Page 149 - BusinessStructures & Forms

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
June 8, 1997. See section 264(f). Attach a statement showing qualified under the Internal Revenue Code and whether or not a
the computation of the deduction. deduction is claimed for the current tax year, must generally file
• Forgone interest on below-market-rate loans (see section the applicable form listed below.
7872). • Form 5500, Annual Return/Report of Employee Benefit Plan.
• Form 5500-SF, Short Form Annual Return/Report of Small
Limitation on deduction. Business interest expense is Employee Benefit Plan. File this form instead of Form 5500
generally limited to the sum of business interest income, 30% of generally if there were under 100 participants at the beginning of
adjusted taxable income, and floor plan financing interest. See
Form 8990, Limitation on Business Interest Expense Under the plan year.
• Form 5500-EZ, Annual Return of A One-Participant (Owners/
Section 163(j), and its instructions for more information. The Partners and Their Spouses) Retirement Plan or A Foreign Plan.
limitation applies at the S corporation level, and any excess File this form for a plan that only covers the owner (or the owner
business interest expense is carried over at the corporate level. and the owner's spouse) but only if the owner (or the owner and
Business interest expense includes any interest paid or the owner's spouse) owns the entire business.
accrued on indebtedness properly allocable to a trade or
business. A small business taxpayer is a taxpayer that isn’t a tax Form 5500 and Form 5500-SF must be filed
shelter (as defined in section 448(d)(3)) and has average annual TIP electronically under the computerized ERISA Filing
gross receipts of $27 million or less for the 3 prior tax years Acceptance System (EFAST2). For more information,
under the gross receipts test of section 448(c). Gross receipts see the EFAST2 website at www.EFAST.dol.gov.
include the aggregate gross receipts from all persons treated as
a single employer, such as a controlled group of corporations, There are penalties for not filing these forms on time and for
commonly controlled partnerships or proprietorships, and overstating the pension plan deduction. See sections 6652(e)
affiliated service groups. If the corporation fails to meet the gross and 6662(f).
receipts test, Form 8990 is generally required. Also see Line 18. Employee Benefit Programs
Schedule B, questions 9 and 10.
Enter amounts for fringe benefits paid or incurred on behalf of
Line 14. Depreciation employees owning 2% or less of the corporation's stock. These
Enter the depreciation claimed on assets used in a trade or fringe benefits include (a) employer contributions to certain
business activity less any depreciation reported elsewhere (for accident and health plans, (b) the cost of up to $50,000 of
example, on Form 1125-A). See the Instructions for Form 4562, group-term life insurance on an employee's life, and (c) meals
or Pub. 946, How To Depreciate Property, to figure the amount and lodging furnished for the employer's convenience.
of depreciation to enter on this line. Don't deduct amounts that are an incidental part of a pension,
Complete and attach Form 4562 only if the corporation profit-sharing, etc., plan included on line 17 or amounts reported
placed property in service during the tax year or claims elsewhere on the return or on Form 1125-A.
depreciation on any car or other listed property. Report amounts for fringe benefits paid on behalf of
Don't include any section 179 expense deduction on this line. employees owning more than 2% of the corporate stock on
line 7 or 8 (or Form 1125-E), whichever applies. An employee is
This amount isn't deducted by the corporation. Instead, it is considered to own more than 2% of the corporation's stock if that
passed through to the shareholders in box 11 of Schedule K-1. person owns on any day during the tax year more than 2% of the
However, reduce the basis of any asset of the S corporation by outstanding stock of the corporation or stock possessing more
the amount of section 179 expense elected by the S corporation, than 2% of the combined voting power of all stock of the
even if a portion of that amount can't be passed through to its corporation. See section 318 for attribution rules.
shareholders this year and must be carried forward because of
limitations at the S corporation level. See Regulations section Line 19. Other Deductions
1.179-1(f)(2).
Enter the total allowable trade or business deductions that aren't
Line 15. Depletion deductible elsewhere on page 1 of Form 1120-S. Attach a
If the corporation claims a deduction for timber depletion, statement listing by type and amount each deduction included
on this line.
complete and attach Form T (Timber), Forest Activities
Schedule. Examples of other deductions include the following.
Don't deduct depletion for oil and gas properties. Each • Amortization. See Part VI of Form 4562.
• Certain business start-up and organizational costs (discussed
! shareholder figures depletion on oil and gas properties. earlier).
CAUTION See the instructions for Schedule K-1, box 17, code R, • Insurance premiums.
for the information on oil and gas depletion that must be supplied • Legal and professional fees.
to the shareholders by the corporation. • Supplies used and consumed in the business.
• Travel, meal, and entertainment expenses. Special rules
Line 17. Pension, Profit-Sharing, etc., Plans apply (discussed later).
Enter the deductible contributions not claimed elsewhere on the • Utilities.
return made by the corporation for its employees under a • Deduction for certain costs of energy efficient commercial
qualified pension, profit-sharing, annuity, or simplified employee building property. See section 179D. Attach Form 7205, Energy
pension (SEP) or SIMPLE IRA plan, or any other deferred Efficient Commercial Buildings Deduction.
• Any negative section 481(a) adjustments resulting from
compensation plan. changes in accounting methods. Show the computation of the
If the corporation contributes to an individual retirement negative section 481(a) adjustments on an attached statement.
arrangement (IRA) for employees, include the contribution in In the statement, for each section 481(a) adjustment, include the
salaries and wages on page 1, line 8, or Form 1125-A, line 3, total section 481(a) adjustment and a brief description of the
and not on line 17. changes in methods of accounting to which the section 481(a)
Employers who maintain a pension, profit-sharing, or other adjustment relates. See Rev. Proc. 2015-13.
funded deferred compensation plan, whether or not the plan is Don't deduct the following on line 19.

Instructions for Form 1120-S (2022) -19-