Down below we will go over what accrual options are available for federal and state taxes within the Corporate and S Corporation modules of the program.
State Tax Accrual Options for an S Corporate return
Use Screen 3.1, Miscellaneous Information, to select the Accrued Taxes option under the Miscellaneous section.
Accrue Federal Tax:
Select the box to accrue federal income tax. If you enter 1, the program calculates total tax, credits the ending balance of Prepaid Federal Income Tax (Screen 29, code 207) up to the prepaid federal income tax entered, and credits Federal Tax Payable (Screen 29, code 253) by any tax remaining. Refer to Prepaid Federal Tax (Screen 29, code 207) for more information on federal tax accrual.
Accrue State State Tax Option 1:
Selecting this box will do the following,
- Deducts the "calculated" state tax on Form 1120S , line 12. The program only accrues state taxes to ordinary income on Form 1120S , page 1. If the state tax applies to rental real estate, other rental activities, or farm activities, you must manually accrue the state tax to the federal return.
- Adds back the state tax on the state return as an ordinary income adjustment.
- Credits the ending balance of Prepaid State Tax (Screen 29 - code 208) up to the prepaid state tax entered and credits State Tax Payable (Screen 29, code 254) by any tax remaining.
- Credits any state underpayment penalty to the balance sheet with the state tax.
- Carries any state underpayment penalty to Schedule M-1, line 3, if applicable.
When accruing state taxes using either option, the program automatically carries the sum of overpayments applied from (prior tax year) plus 1st - 4th quarter estimated payments to the balance sheet as prepaid state tax (before adjustment by the calculated tax). Alternatively, the unadjusted ending balance of prepaid state tax can be entered directly in the balance sheet. The program functions in the same manner with respect to city, county, and other local taxes.
- New York corporations: This entry also triggers the accrual of New York City and Form CT-3-S/CT-4-S taxes.
- Oregon corporations: This entry also triggers the accrual of Multnomah county tax.
- Kentucky corporations: This entry also triggers the accrual of Kentucky cities tax.
- Ohio corporations: This entry also triggers the accrual of Kentucky Ohio tax
Accrue State Tax Option 2:
Selecting this box will do the following,
- Credits the ending balance of Prepaid State Tax (Screen 29 - code 208) up to the amount in this field.
- Credits any remaining balance to State Tax Payable (Screen 29 - code 208).
- Credits any state underpayment penalty to the balance sheet with the state tax.
- Does not deduct the calculated state tax from ordinary income on Form 1120S. Enter the state tax deduction in State Tax (Screen 15, code 38).
- Adds back the state tax entered in State Tax (Screen 15, code 38) to the state return as an ordinary income adjustment, as appropriate. This amount also carries to Schedule M-1, line 6.
- Carries that calculated state tax to Schedule M-1, line 3, and any state underpayment penalty, if applicable.
When accruing state taxes using either option, the program automatically carries the sum of overpayments applied from (prior tax year) plus 1st - 4th quarter estimated payments to the balance sheet as prepaid state tax (before adjustment by the calculated tax). Alternatively, the unadjusted ending balance of prepaid state tax can be entered directly in the balance sheet. The program functions in the same manner with respect to city, county, and other local taxes.
- New York corporations: If you select the box, the program also accrues the New York City taxes.
- Oregon corporations: If you select the box, the program also accrues the Multnomah county tax.
- Kentucky corporations: If you select the box, the program also accrues the taxes for Kentucky cities being generated.
- Ohio corporations: If you select the box, the program also accrues the taxes for Ohio cities being generated.
Prepaid State Tax - Under Assets, Liabilities, and Equity in Screen 29 Balance Sheet :
Enter the ending balance for prepaid state tax. The amount is included on Schedule L, line 6, column (d). If the box is checked Accrue State Tax Option 1(Screen 3, code 50), the program does the following:
- Automatically carries state estimated tax payments from Estimates (Screen 10) as prepaid state income tax. The amount carried from Estimates includes
- An overpayment applied from 2016 and
- All 1st - 4th installment amounts designated as paid
- Note: When accruing state tax, an entry in this field overrides the amount automatically carried from Estimates (Screen 10).
- Adjust the prepaid state tax amount based on the actual tax calculated.
For example, assume the ending balance of prepaid state income tax is $1,000. Again assume that the program calculates current year tax as $800. The amount entered in Prepaid State Tax is reduced by the current year tax ($1,000 - $800 = $200). The ending balance in Prepaid State Tax becomes $200.
Similarly, if the program calculates current year tax as $1,300, the Prepaid State Tax amount is reduced by $1,300. The Prepaid State Tax account (currently $1,000) is set to zero and a liability account is created State Tax Payable for the remaining $300 ($1,000 - $1,300 = -$300).
State Tax Accrual Options for a Corporate return
Use Screen 4.1, Miscellaneous/Other Information, to select the Accrued Taxes option under the Miscellaneous section.
Accrue Federal Tax:
For taxpayers who have selected Accrual as the Accounting Method in the Miscellaneous Info section of Client Information (Screen 1):
Select the box to accrue federal income tax to the balance sheet. When you select the box the program calculates the total tax, then credits the ending balance of Prepaid Federal Tax (Screen 37, code 207) up to the amount of prepaid federal income tax, and credits Federal Tax Payable (Screen 37, code 253) by any tax remaining.
When you accrue federal tax, the program:
- Automatically carries the total of amounts entered for overpayment applied from (prior tax year) plus any installments entered for the 1st - 4th quarters in Estimates (Screen 10) to the balance sheet as prepaid federal tax.
- Alternatively, prepaid federal tax can be entered directly in the Balance Sheet (Screen 37).
- Reduces the prepaid federal tax by the calculated tax. If the calculated tax exceeds the prepaid federal tax, the excess becomes federal tax payable on the balance sheet.
The program also carries the tax to Schedule M-1, line 2. See the F1 help in-program Prepaid Federal Tax for more information on the federal tax accrual.
Accrue State Tax Option 1:
- Deducts the "calculated" state tax on Form 1120.
- Adds back the state tax on the state return.
- Credits the ending balance of "Prepaid State Tax" (Screen 37, code 208) by the amount of the actual state tax, up to the amount of prepaid state tax*, and then credits "State Tax Payable" (Screen 37, code 254) in the amount of any excess.
When accruing state taxes using either option, the program automatically carries the sum of overpayments applied from (prior tax year) plus 1st - 4th quarter estimated payments to the balance sheet as prepaid state tax (before adjustment by the calculated tax). Alternatively, the unadjusted ending balance of prepaid state tax can be entered directly in the balance sheet. The program functions in the same manner with respect to city, county, and other local taxes.
- Note for New York corporations: if you select the box, the program also accrues the New York City and Form 3M/4M taxes.
- Note for Oregon corporations: If you select the box, the program also accrues the Multnomah county tax.
- Note for Kentucky corporations: If you select the box, the program also accrues the taxes for Kentucky cities being generated.
- Note for Ohio corporations: If you select the box, the program also accrues the taxes for Ohio cities being generated.
Accrue State Tax Option 2:
- Credits the ending balance of Prepaid State Tax (Screen 37, code 208) using the calculated state tax up to the amount of prepaid state tax*, and credits "State Tax Payable" (Screen 37, code 254) in the amount of any excess.
- Includes the "calculated" state tax on federal Schedule M-1, line 5 as an expense recorded on the corporation's books but not deducted on the return.
- Includes the "deducted" state tax entered in Taxes-State Tax (Automatic if Using Tax Accrual Option 1) (Screen 20, code 59) on federal Schedule M-1, line 8 as a deduction on the corporation's tax return not charged against book income.
When accruing state taxes using either option, the program automatically carries the sum of overpayments applied from (prior tax year) plus 1st - 4th quarter estimated payments to the balance sheet as prepaid state tax (before adjustment by the calculated tax). Alternatively, the unadjusted ending balance of prepaid state tax can be entered directly in the balance sheet. The program functions in the same manner with respect to city, county, and other local taxes.
- New York corporations: if you select the box, the program also accrues the New York City and Form 3M/4M taxes.
- Oregon corporations: If you select the box, the program also accrues the Multnomah county tax.
- Kentucky corporations: If you select the box, the program also accrues the taxes for Kentucky cities being generated.
- Ohio corporations: If you select the box, the program also accrues the taxes for Ohio cities being generated.
Prepaid state tax under Assets in Screen 37 Balance Sheet:
Enter the ending balance for prepaid state tax. The amount is included on Schedule L, line 6, column (d). If you select one of the "Accrue state tax" options (Screen 4, codes 15 or 16), the program does the following;
- Automatically carries state estimated tax payments from Estimates (Screen 10) as prepaid state tax. The amount carried from Estimates is the aggregate amount for all states:
- An overpayment applied from 2016 and
- All 1st - 4th installment amounts designated as paid
- Note: when accruing state tax, an entry in this field overrides the amount automatically carried from Estimates (Screen 10).
- Adjusts the prepaid state tax amount based on the actual tax calculated.
For example, assume the ending balance of prepaid state income tax is $1,000. Again assume that the program calculates current year tax as $800. The amount entered in Prepaid State Tax is reduced by the current year tax and the ending balance in Prepaid State Tax becomes $200 ($1,000 - 800).
Similarly, if the program calculates current year tax as $1,300, the Prepaid State Tax amount is reduced by $1,300. The Prepaid State Tax account (currently $1,000) is set to zero and a liability account is created "State Tax payable" for the remaining $300 ($1,000 - $1,300 = -$300).
