The next section of the form is for deductions. The total amount of deductions is subtracted from total income, to arrive at the amount of taxable income before net operating loss deduction and other special deductions. The deductions on Form 1120 are compensation of officers, salaries and wages, bad debts, rents, interest, repairs and maintenance, taxes and licenses, charitable contributions, depreciation from Form 4562 not claimed on Schedule A or elsewhere on return, depletion, pension and profit-sharing plans, advertising, employee benefit programs, domestic production activities deduction, and other deductions. If the corporation is deducting depreciation from Form 4562, the form must be attached and filed with the return. Form 8903 must be attached if the corporation has a domestic production activities deduction.
Next, any net operating loss deduction, or other special deductions from Schedule C, line 20, are deducted. The result is taxable income. The next amount on the return is total tax, which comes from Schedule J, line 10. Any payments made during the year, prior year overpayments credited to the corporation in the current tax year, and taxes deposited are then subtracted from total tax, to determine either the amount the corporation owes, or the amount of the refund due to the corporation.
Some of the schedules that supplement Form 1120 are Schedule A, Cost of Goods Sold; Schedule C, Dividends and Special Deductions; Schedule E, Compensation of Officers; Schedule J, Tax Computation; Schedule K, Other Information; Schedule L, Balance Sheets per Books; Schedule M-1, Reconciliation of Income (Loss) per Books With Income per Return; and Schedule M-2, Analysis of Unappropriated Retained Earnings per Books. If the total receipts for the corporation for the year and the total assets of the corporation at year-end are less than $250,000, the corporation does not need to complete Schedules L. M-1, and M-2.
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