Page 147 - BusinessStructures & Forms

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
begins during the current tax year, complete and attach Form Include fringe benefit expenditures made on behalf of officers
4562, Depreciation and Amortization. and employees owning more than 2% of the corporation's stock.
Reducing certain expenses for which credits are allowable. Also report these fringe benefits as wages in box 1 of Form W-2.
Don't include amounts paid or incurred for fringe benefits of
If the corporation claims certain credits, it may need to reduce officers and employees owning 2% or less of the corporation's
the otherwise allowable deductions for expenses used to figure stock. These amounts are reported on line 18. See the
the credit. This applies to credits such as the following. instructions for that line for information on the types of
• Work opportunity credit (Form 5884). expenditures that are treated as fringe benefits and for the stock
• Employee retention credit for employers affected by qualified
disasters (Form 5884-A), if applicable. ownership rules.
• Credit for increasing research activities (Form 6765). Report amounts paid for health insurance coverage for a
• Orphan drug credit (Form 8820). more-than-2% shareholder (including that shareholder's spouse,
• Disabled access credit (Form 8826). dependents, and any children under age 27 who aren't
• Empowerment zone employment credit (Form 8844). dependents) as an information item in box 14 of that
• Indian employment credit (Form 8845), if applicable. shareholder's Form W-2. A more-than-2% shareholder may be
• Credit for employer social security and Medicare taxes paid allowed to deduct such amounts on Schedule 1 (Form 1040),
on certain employee tips (Form 8846). line 17. To find out if the shareholder can claim this deduction,
• Credit for small employer pension plan startup costs and see Self-Employed Health Insurance Deduction in chapter 6 of
auto-enrollment (Form 8881). Pub. 535, Business Expenses.
• Credit for employer-provided childcare facilities and services
(Form 8882). If a shareholder or a member of the family of one or more
• Low sulfur diesel fuel production credit (Form 8896). shareholders of the corporation renders services or furnishes
• Mine rescue team training credit (Form 8923), if applicable. capital to the corporation for which reasonable compensation
• Credit for employer differential wage payments (Form 8932). isn’t paid, the IRS may make adjustments in the items taken into
• Credit for small employer health insurance premiums (Form account by such individuals to reflect the value of such services
8941). or capital. See section 1366(e).
• Employer credit for paid family and medical leave (Form Line 9. Repairs and Maintenance
8994).
If the corporation has any of the credits listed above, figure Enter the cost of repairs and maintenance not claimed
the current year credit before figuring the deduction for elsewhere on the return, such as labor and supplies, that don't
expenses on which the credit is based. If the corporation add to the value of the property or appreciably prolong its life.
capitalized any costs on which it figured the credit, it may need The corporation can deduct these repairs only to the extent they
to reduce the amount capitalized by the credit attributable to relate to a trade or business activity. See Regulations section
these costs. 1.162-4. The corporation may elect to capitalize certain repair
and maintenance costs consistent with its books and records.
See the instructions for the form used to figure the applicable See Regulations section 1.263(a)-3(n) for information on how to
credit for more details. make the election.
Line 7. Compensation of Officers and New buildings, machinery, or permanent improvements that
Line 8. Salaries and Wages increase the value of the property aren't deductible as repair and
maintenance expenses. These expenses must be capitalized
Distributions and other payments by an S corporation to and depreciated or amortized. However, amounts paid for
! a corporate officer must be treated as wages to the routine maintenance on property, including buildings, may be
CAUTION extent the amounts are reasonable compensation for deductible. See Regulations section 1.263(a)-3(i).
services rendered to the corporation.
Enter on line 7 the total compensation of all officers paid or Line 10. Bad Debts
incurred in the trade or business activities of the corporation. Enter the total debts that became worthless in whole or in part
The corporation determines who is an officer under the laws of during the tax year, but only to the extent such debts relate to a
the state where it is incorporated. trade or business activity. Report deductible nonbusiness bad
debts as a short-term capital loss on Form 8949, Sales and
Enter on line 8 the total salaries and wages paid or incurred to Other Dispositions of Capital Assets. A corporation that uses the
employees (other than officers) during the tax year. cash method of accounting can't claim a bad debt deduction
If the corporation claims a credit for any wages paid or unless the amount was previously included in income.
! incurred, it may need to reduce the amounts on lines 7 Line 11. Rents
CAUTION and 8. See Reducing certain expenses for which credits
are allowable, earlier. Enter rent paid on business property used in a trade or business
activity. Don't deduct rent for a dwelling unit occupied by any
Don't include salaries and wages reported elsewhere on the shareholder for personal use.
return, such as amounts included in cost of goods sold, elective If the corporation rented or leased a vehicle, enter the total
contributions to a section 401(k) cash or deferred arrangement, annual rent or lease expense paid or incurred in the trade or
or amounts contributed under a salary reduction SEP agreement business activities of the corporation during the tax year. Also
or a SIMPLE IRA plan. complete Part V of Form 4562. If the corporation leased a
vehicle for a term of 30 days or more, the deduction for vehicle
If the corporation's total receipts (page 1, line 1a, plus lines 4 lease expense may have to be reduced by including in gross
and 5; income reported on Schedule K, lines 3a, 4, 5a, and 6; income an amount called the “inclusion amount.” The
income or net gain reported on Schedule K, lines 7, 8a, 9, and corporation may have an inclusion amount if:
10; and income or net gain reported on Form 8825, lines 2, 19,
and 20a) are $500,000 or more, complete Form 1125-E,
Compensation of Officers. Enter on Form 1120-S, line 7, the
amount from Form 1125-E, line 4.

Instructions for Form 1120-S (2022) -17-