure 3 Selecting Form 1120 from the 4562 screen For drop list NOTE For more on the For drop list in Drake see Associating One Screen with Another in the Drake Software User s Manual Tax Year 2010 Depletion Enter depletion deductions on screen 3 See Form 1120 instructions and Pub 535 for more information on depletion Advertising Enter advertising expenses on screen 3 Pension and Profit Sharing The software reduces the expense based on the credit amount calculated from Form 8881 Credit for Small Employer Pension Plan Startup Costs Domestic Production Activities Use screen 8903 to complete Form 8903 Domestic Production Activities Deduction DPAD The calcula
6. then choose Disable all macros with notification Click OK 33 Importing Trial Balance Information Drake Software User s Manual ale resi DE en Disable Autobalance When autobalance is disabled the program is prevented from automatically adjusting the year end retained earnings or capital amounts thus allowing you to see any discrepancies in the balance sheet To disable auto balance go to the PRNT screen and select Turn off autobalance Force Schedule L By default the program does not display the balance sheet amounts on the return if the entity does not meet the filing requirement If this 1s the case you must override the default in order to have the amounts shown on Schedule L To force the Schedule L amounts to be printed go to the PRNT screen and select the applicable check box Items to Print Force Schedule E I Force Schedules G 1120 C L M 1 and M 2 to be printed Print Form 4552 Printnext year depreciation listing Printinactive return FIN far preparers alternative electronic signature Figure 14 Check box for forcing Schedule L Check for Detail Worksheets The trial balance import allows only those detail worksheets required by the IRS Check updated returns for detail CTRL W worksheets that are not required For example the IRS does not require a detail worksheet for the Gross receipts or sales field on screen 3 if a return has a detail worksheet for that field the trial balance w
7. Other Information column in the trial balance worksheet to indicate special conditions and additional information regarding certain rows Table 4 describes the most common notes in this column Table 4 Other Information Column Notes Note Description not included in totals The amount is required for importing purposes only but is not included in the totals shown on the trial balance does not import Information cannot be imported and must be entered on the appropriate screen in Drake Screen is specified in column to the left of Other Information optional Amount is optional not required for import but could require direct entry in the software enter as negative number Some deficits must be entered as negative numbers import includes the calculated Used for total purchases when calculating cost of goods change in inventory sold COGS in the return the program takes the change in inventory into account for the Schedule A calculation Form or Schedule may be Non financial information such as names of officers for a required Schedule E must be completed in Drake in addition to the financial data entered in the worksheet All does not import notes are accompanied by further instructions in the column to the left of the Other Information column as shown in Figure 23 Tax Year 2010 39 Importing Trial Balance Information Drake Software User s Manual SCH2 Detail Typically a balance sheet
8. above the worksheet tabs labeled 2 in Figure 19 Note that a detail tab the Other Income tab in Figure 19 might include one or more detail worksheets labeled 3 in Figure 19 ut Figure 19 Trial balance worksheet for Other Income Do not create detail worksheets in data entry if the trial balance work NOTE sheet does not provide an equivalent detail worksheet Otherwise the trial balance will not be imported correctly Totals Totals are displayed at the bottom of each worksheet If credit and debit columns are out of balance the worksheet highlights the out of balance amount Figure 20 T4 547 53974 OUT OF men Figure 20 Out of balance amount is highlighted if columns are out of balance PTR IB In addition to credit and debit totals the main trial balance worksheet shows the net income loss to be calculated for line 1 of Schedule M 1 after all entries and adjust ments are made in the software NOTE The data cannot be imported if the worksheet is out of balance Tax Year 2010 37 Importing Trial Balance Information Drake Software User s Manual Saving a File To save a file click the Save icon or select File gt Save from the menu bar To re name a file when saving select File gt Save As For more information on file names in the trial balance program see Naming Convention on page 35 Importing Data into a Return Not all trial balance data can be imported directly
9. as applicable to Schedule K line 9 and to Schedule M 1 line 7 Override fields are available on screens K and M1 if necessary to override the INC screen amount Tax Year 2010 Drake Software User s Manual Income and Deductions Rents and Royalties Enter gross rents and gross royalties using the direct entry fields on screen 3 Note that passive activity loss rules may be applied to rental activities held by a closely held corporation or a personal service corporation NOTE The Rents field is an adjustment field An amount entered here is com bined with the amount if any entered in the Rent fields on screen F Capital Gains Use screen D Schedule D to enter capital gains and losses The net gain from screen D is carried to line 8 of Form 1120 Any net capital loss is carried to the ATT D attachment to offset future gains You can import data for Schedule D using the Schedule D Import fea NOTE ture For more on using this feature see Schedule D Imports in Chap ter 5 of the Drake Software User s Manual Tax Year 2010 Ordinary Gains and Losses The amount generated on line 9 flows from screen 4797 Amounts can also flow from screen 4562 to Form 4797 making screen 4797 entries unnecessary but only if screen 4562 shows assets sold date and property type Other Income Loss Use the INC screen to enter amounts for the Other income line of the main form Specific INC screen entries are displayed on attached stateme
10. attached to the return The system automatically calculates the number of 5472 forms needed enter a number in this field only to override the calculated amount Generally a 2596 foreign owned corporation with a reportable transac tion during the tax year must file Form 5472 Information Return of a NOTE 25 Foreign Owned U S Corporation or a Foreign Corporation Engaged in a U S Trade or Business See Form 5472 for filing instruc tions and penalties for failure to file State Specific Information Drake Software User s Manual See section 6038A c 5 and the related regulations for the constructive ownership rules of section 318 that apply in determining if a corporation is foreign owned If another entity owns 20 or more of the client s corporation or owns NOTE 50 or more of the corporation s stock entitled to vote see Schedule K Line 4 on page 16 Schedule K Line 13 On line 13 of screen K select Yes if the corporation s total receipts line 1a lines 4 through 10 on page 1 of Form 1120 are less than 250 000 for the tax year and its total assets at the end of the tax year are less than 250 000 If the answer to line 13 1s Yes in the lower text box of line 13 enter the total amount of cash distributions and the book value of property distributions other than cash made during the tax year An entry here overrides the amount calculated from entries on line 5 Distributions on the M2 screen and reflected on
11. care of e General contact information Screen 2 also has fields for the name title e mail address ID number and telephone number of the corporation s contact person Other Information and Overrides Use screen 1 to enter the following additional information Resident State If the corporation has a mailing address in one state but does busi ness in another select the state in which the corporation does business from the Resi dent State drop list Drake Codes and Overrides Screen 1 includes fields for miscellaneous codes invoice numbers and several overrides See Listing a Different Firm Preparer or ERO on a Return and Miscellaneous Codes in Drake Software User s Manual Tax Year 2010 for more information Worksheets outlining these and other adjustment and override fields NOTE are accessible through the FAQs Frequently Asked Questions screen For more information see Guide to Overrides and Adjust ments on page 27 Schedule L Balance Sheet per Books Schedule L is required if the corporation s total receipts for the tax year or its total assets at the end of the year are greater than 250 000 Flow of Information Many of the entries made elsewhere such as inventory information from Schedule A flow automatically to the generated Schedule L Depreciable asset information from the 4562 screen and intangible assets and amortization also flow to Schedule L Use the corporation s balance
12. for 1120 returns and the HCOM screen for 1120 H returns No preliminary steps are required for Forms 1120 C or 1120 H Use the same screens you might for an 1120 return but include one of the following screens in addition e 20C For Form 1120 C U S Income Tax Return for Cooperative Associations e H For Form 1120 H U S Income Tax Return for Homeowners Associations Tax Year 2010 3 Header Information Drake Software User s Manual If one of these screens contains data the program automatically produces the type of return indicated For example if a deduction is entered on screen 20C an 1120 C return will be produced Is Form 1120 C or 1120 H being produced in error Check the corre Ip sponding screen 20C or H for data entered To delete a screen open the screen to delete and press CTRL D Header Information Screen 1 contains fields for the general information that is printed in the top section of page 1 of Form 1120 or Form 1120 C or 1120 H as applicable Name and Address Use screen 1 to enter the corporation name and address for Form 1120 For state pur poses only if the corporation has an alternate address such as a P O box you can enter that address on screen 2 in the Address Line 2 field at the bottom of the screen Tax Year The software uses the calendar year as the default tax period for all corporate returns no date entries are required on screen 1 for a December 31 tax year end Fiscal and I
13. into a return For NOTE information on program limitations see Special Conditions on page 39 Once a trial balance worksheet has been set up for a client in Drake the trial balance information can be imported into the program and calculated into the return If you are already in the Trial Balance Import tool for the selected return NOTE go to the Trial Balance Import window in Drake and start at Step 3 of the following procedure To import a trial balance into a return a 1 Open the return to which you will import the trial balance information S Click Import gt Trial Balance Import from the menu toolbar The preliminary Trial Balance Import dialog box is opened Click Next 4 Enter or select the trial balance file to be imported Use the Browse feature if nec essary By default each trial balance file is an Excel xls file showing the client name and ending in TB for trial balance as shown in the example in Figure 21 See Naming Convention on page 35 Import dd 1 Import File Name F5DEAKEUSSTBSTREE FIA UPPER INCTE LS Figure 21 Selected file to import 9 Select the Trial Balance Import Options See Additional Import Options fol lowing this procedure 6 Click Next and wait for the import to be completed T Click Finish The program returns to the Data Entry Menu for the open return Note that all selected data from the trial balance worksheet has been imported into the return This c
14. is printed on all letters and filing instructions generated with a return You can now override the default by entering ll an alternate due date in the Due date to print on letter and filing instructions field on the PRNT screen Guide to Overrides and Adjustments Tax Year 2010 Available in the 1120 package are spreadsheets with information on overrides and adjustments in the business packages These spreadsheets allow preparers to see what data or calculations are being affected when an entry 1s made in an override or adjust ment field They can provide a better understanding of how overrides and adjustments work in the software 27 Electronic Filing Drake Software User s Manual To access the worksheets click FAQ from any Data Entry Menu and then click the Screen Help button at the top of the FAQ screen Next click the link for the desired worksheet and wait for the worksheet to be displayed as a PDF file An Internet connection and Adobe Reader are required in order to view the worksheets NOTE Much of the information contained in the worksheets is also available from the field level helps within the program To access a field level help click inside a field and press F1 or right click in a field and select View Help Electronic Filing steps for e filing Form 1120 are the same as for e filing Form 1040 with the excep tion of bankruptcy returns which must be paper filed Common Error Codes If one or m
15. of a document to attach n Click Browse 6 Browse to the proper folder select the PDF file to attach and click Open or dou ble click the file name Repeat for all documents with a red X When all documents have been attached to a completed return the return is ready to be e filed Printing Generated Documents In some instances Drake generates a document that must be attached to the return For example if Form 851 Affiliations Schedule is present in a corporate return message 0132 is generated when the return is calculated 32 Tax Year 2010 Drake Software User s Manual Importing Trial Balance Information 0132 FORM 851 REQUIRED STATEMENTS Form 851 has required attachments that must be attached in PDF format Supporting statements are required for each corporation included in the consolidated return and the attached statement cannot be a Form 1120 The statement must include Items of gross income and deductions JA sempukatiop of taxable income gg a men Figure 13 EF message regarding Form 851 As shown in Figure 13 the EF message states that attachments are required You would then need to obtain or complete the statements scan them into the computer save them as a PDF file and attach them to the return Importing Trial Balance Information Drake s trial balance import feature allows data to be imported into an 1120 return from a trial balance worksheet The trial balance template a
16. or losses for a short year return Depreciation for a short year return can be entered on screen 4562 and or screens 6 7 8 and 9 Boxes A through E Use screen 1 to enter most information for boxes A through E top of Form 1120 Note that boxes A 4 Schedule M 3 attached and D Total assets are completed automatically by the program based on data entered elsewhere NEW FOR Box 1a Consolidated return is automatically marked if there are entries on screen 851 Form 851 Affiliations Schedule Box 2 Per ll sonal holding company is automatically marked if there are entries on screen PH Schedule PH U S Personal Holding Company PHC Tax Income and Deductions Income and deductions are entered primarily on screens 3 INC Other Income DED Other Deductions and TAX Taxes and Licenses Gross Receipts Enter gross receipts Form 1120 line 1a and returns and allowances Form 1120 line lb on lines la and 1b of screen 3 Exclude any amounts that are to be reported on lines 4 through 10 of Form 1120 Cost of Goods Sold Schedule A For cost of goods sold COGS complete screen A Schedule A Cost of Goods Sold On screen A items 9a through 9f are direct entry fields and follow the NOTE format of IRS Schedule A For more information on completing these fields press F1 or consult the IRS instructions Inventory Inventory amounts entered on lines 1 and 7 of Schedule A automatically flow to Schedu
17. page 4 line 13 of the 1120 return If the answer on line 13 is Yes the corporation is not required to com NOTE plete Schedule L M 1 or M 2 To force the software to print these forms go to the PRNT screen and select Force Schedules L M 1 and M 2 to print State Specific Information Resident State The program automatically generates a return for the corporation s resident state Use screen 2 to enter company information as it should appear on the state return Company information includes the type of return that applies for state purposes con solidated composite controlled group multi state and state specific dates and num bers for identification NOTE The company information fields on screen 2 apply for the resident state Other States only Data for other states must be entered manually in state data entry To access state data entry select the States tab or enter the two letter state code in the selector field and press ENTER To apportion income to multiple states it is necessary to enter the apportionment fac tors on the individual state screens Tax Year 2010 Drake Software User s Manual Other Information and Overrides Contact Information If certain contact information required for state purposes is different from that entered on screen 1 use screen 2 This screen has fields for the following types of contact information e Registered office e Principal place of business e Books in
18. qd PEO Ae ee ees aA 8 Repairs and Maintenance iud u 200 00 00 0 an0 0 e 44 Vue maU a ne eo eee ees 8 Bad DoDo 420 cheean den NEE EE ead bod aha ran er ehren reis 9 hiv nce ern age aus meee ees hou ews ae oes oes ae Gee ae ee we dee oe nee ees as 9 Taxes and Licenses conc fred eicere duende ts dant wd dois vob hem ae Rem Ae heeds 9 lini user Bee a ka ade che re v oR Ae ede een eae ee 9 Charitable Contributions ires RR he dw AREA REA PRECOR tebe ae bs 9 Depe 5 15 6 1 5 o 222902 eee os sees ESE RENE eee FES hE ARAUPRRRASASOSTS TET ET Peace 10 Bac lt 5 5 eree a ee bea 0 es ee ee Oe a gr a Sa got a oe be a oe ee eee 10 Lucr MP 10 Pension and Profit SBattlg 654 000 avi red 000000 0 0 01 200 00 0 Rode ea 78 s ct e dica di c ecd d dee e 10 Domestic Production Activities saco acere share doe ERREUR ra en i Eae tdi d deg s TR ql e 10 Ober Aue ons cu em vps abe am a E ERN EUN Faq addam rufo PR NES RN d 11 NOL Carrybacks and Carryforwards 0 0 0 00 00 ee ene ers 11 Tax Refundable Credits and Payments LL 11 lv ME D 11 Estimated Taxes and Applied Refunds 0 0 0 0 000 ccc eee eens 12 Direct Deposit of Refunds 2 0c ce es 12 Tax Year 2010 ill Drake Software User s Manual Supplement Corporations Electronic Funds Withdrawal Direct Debit 13 Program Detaults and Overrides
19. referred to on line 17 with an ATT_CTL reference To keep the notification from appearing go to the PRNT screen and select Suppress printing form and attachment references State tax amounts income tax and franchise tax entered on the ES Estimated Taxes screen are carried to the tax computation ATT TAX worksheet The state tax amount carried from the ES screen may differ depending on which method of accounting cash or accrual is used Interest Enter interest expense on line 18 of screen 3 Note that the Interest expense field is an adjustment field Any amount entered here 1s combined with the amount if any entered in the Interest fields on screen F Charitable Contributions Screen 3 provides two fields for entering data for line 19 Charitable contributions Figure 2 Charitable contribution lines on screen 3 Tax Year 2010 9 Income and Deductions Drake Software User s Manual e Contributions Enter the gross amount of contributions for the year that are subject to the 10 limit on deduction e 100 farm related qualified conservation contributions Enter the gross amount of contributions for the year that are not subject to the 10 limit These contributions have a carryover period of 15 years see IRS instructions for details The program calculates the contributions allowed and determines carryover capability for amounts entered in both fields for line 19 and reflects the applicable amount on Form 1120
20. the 1040 program See the Drake Soft ware User Manual Tax Year 2010 for the basics of using the program What s New in Drake for Corporations Drake programs its tax software according to the latest IRS rules and regulations The 2010 program reflects all changes to credits and deductions including discontinua tions For details on the new regulations for the 2010 tax year see the IRS instructions for Form 1120 Data Entry and Calculation Tax Year 2010 This year s changes and enhancements to calculations are summarized below Improved Calculation Results Window The Calculation Results window now features more EF message links An EF message link takes you directly to the screen that is causing the EF message Foreign Ownership Capabilities Screens G and K have been expanded to allow input of foreign owners without an EIN In addition returns with foreign ownership information on schedules G and K are now eligible for e filing Multiple Forms 8027 Available Returns can now include multiple instances of Form 8027 Employer s Annual Information Return of Tip Income amp Allocated Tips Depreciation on Installment Sales and Like Kind Exchanges For a sold item on the 4562 Depreciation Detail screen three new options are available in the Property type drop list located in the If sold section of the screen Selecting one of these options listed below prevents the program from automatically car rying the sale in
21. the U S corporation or consolidated tax group if applicable as reported on Schedule M 3 Part II line 30 column d to taxable income loss as reported on Form 1120 page 1 line 28 Tax Year 2010 Drake Software User s Manual Schedule M 2 Unappropriated Retained Earnings Schedule B The SCH3 Screen The software carries certain items that are readily available but it does not balance the M 3 automatically To ensure that the M 3 balances additional data entry may be required on the M31 M32 and M33 screens Schedule B is required when an M 3 is present in a return Use screen M3B for Form 1120 Schedule B Additional Information for M 3 Filers The SCH3 screen is similar to the SCH2 screen and is used to provide detailed infor mation for Schedule M 3 and Form 8916 A It can be used in place of the actual M3 and 8916A screens For more information on using this type of screen see The SCH2 Screen on page 20 Schedule M 2 Unappropriated Retained Earnings Information from Schedule M 2 Unappropriated Retained Earnings form ties to the Schedule L line 25 portion of the balance sheet Increases distributions and other decreases to the retained earnings are entered on Schedule M 2 Unappropriated retained earnings refer to corporate income that has not been distributed to sharehold ers that 1s available for dividend distribution M 2 Troubleshooting Tax Year 2010 The beginning Unappropriated Retained Earnings flow
22. the end of the year exceed 250 000 but are less than 10 million Schedule M 3 is required if the balance sheet s total assets at the end of the year equal or exceed 10 million NOTE If the corporation is filing Schedule M 3 any entries on the M1 screen Schedule M 1 Tax Year 2010 for Schedule M 1 should be deleted Schedule M 1 shows all items of income and expense that are not subject to tax plus those accounting items that are not income tax items When required the corporation must reconcile book income with the taxable income 21 Schedules M 1 and M 3 Reconciliation of Income per Books Drake Software User s Manual Use the M1 screen schedule to enter book to tax difference for Schedule M 1 Book to tax differences are classified as permanent or temporary and as favorable or unfa vorable Examples of both kind of differences are shown in Table 1 Table 1 Examples Book to Tax Differences for Schedule M 1 Permanent Book or tax items that will never be Meals amp entertainment limitations reported for book or tax purposes Penalties Tax exempt interest Temporary Items that will be reported for both Depreciation tax and book purposes but not dur Gains or losses on the sale of ing the same tax year depreciated assets Favorable Items that reduce taxable income Instances in which tax depreciation amount is greater than book depre ciation amount Unfavorable Items that increase taxable income Disal
23. trial balance worksheet are view only In a new template editable debit and credit cells are indicated by a dollar amount 0 Detail Some cells require more detail than can be entered on a single line These cells are Worksheets indicated by buttons Buttons do not work if macros are disabled see Opening a Template on page 34 b 3 line 7 Form 1120 p gt 0 does not carry detail required 4 0 detail require gi Eee f PRESS UU Du a Deam e requires detail i requires deta E Form 1120 Scu Figure 18 Example of cells that require worksheets Click a worksheet button to open a worksheet in a new tab Figure 19 shows an exam ple of the Other Income worksheet 36 Tax Year 2010 Drake Software User s Manual Importing Trial Balance Information statement Required Other Income Farm 1120 page 1 line 10 Amount of credit for tax an fuels Form 4136 INC line 1 Interest income on receivables INC line 2 Ordinary incame from partnerships Partnership Income Detail Lo m 1i Recoveries of bad debts deducted in earlier years INC line 4 5 Section 481 adjustments INC line 5 5 State tax refund cash basis ING line 5 3 h TT i Taxable income from insurance proceeds o Other Other Income Detail Total other income Click to EE to TB 4 Lone Income To return to the previous worksheet click the Corp TB tab labeled 1 in Figure 19 or click the Return button
24. which the 52 53 week year ends for the current fis cal year 01 January 02 February etc 5 For line 2 select the day of the week the tax year always ends Tax Year 2010 29 Binary Attachments Drake Software User s Manual 6 For line 3 enter the actual date that the tax year ends the same date entered in the Fiscal year ending field on screen 1 Once a 52 53 week year is selected the entity must use that account NOTE ing period every year To change accounting periods the entity must submit to the IRS Form 3115 Application for Change in Accounting Method In subsequent years only the 52 53 week tax year check box on screen 1 must be marked the program automatically updates the dates Inactive Returns Entities that are inactive but are still required to file returns may e file inactive returns in Drake To indicate that a return is inactive 1 Go to the PRNT screen accessible from the General tab 2 Under Items to Print mark the Print inactive return box When the return is calculated the program displays the words Inactive Return on the main form of the return specifically on lines 1c and 2 Zeros are displayed where required by the IRS in order for amounts to be properly included in the e file data All EF messages must be cleared in order to e file an inactive IMPORTANT AUEF For detailed instructions on e filing returns in Drake see Drake Software User 5 Man ual Tax Year 2010 Binary At
25. 2220 screen in Drake consists of two screens Press PAGE UP and PAGE DOWN to move from screen to screen The program retains the underpayment and penalty rates as of IMPORTANT 12 31 of the calendar year If a corporation has a fiscal year end you must enter the effective rates manually State Enter 2010 estimates and 2011 overpayments for state returns on the ES screen For Estimates the federal return to override 2010 estimates and apply overpayments to 2011 use screen W Direct Deposit of Refunds The IRS requires that Form 8050 Direct Deposit of Corporate Tax Refund be submit ted with an e filed return in order for a corporate refund to be direct deposited To access this form in Drake go to the DD screen accessible from the General tab When filling out the DD screen e Ifthe federal refund is to go to the account listed select Yes for the Federal Account selection otherwise select No Default is Yes e Ifa state refund is to go to the account listed select the state abbreviation from the State City selection drop list e Enter the name of the financial institution the routing number RTN the account number and the type of account Checking or Savings e Re enter the routing number account number and type of account to verify Figure 4 Account 1 Federal Account and State if same as Federal Deposit selection Federal selection IY State city selection MD Name of finan
26. If the depreciation amounts match but the line 1 amounts differ an M 1 adjustment could be required 40 Tax Year 2010 Drake Software User s Manual Supplement Appendix Trial Balance Import Tax Year 2010 The trial balance import allows data to be imported into a corporate tax return from a trial balance worksheet Drake s specially designed trial balance template and importing function has the fol lowing benefits e Eliminates the need to duplicate entries e Eliminates data entry errors by automatically importing data to the correct fields e Allows preparers to merge basic accounting functions with tax preparation See next page for a flow chart describing the use of the trial balance import Trial Balance Import General Process 11205 amp 1065 Were rental totals entered in trial balance Compare M 3 line 1 Does trial balance match Schedule M 1 line 1 Pre pa re to use Tri al gt Balance Import M Enable Excel macros Disable autobalance Force Schedule L Delete unnecessary detail worksheets YES Go to data entry an enter individual rentals on 8825 or RENT screens as applicable Did data import correctly Populate Trial Balance Template Import Trial Balance Import direct entry data cells with 0 applicable detail worksheets totals for depreciation Schedule L rentals 1120S amp 1065 only Make i correctio
27. Reader installed Adding PDF To indicate in the software that a PDF file will be sent with the return Files 1 Goto the PDF screen in data entry 2 Fill out the columns on the screen See Table 2 for examples Table 2 PDF Attachment Window Columns Reference Source Name or number of regulation IRS Pub xxx 1 4 publication or form instruction that Form Instructions for 1120 makes attachments necessary Description Description of form or document to Title of house on Oak Street be attached Appraisal of Lot 1234 File name Distinctive easily recognizable file TitleHouseOakSt pdf name followed by pdf AppraisalLot1234 pdf 3 Exit the PDF screen Because you ve indicated that a PDF file 1s attached the program generates an EF message page regarding the attachment when the return is calculated Attaching To attach a PDF file to a return Documents to the Return 1 From the return click View If anything was entered on the PDF screen see Adding PDF Files previously there will be three PDF related items in the View Print window e Ared MESSAGES alert see item 1 in Figure 11 e An EF PDF worksheet that lists all items entered on the PDF screen see item in Figure 11 e An Attach PDF button on the toolbar item 2 in Figure 11 Tax Year 2010 3l Binary Attachments Drake Software User s Manual n 2 a e E 0 Data Entry Print Setup Archive Email Hefresh Basic Vie
28. TRL W worksheet The depreciation amount is included on the statement for other costs and should not be included in the Other Costs worksheet If using the trial balance import feature see Importing Trial Balance Information on page 33 enter depreciation amounts directly into the appropriate fields on the trial balance worksheet not in the fields in data entry When the trial balance is imported the COGS depreciation expense amount flows directly to the appropriate line of Schedule A and is calculated accordingly Dividends Schedule C Interest Enter dividends and special deductions on screen C Schedule C The Dividends Received Deduction Worksheet WK_DRD is generated from data entered in these fields The result of the WK DRD is carried to Schedule C of the return The total from Schedule C line 19 column A is carried to Form 1120 line 4 Dividends and the total from Schedule C line 20 column C is carried to Form 1120 line 29b Special deductions NOTE If the corporation is filing a consolidated return do not enter non included dividends here or anywhere else in the program Line 5 is for interest income which is entered on screen 3 line 5 Note that the line 5 field is an adjustment field an amount entered there is combined with the interest amount if any entered on screen 6252 Form 6252 Installment Sale Income Enter tax exempt interest income at the bottom of the INC screen This amount flows
29. Users Manual gt D rake Voron Supplement Corporations 1120 Drake Software User s Manual Tax Year 2010 Supplement Corporations 1120 Support DrakeSoftware com 828 524 8020 Copyright Trademarks Drake Software User s Manual Supplement Corporations The 2010 Drake Software Manual Supplement Corporations Drake Tax Software and any other related materials are copyrighted material All rights are reserved by Drake Enterprises LTD including all ownership rights This document associated software and related material are the property of Drake Enterprises LTD Drake Enterprises LTD hereby authorizes you to download display print and repro duce the material in this document in an unaltered form only for your personal non commercial use or for non commercial use within your organization Copyright trademark and other proprietary notices may not be removed 2010 Drake Enterprises LTD All rights reserved While every attempt has been made to produce an accurate and complete manual there is no warranty expressed or implied to that effect Drake Enterprises LTD assumes no liability for damages or claims resulting from the use of the information contained herein The Drake Software Logo and Drake Tax are registered trademarks of Drake Enterprises LTD Other product names mentioned in this manual may be trademarks or registered trademarks of their respective companies Tax Year 2010 Dr
30. Windows 7 and Microsoft Vista you may see a Security Warning NOTE message with an Options button Click Options to open the Security Options dialog box then select Enable this content Click OK The trial balance template 1s displayed in Microsoft Excel Naming Whenever a new template is opened the tax software assigns it a default file location Convention and name Trial balance templates are saved in the TB folder of your Drake10 soft ware The file name consists of the client name as entered in Drake plus TB for trial balance plus the xls extension assigned to all Excel files as shown in Figure 16 Drake 101 TSlGompanyWam elis em Eres re tt File Location Name of Client TB indicates trial balance file Figure 16 Example of trial balance template file name To change the name of a file in Excel select File gt Save As and assign the new name NOTE If saving a trial balance to a different location make of note of where youre storing it The program automatically looks in the default directory Template The trial balance template consists of three title rows and six columns The Entity Structure Name and Year End title rows can be edited double click a row to change the title Columns are described in Table 3 Table 3 Trial Balance Template Columns Column Description Account Title Title of account Debit Credit Debit and credit amounts Import to Screen and line in Drake to which the debit or credit
31. ake Software User s Manual Supplement Corporations Table of Contents What s New in Drake for Corporations nenn nn nn 1 Data Entry and Calculation seid ana anes enone el cased SUCUS UR Ue Rol do dod ee de arn l Screens amd POLIS s es exce Suid a Facer d esie Neh EEIE Des ae Se RER Dre he Da EEE 2 Electronic Filing BealuteS serien Iq qd PASS Rem rasiert 2 BaO TOU SE eraciren E eed s gages 3 Updating a Prior Year Return in Drake l l eee e ees 3 Converting from Another Return Type llllllllleeeeeee rra 3 Filing Borm 1120 C or 1120 1 4 ou 2 ie 3 Header Information ioo d cando 8 216 seh are a Name and Aldress cv cese c ose eG ER Hom bee hae EU bona dpa eee PERS eee ERU Berea ee 4 o Ad TH 4 Boxes AOU Dis e sober Sat E RUPES ine E eoas ee enone RE rasa E aded rV Pd ES 5 Income and Deductions 0 cee ee 5 Gross RE CIP S rsrs a eee sone ere hee ee re ee ead ae ead oad Re oe Ad Soe ee ee 5 Cost of Goods Sold Schedule A eee s 5 Dividends Schedule GC 6 Interest PPP 6 Rents and Royalties 5 26 544440 30004 0 RR aa une ae dad es 7 Capital Gals een een nee en ee REES Her sar Es pee ee ee ee 7 Ordinary Gains and LOSSES an a 1 o gees ee d Eq OR a a De bean I Other Income 1088 he canes dae pees neces EEEE E er ee oreo eas eee RO E RU REX gd ds 7 Compensation of Officers Schedule E llillllllleeeeeeee rr 8 Salares and W deus quor hbro ee or hedge eee a ae Fal ed ndun
32. am defaults Suppressing Forcing Documents To suppress or force the printing of certain documents go to the PRNT screen and select the desired options Many on the fly changes override the options established in Setup You can force the program to print the following 1120 items on a return Schedule E Schedules G 1120 C L M 1 and M 2 Form 4562 Next year depreciation listing Inactive returns PIN for the preparer s alternative electronic signature Schedule E is required if total receipts line 1a lines 4 through 10 are NOTE 500 000 or more Schedules L M 1 and M 2 are not required if receipts and total assets Schedule K line 13 are less than 250 000 The PRNT screen can also be used to suppress printing of the following items on a return Form and attachment references References are printed by default Form 4626 Alternative Minimum Tax Corporations Calculation and Other Options The following calculation and other options are available 26 Tax Year 2010 Drake Software User s Manual Making Changes on the Fly Calculate Form 2220 penalty Select this box to have the program calculate the penalty for Form 2220 Underpayment of Estimated Tax by Corporations The program retains the rates as of 12 31 of the calendar year If a corporation has a fiscal year end the preparer must enter the effective rates manually Calculate WK 1120W based on 2010 taxable income The WK 1120W is an
33. amount is imported Form Page Sch and or line Location of the amount on the printed return Other information Additional details for preparers see Details for Pre parers on page 39 Tax Year 2010 35 Importing Trial Balance Information Drake Software User s Manual Displayed at the bottom of the trial balance worksheet are the calculated amount for Schedule M 1 line 1 the credit and debit totals and a cell showing whether or not the balance sheet is out of balance and if applicable the out of balance amount Figure 17 see also Figure 20 on page 37 Y T cu rn H tX ae J eU i My V un un i B ets NU T2 v rT Salaries and wages shareholder employees TU Waste removal TO n Income Loss Schedule M 1 line 1 100 600 gt 2 lt COMME sun 549 050 LOUT OF BALANCE F Figure 17 Schedule M 1 amount 1 totals 2 and indication of balance 3 Following are instructions and guidelines for using the trial balance template to assemble financial data for importing into data entry Entering Financial Data When a new trial balance file is opened for a return all debit and credit amounts are zero 0 All data must be entered manually into the template Some data cannot be imported from the trial balance and must be NOTE entered directly into the data entry fields within the program For more on these categories of data see Special Conditions on page 39 Direct Entry Most cells in the
34. an be seen both in the data entry screens and on the generated return Additional The program can import the following additional information when importing the trial Import balance data Select the items to import or click Select All Options Buildings amp other depreciable assets Accumulated depreciation Goodwill amp other intangible assets Land 38 Tax Year 2010 Drake Software User s Manual Importing Trial Balance Information Accumulated amortization Special Conditions Some trial balance items cannot be entered into the trial balance worksheet and must be typed directly into Drake data entry Other items should be entered into the work sheet for balance purposes but are not carried to data entry these must be entered sep arately and the calculated results compared to the trial balance worksheet Details for Most trial balance items go directly to the location indicated in the program and on the Preparers return For example the amounts shown in Figure 22 go to Schedule L line 1 column d in the program and are shown on page 5 line 1 column d of the 1065 return 4 20 O50 Te L line 1 cal d 1065 page 5 line 1 cold L line 2a cal c 1065 page 5 line 2a cal c E d ON ee D on T E On rF NEN O TA g gi gea ain ee Figure 22 Indication of where an amount will go in Drake and on the return Not all figures can be imported directly however and some amounts are optional Drake has provided an
35. by an individual or estate enter on screen G2 the name and ID number of the individual or estate country of citizenship and percentage of stock owned Mark the check box if this stock is owned by an individual Use the CTRL PAGE DOWN function to open additional blank G1 or G2 screens For more information on line 4 of Schedule K see the IRS instructions Schedule K Line 5 If the corporation owned stock in other corporations or partnerships or the beneficial interest in a trust enter the information Schedule K NEW FOR Use screens K5A and K5B for Schedule K line 5a and Schedule K line 5b respectively These screens can be accessed from the Data ll Entry Menu or from the Schedule K screen by clicking the applicable link or pressing PAGE DOWN Use the CTRL PAGE DOWN function to open additional blank K5A or K5B screens For more information on line 5 of Schedule K see the IRS instructions Schedule K Line 7 Tax Year 2010 Enter information on line 7 of screen K if a foreign person owned directly or indi rectly at least 25 of the total voting power of all classes of the corporation s stock entitled to vote or the total value of all classes of stock of the corporation If there 1s more than one 25 or more foreign owner complete the fields for the person with the highest percentage of ownership Enter the percentage that person owned the owner s country of residence and if necessary the number of 5472 forms
36. cial institution RTN Accountnumber Type of account First Bank and Trust 123456789 0876543210 Checkng Savings iw Checking Savings Repeat Account Information 123456789 9876543210 Figure 4 Federal section of DD screen also 8050 screen 12 Tax Year 2010 Drake Software User s Manual Electronic Funds Withdrawal Direct Debit If receiving refunds from different state tax authorities use the State Account boxes on the DD screen to indicate where other state refunds should be deposited Electronic Funds Withdrawal Direct Debit Use the PMT screen accessible from the General tab to indicate that the balance due for an e filed return be withdrawn direct debited from an account Program Defaults and Overrides By default the program indicates that the entire balance due line 34 Amount owed of Form 1120 is to be withdrawn on the return due date To indicate other wise complete the Requested payment date override fields see Figure 5 for the applicable payment If the return is e filed on or before the due date the requested payment date cannot be later than the due date If the return is transmitted after the due date the requested payment date cannot be later than the date the return is transmitted Required Information A Withdrawal selection item 1 in Figure 5 is required if the program is to direct tax authorities to withdraw funds from the corporate bank account Federal Account and State if same as Federal
37. corporation select NONE in the Firm and Preparer drop lists on screen 1 To have the preparer s name and address information displayed on the printed return e Ifthe return preparer and ERO entered in Setup gt ERO are the same Goto Setup gt Preparer s and ensure that the Alternative Electronic Signa ture box is marked for the preparer Complete the PIN screen for the return e Ifthe return preparer and ERO are not the same 14 Tax Year 2010 Drake Software User s Manual Amending a Return Goto the PRNT screen for the return and complete the field labeled PIN for preparer s alternative electronic signature The PIN entered should match the one entered for the preparer in Setup gt Preparer s For more informa tion press F1 in this field NOTE Setup gt ERO must still be completed in Drake for e filing See the IRS instructions for further details on signing requirements Amending a Return Returns Previously Prepared in Drake New Returns E filing an Amended Return Tax Year 2010 The program can automatically fill the 1120X screen for Form 1120X Amended U S Corporation Income Tax Return When you amend a return in Drake the amended information replaces the original in the data file Before amending a return you CAUTION should archive the original to avoid losing previously submitted data For more information on archiving returns see Archive Manager in Chapter 6 Ret
38. d it may be necessary to do a detailed comparison between the corporation s financial records and the completed return information Schedule O Controlled Group Information Use screens O and OM accessible from the first Other Forms tab to fill out Sched ule O Consent Plan and Apportionment Schedule for a Controlled Group Press PAGE UP and PAGE DOWN to navigate from screen to screen N ITE Members of a controlled group are entitled to one 50 000 one 25 000 and one 9 925 000 taxable income bracket amount in that order AMT Adjustments and Other Items Alternative Minimum Tax AMT adjustments are limited among the members of a controlled group These should be entered in the Other information fields of the OM screen Figure 7 ll ih a eh t S a tu P fe LM P F Sa 2 et ee Am _ E me tem pi eA pmt TS ume E pale adim ef no vette foe om e A ves 24 d c Tr 58 F F lli ee t w A et Phaseout of Accumulated AMT AMT Penalty for earnings exemption exemption failure to pay Other credit amount amount estimated tax Description Amount Other Apportionments EC WEN s elle Men nn m ann Lg Ww omm dine I6 Mas tier anf M oat Att d eS oe m diit dpt a adito N Figure 7 Other information fields for other AMT adjustments Types of Controlled Groups At the top of screen O mark the box indicating the type of reported controlled group for which Schedule O is reporting Controlled group t
39. d 20 AWODI PCT OO 21 Schedules M 1 and M 3 Reconciliation of Income per Books 21 vena M 21 SEEN E een ee se ETUR ee eee Meee ge PERSE Es aaa ees 22 Schedule M 2 Unappropriated Retained Earnings 23 M 2 Troubleshooting ua oh odors SOR goce d Roos deed nenne Robben SOR ddr Sd edes 23 Schedule O Controlled Group Information Le 24 AMT Adjustments and Other Items 0 eee e ee nen nee 24 Types of Controlled Groups a 0 ss20 ced Seb nee dd poer awh ed ee ew deed ve bebe eee eek A 24 Line 5 Apportionment Plan Stats lt s 20 44082 c2004 sha 14 euere acteurs irren 23 Credits and Adjustments eleeeeeeeee es 25 Adjusting Charitable Contributions NOL nn nn nenn 25 Making Changes on the Fly lesen 26 Suppressing Forcing Documents 0 0 es 26 Calculation and Other Options 0 0 eer hrs 26 Overriding Other Setup CDDOFTS auus adios dens ou sa das ov da Peur S 04a 9494 du Ex og woes ends 27 Guide to Overrides and Adjustments nnna annann naa 27 EIBCIPOIBE FIING rirse EREEREER DARS 28 Common Error Odessa ti mes Sy ed ay Ben 99 12 EE WINE E REG E VE PNE EEA E EE qs 28 iv Tax Year 2010 Drake Software User s Manual Supplement Corporations Special Types of Returns lleleeee
40. e items requiring a subsidiary schedule CCOM screen Similar to the COMP screen the CCOM screen compares data from the current return with data from the two previous years returns for Form 1120 C Form 8866 Form 8866 Interest Computation Under the Look Back Method for Property Depreciated Under the Income Forecast Method has been added to the 1120 package Electronic Filing Features This year s e filing changes for the corporate package are listed below Amended Returns EF Eligible Form 1120X Amended U S Corporation Income Tax Return is now eligible for e filing See Amending a Return on page 15 for information on e filing Form 1120X Foreign Ownership Information Returns with foreign ownership information on schedules G and K are now eligible for e filing More EF Trapping For Business Returns New programming will help the software catch more errors in a return before a return can be e filed and then rejected by the IRS EF Messages and Notes Many of the EF messages and notes pages have been rewritten for improved clarity and to better help with trouble shooting issues in business returns EF Messages for Accepted Returns An EF messages is now produced when a return is calculated that has already been e filed and accepted Tax Year 2010 Drake Software User s Manual Before You Start Before You Start Actions you might need to take before starting a 1120 return in Drake include e Updat
41. eeel nnn 29 Electing a 52 53 Week Year Initial Return 0 0 0 0 00 e 29 Bas ve Se utis ea weet ERUNT eee eee aoe a eGo en E een Royce near EOS 30 Binary Attachments a2 3 32 353 335 naeh a ee a aie d d RES 30 The PDF Attachment Process en aveaccuads serier AKT qESST OSEE dS E RIP Sq Ra PE a dE RATES 30 Printine Generated Documents uo ado 20 are ae Bau ER EUN EARN qur PP Fare da Rica 32 Importing Trial Balance Information LL 33 Preparing to Use Trial Balance Impott i0 lt cassoedee0n4 5506 RR A PRA E RE areas rent 33 Preparing Financial Data for Import 0 0 0 0 00 e 34 Entering Fmancial Dala nassen nee TOP na eee eee dia eee dd En aS OR WP PIE T NEP 36 Davie du 38 Importing Data mto a Rein as 8244204 xr ERES REPRE RERATAGORUC EG GU REGERE GUERRE ERREUR 38 Pe cla CONGINOMS cesa d ee IEEE TISARN AA TE ee MEE ea ad Md sine 39 Appendix Trial Balance Import lelseleleeeens A 1 ln P vii Tax Year 2010 V vi Drake Software User s Manual Supplement Corporations This page intentionally left blank Tax Year 2010 Corporations 1120 The basics of data entry for a corporation 1120 1120 C 1120 H return are the same as for a 1040 return Field and screen level help shortcut keys and navigation throughout data entry all function as they do in
42. estimated tax worksheet based on the current tax year taxable income Calculate Form 4466 application for quick refund Form 4466 Corpora tion Application for Quick Refund of Overpayment of Estimated Tax A check mark in this box 1s the only entry needed to generate the form Subchapter T Cooperative Select this box to have the return treated as a Sub chapter T cooperative When this box is selected Subchapter T Cooperative is printed above the corporation name on page 1 of the return but the return does not become an 1120 C return Turn off autobalance For more information on the autobalance feature in Drake see Autobalance on page 21 Prepare Form 7004 extension based on screen 1 info Select this box to pre pare a six month extension based on the information that has already been entered into the return Note that screen 1 must be completed to prepare an extension NOTE To prepare Form 7004 based on information other than or in addition to that provided on screen 1 use the 7004 or EXT screen Overriding Other Setup Options The following program defaults can be overridden from the PRNT screen Filing instructions federal and state Envelope coversheets corporation IRS state and city Date to print on return Due date to print on letter and filing instructions see note below Amount on Form 1120 page 1 item D Total assets IRS Service Center NEW FOR A default due date for filing
43. fficer compensation 8 ordinary gains and losses 7 other income loss 7 out of balance M 2 troubleshooting 23 overrides 27 ownership foreign 17 of stock 16 18 percentages 8 P parent subsidiary group 16 24 partnership income 7 PDF documents e filing 30 33 percentage stock and ownership 8 PIN electronic signatures 14 printing statements for Schedule L 20 suppressing forcing 26 prior year returns updating 3 R receipts 5 references to forms and worksheets 26 refunds direct deposit of 12 state tax 7 reject codes 28 rent paid on business property 9 rental amp royalty income 7 repair costs 8 resident state 19 Drake Software User s Manual Supplement Corporations Tax Year 2010 Drake Software User s Manual Supplement Corporations returns consolidated 6 converting from another type 3 fiscal and calendar year 4 tax exempt organizations 990 30 33 updating 3 S salaries 8 SCH2 screen for Schedule L 20 Schedule A Cost of Goods Sold 5 6 21 Schedule B Additional Information for M 3 Filers 23 Schedule C Dividends amp Special Deductions 6 Schedule D Capital Gains and Losses and Built In Gains bad debts 9 Schedule E Compensation of Officers 8 26 Schedule G Information on Certain Persons Owning the Corporation s Voting Stock 26 Schedule G Schedule G Information on Certain Persons Owning the Corporation s Voting Stock 2 17 Schedule L Balance Sheet per Books 19 21 26 Schedule M 1
44. formation to Form 4797 IN Installment sale section 1245 property Form 6252 JS Installment sale section 1250 property Form 6252 LK Like kind exchange Form 8824 Form 1120 C Cooperative Associations The 20C screen now allows entry of non patronage NOL carryforwards from prior years What s New in Drake for Corporations Drake Software User s Manual Section 179 Expensing for Qualified Real Property In accordance with the Small Business Jobs Act of 2010 a taxpayer may elect under section 179 to expense up to 250 000 of the cost of qualifying real property placed in service during the taxable year In Drake this election is made on the 4562 screen Screens and Forms Listed below are some of the changes to screens and forms in this year s 1120 pro gram Screens G1 and G2 In the 2009 program screen G was used for Schedule G Voting Stock Ownership In the 2010 program this screen has been broken out into screens G1 Schedule G Part I and G2 Schedule G Part II Screens K5A and K 5B Screens K5A and K5B have been added for complet ing Schedule K lines 5a and 5b respectively To access either of these screens click the applicable link from screen K or enter the screen code into the selector field and press ENTER Screen L The L screen and L2 screens from previous years have been consoli dated into one screen for easier data entry Links to the SCH2 screen are provided for thos
45. fthe corporation uses a fiscal year where the year begins in the current calendar year Calendar and ends in the next specify the beginning and ending dates in the If not calendar YearS year section in the lower left corner of screen 1 The program adjusts calculations for depreciation and for gains and NOTE losses on sales of assets based on the entity s tax year For information on filing with a 52 53 week year see Electing a 52 53 Week Year Initial Return on page 29 Short Year An entity may have a short year return if changing accounting periods with IRS Returns approval Form 3115 or if this is its first or last year in business and the tax year is not a full year To indicate a short year return use the fiscal year date fields on screen 1 to indicate the beginning and ending dates for the current year If filing a short year return other than an initial or final return you have to provide an explanation To do so go to the ELEC screen and select an explanation from the Other short year options elections drop list Your explanation will be displayed at the top of the first page of the tax return If you do not select an explanation an EF message will be generated with the return and the return cannot be e filed 4 Tax Year 2010 Drake Software User s Manual Income and Deductions For more information on short year explanations see IRS Pub 4163 NOTE The program may not correctly calculate depreciation gains
46. g an Extension Calendar year returns are due on March 15 2011 By filing Form 7004 a corporation can extend the deadline six months to September 15 Fiscal year returns are due on the 15th day of the third month after the end of the corporation s year The 7004 extends the deadline six months NOTE An 1120 return is due no later than eight and a half months after the close of the corporation s tax year Use one of the following options to file an extension for an 1120 1120 C or 1120 H e Go to the 7004 screen in Drake and select Generate an extension Complete any other applicable fields on the screen e Go to the PRNT screen and select Prepare Form 7004 extension based on screen 1 info Signing the Return Electronic PIN signatures are required for e filed returns If e filing a return com plete all fields on the PIN screen A return cannot be e filed if the PIN screen fields including the title and signature name of the officer signing the return are not com pleted An 1120 return must be signed and dated by one of the following individuals e The corporation s president vice president treasurer assistant treasurer or chief accounting officer e Any other corporate officer such as a tax officer who is authorized to sign If the return is prepared by a paid preparer the preparer must complete the required information and sign the return in the space provided If it is prepared by an employee or officer of the
47. ill not be imported correctly into the return Detail worksheets are indicated by red shading as shown in Figure 15 Income and Deductions Income TM to rgse TEPBIBES OS Seen ee UL ae ee i a sad pcan aa uaebcliunuciclc ce cec M T Fami VOT Ae ETE howard 8 ue C LU MUI Rua eu LA p eater EEE ante Figure 15 Example of an unnecessary detail worksheet Remove unnecessary detail worksheets prior to import See Detail Worksheets on page 36 for more information on using detail worksheets in the trial balance Preparing Financial Data for Import 34 Opening a Template To prepare the financial data for importing into the return the data must be entered into Drake s specially designed trial balance template Once this information 1s entered and saved it can be imported into the return The first step in preparing financial data for importing is to open a trial balance tem plate for the return and enter the financial data To open a trial balance template for a return Tax Year 2010 Drake Software User s Manual Importing Trial Balance Information iz Open the return to the Data Entry Menu r N e Click Import gt Trial Balance Import in the menu toolbar The preliminary Trial Import lx Balance Import dialog box is opened 3 Click Create New or Open Existing If opening an existing file click Open after selecting the correct file 4 Ifa Security Warning box appears click Enable Macros In
48. ing the trial balance worksheet for SCH2 items and amounts Autobalance forces Schedule L to balance for both the beginning and end of year amounts The program adjusts the unappropriated retained earnings amount on Sched ule L by the difference between the total assets and the total liabilities and capital before the adjustment For example if assets are 1 000 and liabilities and capital are 900 the program increases the unappropriated retained earnings by 100 The program makes the adjustments due to differences in the balance sheet Incorrect data entry could cause these differences but they are usually the result of one of the following issues e An asset was deleted from 4562 screen Depreciation Detail instead of being indicated as sold e Beginning inventory amounts were adjusted on the Schedule A or ending inven tory amounts were entered incorrectly e Amounts were erroneously deleted or changed from screen L To reconcile the differences it is best to compare the corporation s beginning and end ing balance sheet amounts for the tax year To turn off this feature for a specific return go to the PRNT screen and select Turn off autobalance NOTE If you are using trial balance import autobalance must be turned off prior to import See Preparing to Use Trial Balance Import on page 33 Schedules M 1 and M 3 Reconciliation of Income per Books Schedule M 1 is required if the balance sheet s total assets at
49. ing a prior year return if you prepared the tax return last year e Changing a return from another type of return to an 1120 if the corporation has made such a change in the last year Updating a Prior Year Return in Drake A prior year return can be updated in three ways e With all other returns in the program using Last Year Data gt Update 2009 to 2010 not recommended e Asa single return updated one at a time using Last Year Data gt Update 2009 to 2010 recommended e When you open a return for the first time in the 2010 program and are prompted to update it When you update an 1120 return that was marked final the previous year the pro gram informs you that the return was marked final before prompting you to proceed Converting from Another Return Type If the corporation is electing to become an 1120 corporation after existing as another type of entity S corporation partnership etc it is necessary to indicate this in the program To change from another type of entity to an 1120 corporation in the program 1 From the Home window select Tools gt File Maintenance gt Change File Type 2 Enter the EIN of the entity and click OK 3 Select the new return type 4 Click OK to save the change Filing Form 1120 C or 1120 H NEW FOR The CCOM screen has been added to allow comparison of the current year 1120 C return with those from the two previous years This screen Al is similar to the COMP screen
50. ing any resulting deficiency Credits and Adjustments Certain credits require an adjustment to either income or expenses Drake 2010 carries the required adjustments to the appropriate line of the return and to Schedule M 1 or M 3 Manually reducing the expenses deductions or increasing the income for these credits causes the return to be out of balance Adjustments are made to other income for the credit amounts for the following cred its e Form 6478 Alcoholic and Cellulosic Biofuel Fuels Credit e Form 8864 Biodiesel and Renewable Diesel Fuels Credit e Form 8912 Credit to Holders of Tax Credit Bonds interest income Adjustments are made to the appropriate deduction expenses for the credit amounts for the following credits e Form 5884 Work Opportunity Credit e Form 6765 Credit for Increasing Research Activities e Form 8820 Orphan Drug Credit e Form 8845 Indian Employment Credit Form 8846 Credit for Employer Social Security and Medicare Taxes Paid on Cer tain Employee Tips e Form 8881 Credit for Small Employer Pension Plan Startup Costs e Form 8844 Empowerment Zone and Renewal Community Credit e Form 8941 Credit for Small Employer Health Insurance Premiums Adjusting Charitable Contributions NOL Limitation on Deduction Tax Year 2010 Corporations with a net operating loss NOL carryover from any taxable year must apply the special rule of IRC section 170 d 2 B for charitable contributions The rules a
51. its and adjustments 25 Ctrl W detail worksheets 6 11 34 D data entry FAQ screen 28 trial balance import 36 debts bad 9 deductions and income 5 11 depletion 10 depreciation and auto balance errors 21 expense 10 for cost of goods sold Schedule A 6 installment sales and like kind exchanges 1 on short year returns 5 trial balance business returns only 40 detail Ctrl W worksheets 6 11 34 direct debit of balance due 13 14 domestic production activities deduction 10 E e filing new features in Drake 28 PDF documents 30 33 electronic funds withdrawal direct debit 13 signatures PIN 14 entertainment and meals 11 envelope coversheets 27 error codes 28 estimated tax worksheet 27 estimates 12 27 extensions 14 27 F filing instructions 27 final returns indicating in the program 5 updating 3 fiscal year returns 4 foreign ownership 2 17 Form 1120 C U S Income Tax Return for Cooperative Associations 1 3 Form 1120 H U S Income Tax Return for Homeowners Associations 3 vii Index Form 2220 Underpayment of Estimated Tax By Corpora tions 12 27 Form 4466 Corporation Application for Quick Refund of Overpayment of Estimated Tax 12 27 Form 4797 Sales of Business Property 7 Form 5884 Work Opportunity Credit 25 Form 6252 Installment Sale Income 1 6 Form 6478 Alcohol and Cellulosic Biofuel Fuels Credit 7529 Form 6765 Credit for Increasing Research Activities 25 Form 7004 A
52. le L line 3 Inventories Lines 1 and 7 of screen A are adjustment fields Amounts entered in these fields adjust add to or subtract from any amount being carried from the F screen Form 1040 Schedule F Profit or Loss from Farming NOTES to line 2 of Form 1120 The fields on screen L Schedule L Balance Sheet Assets for line 3 Inventories are override fields Anything entered in these fields over rides replaces the data entered for inventory on screen A Tax Year 2010 Income and Deductions Drake Software User s Manual Line 5 Other Costs Importing Trial Balance to Sch A Line 5 Other costs 1s designated for any applicable costs not entered on lines 2 through 4 purchases cost of labor and additional section 263A costs In Drake two data entry fields are used to complete line 5 one for other costs excluding deprecia tion and one for depreciation Figure 1 4 5 5 atii deo cese errata Pre E Figure 1 Screen A Schedule A line 5 In the Depreciation field enter any depreciation that relates to the cost of goods sold unless the amount is flowing from the 4562 Detail screen with COGS selected from the For drop list Note that this field is an override field an entry here overrides cal culations from the 4562 screen Amounts entered in this field automatically adjust the total depreciation that is carried to page 1 of Form 1120 For Other costs excluding depreciation use a C
53. ll line selections and screen descriptions are carried to the next year NOTE and year end amounts are carried to the beginning of year column when the returns are updated The total amounts entered on the SCH2 screen do not show up on the actual L screen in the program They are however printed on the return where needed with refer ences to the corresponding statements The type of statement produced by the program depends on the selected line and the IRS requirements If a line is required a statement labeled STATEMENT is pro duced and is e filed with the return If a line is not required a statement sheet STMT is produced and is NOT e filed with the return Note that an e fileable STATEMENT is referenced in the return Typically one or more SCH2 screens are needed for Schedule L items Data for the SCH2 screens cannot be entered directly into the trial balance worksheet Although the amounts must be included in the trial balance worksheet for the worksheet to bal ance the SCH2 detail screens must be created separately from the worksheet When the return is produced Schedule L will reflect both the amounts imported from the Tax Year 2010 Drake Software User s Manual Schedules M I and M 3 Reconciliation of Income per Autobalance trial balance worksheets where direct entry was allowed and the totals of the SCH2 screen amounts See Importing Trial Balance Information on page 33 for detailed instructions us
54. lowed meals amp entertainment Schedule M 3 22 Parts I III Schedule M 3 is completed using the following screens all found on the General tab of the Data Entry Menu e M3 M31 M32 and M33 for Parts I IL and III of the Schedule M 3 e M3B for Schedule B Additional Information for M 3 filers e SCH3 for subsidiary schedules for Schedule M 3 and Form 8916 A e M3S for supplemental statements e 8916 for reconciling of M 3 with taxable income for mixed groups e 916A for supplemental attachments to the M 3 If the corporation is required to file or voluntarily files Schedule M 3 the corpora tion must file Form 1120 and all attachments and schedules including Schedule M 3 Certain income and deduction amounts and adjustments flow from NOTE Form 1120 to Schedule M 3 and Form 8916A in the program but all other M 3 data must be entered manually If a Schedule M 3 is present in a return no Schedule M 1 is generated Part I of Schedule M 3 asks certain questions about the corporation s financial state ments and reconciles financial statement worldwide net income loss for the corpora tion or consolidated financial statement group if applicable as reported on Schedule M 3 Part 1 line 4 to net income loss per the income statement of the corporation for U S taxable income purposes as reported on Schedule M 3 Part 1 line 11 Parts II and III reconcile financial statement net income loss for
55. nd importing function has the following benefits e Eliminates the need to duplicate entries e Reduces data entry errors by automatically importing data to the correct fields e Allows preparers to merge basic accounting functions with tax preparation NOTE A flow chart of the trial balance importing process is available as an appendix at the end of this manual Preparing to Use Trial Balance Import Tax Year 2010 The trial balance import function can be used only on returns that were created in Drake 2008 or later If you haven t already create a client file in Drake or update an existing client file from the prior year Like several other functions of the tax software this new feature requires Microsoft Excel version 2000 or later In addition take these actions to ensure the trial balance import works properly Activate Macros The trial balance import function uses macros in Microsoft Excel Check your Excel settings to ensure that macros are activated and that macro security is set to medium To do so go to Tools gt Options in Excel and select the Security tab Click Macro Security and select Medium and then click OK In Windows 7 and in Microsoft Vista click the Office button in the upper left and then click the Excel Options button at the bottom of the win NOTE dow Next select Trust Center from the list at left then click the Trust Center Settings button Select Macro Settings from the list on the left
56. ng in the Drake Software User s Manual Tax Year 2010 Schedule K Schedule K Drake Software User s Manual Use screen K to enter data for Schedule K Other Information Screen K should also be used for Schedule K of Form 1120 C Detailed here are some specific areas that might need your attention NEW FOR 7 Il now eligible for e filing Returns with foreign ownership information on Schedules G and K are Schedule K Line 3 On line 3 line 5 for 1120 C enter the EIN and name of the parent corporation if the corporation is a subsidiary in an affiliated group or a parent subsidiary controlled group Be aware of the following guidelines from the IRS If the corporation is an excluded member of a controlled group see section 1563 b 2 it is still considered a member of a controlled group for this purpose An affiliated group is one or more chains of includible corporations section 1504 a connected through stock ownership with a common parent corporation The common parent must be an includible corporation and the following require ments must be met The common parent must own directly stock that represents at least 80 of the total voting power and at least 80 of the total value of the stock of at least one of the other includible corporations Stock that represents at least 80 of the total voting power and at least 80 of the total value of the stock of each of the other corporations except fo
57. ns in TB worksheet Delete imported 8825 and RENT screens Is an M 1 adjustment necessary Populate Data Entry Enter any trial balance data that cannot be imported via Trial Balance Import Make M Adjust Screen SCH2 for Schedule L items adjustment NS C amounts Screen 4562 for individual assets M here in depreciation data entry Process complete Drake Software User s Manual Supplement Corporations Index A address change of 5 e mail 19 entering on Form 1120 4 adjustment fields 27 adjustments and credits 25 advertising expenses 10 affiliated groups 16 alternative minimum tax AMT 24 amended returns 2 15 amortization 11 19 apportionment plan status 25 to multiple states 18 attachments binary 30 33 PDF see PDF files auto balance 21 27 B bad debts 7 9 bankruptcy 28 book to tax difference Schedule M 1 21 22 brother sister group 24 C calendar years 4 capital gains and losses 7 carryover of NOLs 11 25 change of name or address 5 charitable contributions 9 25 codes error reject 28 miscellaneous screen 1 19 state 18 combined group 24 compensation of officers 8 consolidated returns 6 contact information for state returns 19 contributions charitable 9 25 controlled groups 11 24 converting to 1120 3 cost of goods sold see Schedule A Cost of Goods Sold coversheets 27 credit for tax on fuels 7 Tax Year 2010 Index cred
58. nts in View mode of the return For Form 1120 calculated amounts from the following screens also flow automati cally to the Other income line line 10 e Screen 6478 Form 6478 Alcohol and Cellulosic Biofuel Fuels Credit e Screen 8864 Form 8864 Biodiesel and Renewable Diesel Fuels Credit Additional fields for other income on the INC screen include e Amount of credit for tax on fuels e Interest income on receivables e Ordinary income from partnerships must include partnership name and EIN see note following this list Detail worksheet is required e Recoveries of bad debts e Section 481 adjustments e State tax refund e Income from insurance proceeds e Other itemize Detail worksheet is required Tax Year 2010 7 Income and Deductions Drake Software User s Manual An entry for the Ordinary income from partnerships worksheet must NOTE contain the partnership s name EIN and amount of income or loss all on one line Losses are included with Other Deductions entered on the DED screen Compensation of Officers Schedule E Schedule E is not generated automatically with the return unless it is required in other words unless total receipts line 1a plus lines 4 through 10 on Form 1120 are 500 000 or more To force the software to print the Schedule E from the PRNT screen select Force Schedule E Entering Use screen E to enter officer information and compensation amounts Press PAGE Comp Da
59. ore of the following IRS error reject codes is generated when e filing an 1120 return the preparer must contact the IRS for further information The e file help desk number is 866 255 0654 28 Reject Code 307 Filer s TIN and Name Control in the return header must match data in the e File database unless Form 1120 Item E 3 check box Name Change is marked Reject Code 900 The return type indicated in the return header must match the return type established with the IRS for the EIN Reject Code 905 Electronic Filing Identification Number EFIN in the return header must be listed in the e File database and in accepted status If you get this reject code you must update your e file application to include the 1120 return type 4 Check the individual and or business form types you will e file for 1oe40 Lles41 oo0 1040 ETD 1041 VJ 1065 C 1120 POL State Ack Figure 8 The 1120 box must be marked on Form 8633 in order to e file Form 1120 This can be done at the IRS website or by calling the IRS e file Help Desk at 866 255 0654 Reject Code 910 If Amended Return or Superseded for 1120 11205 check box is not selected then Taxpayer TIN in the return header must not be the same as a TIN of a previously accepted paper return for the return type and tax period indicated in the tax return Tax Year 2010 Drake Software User s Manual Special Types of Returns Special Types of Returns This sec
60. pplication for Automatic Extension of Time to File 14 27 Form 8027 Employer s Annual Information Return of Tip Income amp Allocated Tips 1 Form 8050 Direct Deposit of Corporate Tax Refund 12 Form 8820 Orphan Drug Credit 25 Form 8844 Empowerment Zone and Renewal Community Credit 25 Form 8845 Indian Employment Credit 25 Form 8846 Credit for Employer Social Security and Medi care Taxes Paid on Certain Employee Tips 9 25 Form 8864 Biodiesel and Renewable Diesel Fuels Credit 1525 Form 8873 Extraterritorial Income Exclusion 11 Form 8881 Credit for Small Employer Pension Plan Star tup Costs 25 Form 8903 Domestic Production Activities Deduction 10 Form 8912 Credit to Holders of Tax Credit Bonds 25 Form 8941 Credit for Small Employer Health Insurance Premiums 25 Form 8941 Credit for Small Employer Health Insurance Premiums 11 G gains and losses 7 gross receipts 5 H header information 4 importing trial balance 33 40 income and deductions 5 11 installment sales 1 instructions for filing 27 insurance proceeds income from 7 interest expense 9 income 6 7 inventory 5 viii L life insurance companies 24 like kind exchanges 1 limitations meals and entertainment 11 on NOL deductions 25 M 2 out of balance troubleshooting 23 maintenance costs 8 meals and entertainment 11 N net operating losses NOL 11 25 new features in Drake 1 next year depreciation listing 26 O o
61. ps 2 and 3 Data is saved automatically upon entry When the return is produced the Schedule L of the return reflects both the amounts imported from the trial balance worksheet and the totals of the amounts entered on the SCH2 screen Depreciation Onan 1120 return total depreciation consists of COGS depreciation which is reported on Schedule A and any remaining depreciation which is reported on page 1 of the return For trial balance purposes enter depreciation amounts directly into the appropriate fields on the trial balance worksheet When the trial balance 1s imported the COGS depreciation expense amount flows directly to the appropriate line of Schedule A on the return and the rental depreciation expense amounts flow directly to the appropriate lines of the 8825 and RENT screens as applicable Because the remaining depreciation can comprise any number of assets the amount entered on the trial balance does not flow to the return To ensure that each component of the total remaining depreciation is calculated into the return each asset must be entered on the applicable depreciation screens in data entry Entering the remainder of the depreciation on the trial balance work sheet helps ensure that the balance sheet balances and provides a way to check that the amount on line 1 of Schedule M 1 is correct Compare NOTE the calculated line 1 at the bottom of the trial balance to the equivalent line on Schedule M 1 of the calculated return
62. r compensation data on screen E or as Officer Compensation on screen 3 line 12 Repairs and Maintenance Enter repair and maintenance costs on screen 3 An amount entered here is combined with the amount if any entered in the Repairs and maintenance field on screen F 8 Tax Year 2010 Drake Software User s Manual Income and Deductions Bad Debts Use the Bad debts field on screen 3 to enter the total debts that became worthless in whole or in part during the year but only to the extent that such debts related to a trade or business activity Enter deductible non business bad debts as a short term capital loss on NOTE Schedule D Form 1120 Cash method corporations cannot take a bad debt as a deduction unless the amount was previously included in income Rents Use screen 3 to enter rent paid on business property used for a trade or business activ ity If the partnership rented or leased a vehicle enter the total annual rent or lease expense incurred in the trade or business activity of the entity and then complete Part V of the 4562 screens 8 and 9 Taxes and Licenses Enter tax and license amounts on the TAX screen Amounts are combined and the sum generated on Form 1120 line 17 Taxes and licenses Note that credit from Form 8846 Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips adjusts the line 17 amount These amounts also appear on the Taxes and Licenses Attachment NOTE ATT CTL
63. r the com mon parent must be owned directly by one or more of the other includible corpo rations For this purpose the term stock generally does not include any stock that a is nonvoting b is nonconvertible c 1s limited and preferred as to dividends and does not participate significantly in corporate growth and d has redemption and liquidation rights that do not exceed the issue price of the stock except for a rea sonable redemption or liquidation premium See section 1504 a 4 See section 1563 d 1 for the definition of stock for purposes of determining stock owner ship Schedule K Line 4 If a corporation partnership trust individual or estate owned directly or indirectly 20 percent or more or owned directly or indirectly 50 percent or more of the total Tax Year 2010 Drake Software User s Manual Schedule K NEW FOR PUN accessed from the Data Entry Menu or from the Schedule K screen voting power of all classes of the corporation s stock entitled to vote enter the appli cable data on Schedule G Use screens G1 and G2 for Schedule G These screens can be by clicking the applicable link or pressing PAGE DOWN If the stock is owned by a corporation partnership or trust enter on screen G1 the name and EIN of the entity the type of entity corporation partnership or trust the country of the entity s organization and the percentage of stock the entity owns If the stock is owned
64. re designed to prevent a double tax benefit through interaction of NOL and charitable contribution carryovers The excess charitable deduction can reduce taxable income only once Under these rules a corporation s charitable contributions carry over but not the NOL carryover must be reduced to the extent the charitable contri bution deduction in computing the taxable income of an intervening year would increase the NOL to a succeeding year The total amount claimed cannot be more than 10 of taxable income line 30 com puted without regard to the following 25 Making Changes on the Fly Drake Software User s Manual Any deduction for contributions The special deductions on line 29b The deduction allowed under section 249 The domestic production activities deduction under section 199 Any net operating loss NOL carryback to the tax year under section 172 Any capital loss carryback to the tax year under section 1212 a 1 To prevent the double benefit from the excess charitable contribution deduction when there is a charitable contribution on the return and an NOL carryover the program makes the IRC section 170 d 2 B adjustment In this situation the charitable contri bution carryover amount is reduced on column C of the Contribution Limitation Car ryover worksheet WK CNTRB in View mode and the NOL carryforward is increased on the ATT NOL worksheet Making Changes on the Fly Use the PRNT screen to override most progr
65. s Tax Refundable Credits and Payments Total Tax Tax Year 2010 Screen 4 has fields for completing the Tax and Payments section of Form 1120 Note that some fields are overrides Press F1 to view more information on a field For corporations that belong to a controlled group complete all applicable fields on screen J Schedule J Tax Computation If allocating income to the various brackets on the J screen you must enter 0 zero in the fields of the brackets to which no income is allocated The total tax from Schedule J is calculated and carried to line 31 of Form 1120 Controlled groups are also required to complete Schedule O Use the O NOTE screen in Drake to complete Schedule O See Schedule O Controlled Group Information on page 24 Direct Deposit of Refunds Drake Software User s Manual Estimated Taxes and Applied Refunds Enter estimated corporate taxes paid on screen ES If necessary use screen W to over ride 2010 estimated taxes paid and apply any overpayments from 2010 to 2011 NOTE Estimate vouchers are not used in federal corporate tax returns Quick To file Form 4466 Corporation Application for Quick Refund of Overpayment of Refund Estimated Tax go to the PRNT screen and mark the Calculate Form 4466 box This is the only entry necessary to produce the form Under Use screen 2220 to enter information for Form 2220 Underpayment of Estimated Tax rpay payment by Corporations Note that the
66. s from Schedule L Balance Sheet and the Net Income Loss per books flows from the completed Schedule M 1 or M 3 on Form 1120 These numbers combined with amounts entered on the M2 screen are used to calculate the ending Unappropriated Retained Earnings If the computed amount does not match the amount in the completed Schedule L Bal ance Sheet the system produces an EF message that the M 2 1s out of balance Solv ing this problem can be challenging since it can have one of several causes e The beginning balance sheet entries are inaccurate e The Beginning of Year unappropriated retained earnings amount line 25 on screen L entered on the SCH2 screen for line 24 Retained earning Appropri ated is incorrect e Autobalance is not turned on See Autobalance on page 21 e The ending balance sheet entries are inaccurate e The net income per the tax return is inaccurate e The reconciling items on Schedule M 1 or M 3 need to be adjusted e The reconciling items on Schedule M 2 need to be adjusted If the items are off by a couple of dollars or less resolve the problem by entering a reconciling item on the M2 screen 1 Double click in a field on the M2 screen to open a detail CTRL W worksheet 2 Enter an amount and the word Rounding as the description 3 Press ESC The program returns to the M2 screen 23 Schedule O Controlled Group Information Drake Software User s Manual If the problem is not resolve
67. sheet to enter data directly onto Schedule L NOTE See Importing Trial Balance Information on page 33 for information on using the trial balance import to enter Schedule L data Tax Year 2010 19 Schedule L Balance Sheet per Books Drake Software User s Manual The SCH2 Screen Entering Information Statements SCH2 and Trial Balance 20 Import The SCH2 screen see Figure 6 is used to provide detailed information required by the IRS for certain lines on Schedule L The amounts are carried to Form 1120 and printed on an attached statement This screen can also be used in place of the actual L screen in Drake If you use this screen for all applicable lines on Schedule L you do not need to make any entries on screen L NOTE To access the SCH2 screen from screen L click an SCH2 Screen link or press CTRL and the number 2 Press ESC to return to screen L To create a statement for a line using the SCH2 screen select the desired line from the Line Number drop list and enter descriptions and their corresponding amounts Line Number 6 Other current assets Beginning of End of Description year year Notes Receivable 0 Parts Inventory 26943 Loans Receivable 654801 PO Taxes Prepaid 16072 HERE Figure 6 SCH2 screen fields for line number description and amounts Once the information is entered or if additional descriptions are required for the line press PAGE DOWN to access a new screen A
68. subsidiary schedule SCH2 detail screen for Schedule L is required for an item marked does not import on the trial balance The 1120 Corporation Trial Balance 12 31 2010 Account Title ee Import to screen line Form Page Sch and or line Other Information MO nt m DV nme ee eee aute apto M nae ctl ool n abeo sail m apto onto all ui tests dite c aatis MP me nad O tz X Bos 2 red a Se a Saadi ie at a a Jd 2s eee Eoo TTU ee fme pm 2 2i aan omma o ll FE nmm sen A L line 4 col d To py cC EC C We Form 1120 Sch L line 4 col d Form 1120 Sch L line 7 col d Farm 1120 Sch L line 8 col d SCH 2 detail required in Drake does not import Form 1120 Sch L line 10a col c optional TT pP aano Lors ea S ptm a U S EEG Tax exempt securities Other current assets L line 7 col d nes co Other Investments Detail L line 10a col c Pr n P een Loans to shareholders Mortgage and real estate loans Other investments Buildings and other depreciable assets A urorlateaiedmmatag nn dila dE NW E Figure 23 SCH2 screen required for does not import items To complete an SCH2 detail screen in data entry 1 Open the SCH2 screen for the return 2 Select the line number from the SCH2 drop list 3 Enter the applicable item descriptions and beginning and end of year totals To enter details for additional lines of the Schedule L press PAGE DOWN and repeat ste
69. ta Down to enter additional officers Screen E totals are calculated and carried to line 12 of Form 1120 The total of officer compensation can be entered in the override field on screen 3 gen erally used when Schedule E is not required An entry in that field overrides any cal culations from screen E changing lines 12 and 27 of the 1120 but not Schedule E Screen E Screen E has two check boxes Signs return and Books in care of Mark the applica Check Boxes ble box on the screen that identifies the officer who either signs the federal or state paper returns or is the contact person for the books state return only Ownership amp The Ownership and Participation fields on screen E are required Fields are as fol Participation lows e Total Enter the officer s ownership percentage e Common Enter the percentage of common stock owned by the officer Preferred Enter the percentage of preferred stock owned by the officer e Time Enter the percentage of time the officer devotes to the corporation Enter percentage amounts in whole numbers For example enter 40 for 4096 Salaries and Wages Use screen 3 to enter salaries and wages paid Note that the screen 3 amount is reduced by the amount if any of credit from Forms 5884 8844 and 8845 See the wages and salaries attachment ATT CSW for more information The Salaries and wages field on screen 3 should not include compen NOTE sation of officers Enter office
70. tachments Binary or PDF files can be attached to certain tax forms These attachments are gen erally signature or third party documents such as a copy of a signed lease or a signed appraisal statement In some instances the IRS requires that a document be attached to an e filed return in other instances a document can be attached voluntarily to sup port or explain an entry in the return In either case a PDF must be available to be attached to the return in order to be e filed with the return Attach files through the PDF Attachments screen accessible from the Electronic Filing section on the General tab of the Data Entry Menu The PDF Attachment Process Three main steps are involved in the PDF attachment process in Drake 1 Creating a PDF file to be attached 2 Informing the program that a PDF file will be sent with the return 3 Attaching the PDF file for e filing These steps are described in the following sections 30 Tax Year 2010 Drake Software User s Manual Binary Attachments Creating a To create a PDF file PDF File 1 Scan the document to be attached to the return as a PDF Ip Its a good idea to use the DDM scanning feature for this step 2 Save the document to your client s DDM file your computer s desktop or any where you can readily find it Many types of documents for instance documents created in Microsoft NOTE Word can be printed or saved as PDF files if you have a PDF printer such as Adobe
71. ted total of screen 8903 flows to line 25 of Form 1120 10 Tax Year 2010 Drake Software User s Manual Tax Refundable Credits and Payments NOTE The DPAD is not allowed on returns with a net operating loss NOL for the current year It also cannot be used to create a current year loss Other Deductions Enter all other deductions on the DED screen The program calculates these amounts and incorporates the total into line 26 Other deductions of Form 1120 The follow ing deductions credits adjustments and exclusions also flow to line 26 e Amortization from Form 4562 e Credit from Form 8820 Orphan Drug Credit e Exclusion from Form 8873 Extraterritorial Income Exclusion e Credit from Form 8941 Credit for Small Employer Health Insurance Premiums Drake automatically calculates meals and entertainment limitations A detail CTRL W worksheet is required for the Other itemize field NOTE the last field on the DED screen The program automatically gener ates a worksheet if an entry is made here or in any other field where a worksheet is required by the IRS NOL Carrybacks and Carryforwards Enter NOL carrybacks from future years to the current year on line 29a of screen 3 To enter multiple carryback amounts use a detail CTRL W worksheet Use the LOSS screen to enter NOL carryforwards capital losses and contribution carryforwards from prior years Use screen 3 to enter current year carrybacks to prior year
72. tion covers 52 53 week year returns and inactive returns Both types of returns can be e filed using Drake Electing a 52 53 Week Year Initial Return To elect a 52 53 week year a new entity one that has never filed a return must enter data on both screen 1 and the ELEC screen To elect a 52 53 week year for any entity 1 In the If not calendar year section of screen 1 enter the Fiscal year beginning and Fiscal year ending dates Use MMDDY Y Y Y format as shown in the exam ple in Figure 9 2 Mark the 52 53 week tax year box If nat calendar year Fiscal year begins 12 30 2009 Fiscal year ends 01 01 2011 w 52 53 week tas year ELEC Figure 9 In this example the fiscal year begins 12 30 09 and ends 1 1 11 the Saturday closest to the end of December giving the entity a 53 week year for 2010 An entity that has filed returns in the past must complete only steps 1 NOTE and 2 of this process An entity that has never filed a return before must continue with steps 3 through 6 3 Click the ELEC link to open the Election Options screen Figure 10 Election Options 52 53 Week Tax rear Election 1 Month in which new 52 53 week tax year ends eee enn 2 The day of the week on which the tax year always ends Ne STATES Gl ate TMS FAVS II eni Sere coos eee ote ater M Other short year optionsfelections Figure 10 Elections for 52 53 week tax years 4 For line 1 select the month in
73. urn Results of the Drake Software User s Manual Tax Year 2010 From the Data Entry Menu of an 1120 return enter an X in the selector field and press ENTER Screen X is also accessible from the first Other Forms tab At the prompt select Yes to automatically fill the screen with data from the original return that 1s the return as originally entered in Drake If the corporation s name and address information has changed enter the new information on screen X Make all other necessary changes to the regular data entry screens When you go to View mode the program calculates the amended return To amend a return not previously prepared in Drake create an 1120 return in Drake and open screen X Complete the applicable fields on this screen and then enter the amended data in the appropriate other screens as described in the example below Example An 1120 return was filed using a different tax software but gross rental income was not reported on line 6 To amend the return From the Data Entry Menu of an 1120 return open screen X Complete all applicable fields on screen X Close screen X and open screen 3 Enter the amount of unreported income on line 6 a SS Calculate and view the return Note the adjustments made on the Form 1120X To add Form 1120X to the queue for e filing go to the EF screen for the return and mark the 1120 X box For detailed instructions on e filing the returns in the queue see Chapter 7 E fili
74. ypes are briefly defined below See Schedule O instructions for more details e Parent subsidiary group One or more chains of corporations that are con nected through stock ownership with a common parent corporation if certain con ditions apply Brother sister group Two or more corporations if the same five or fewer per sons who are individuals estates or trusts directly or indirectly own stock of each corporation with a certain amount of voting power e Combined group Three or more corporations each of which is part of a par ent subsidiary group or a brother sister group and one of which is 1 a common parent corporation included in a group in a parent subsidiary group or 2 included in a group of corporations in a brother sister group e Life insurance companies only Two or more insurance companies subject to tax under section 801 that are members of one of the previously described groups are treated as a particular type of controlled group 24 Tax Year 2010 Drake Software User s Manual Credits and Adjustments Line 5 Apportionment Plan Status The corporation is required to provide information about the status of the group s apportionment plan Select the applicable box on screen O to show the status of the controlled group s apportionment plan If adopting a plan or amending the current plan for a prior tax year at least one year must remain on the statute of limitations for each group member for assess

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