| If you own an S Corporation, you must file Form 1120S | | | | 12 expense categories for you to start with: |
| every year to report the income and expenses of | | | | compensation of officers, salaries and wages, repairs |
| your small business. The purpose of this article is to | | | | and maintenance, bad debts, rents, taxes and licenses, |
| help you properly report all the legitimate expenses | | | | interest, depreciation, depletion, advertising, pension and |
| you are entitled to take. Like any business owner, you | | | | profit-sharing plans, and employee benefit plans. |
| are in business to make a profit. But you also don't | | | | 3. Other deductions. The deduction section described |
| want to pay more tax than required, so read on to | | | | above only offers 12 expense categories. Perhaps |
| make sure you know where to report expenses on | | | | you are thinking, "Only 12 expenses! I know my |
| Form 1120S. | | | | business has many more expenses than that. In fact, |
| Form 1120S has three places for you to report your | | | | most of my business expense categories aren't even |
| expenses: | | | | listed on lines 7-18 of page 1." If that's you, do not |
| 1. Schedule A, Cost of Goods Sold. If you sell a | | | | despair. You are not alone, and your situation is quite |
| product and maintain an inventory, you must calculate | | | | common. That's why page 1 has line 19, "Other |
| your cost of goods sold. Form 1120S provides a | | | | deductions." This is where you get to list all other |
| special section to do this calculation; it's called Schedule | | | | business deductions on a separate schedule. The total |
| A, and it's found on Page 2. This is not an overly | | | | from that schedule is then transferred to page 1, line 19. |
| complicated schedule, but it must be done right, or you | | | | Here are some of the most common business |
| can come up with the wrong amount for what is often | | | | deductions that you'll likely include on the "Other |
| the biggest expense for many businesses that sell a | | | | deductions" schedule: automobile and truck expenses, |
| product. | | | | bank charges, consulting fees, credit and collection |
| After you complete Schedule A, the amount from line | | | | costs, delivery, discounts, dues and subscriptions, |
| 8 of Schedule A must be transferred to line 2 of page | | | | equipment rent, insurance, janitorial, laundry and cleaning, |
| 1. Of course, if you don't sell any product, you can | | | | legal and professional fees, miscellaneous, office |
| ignore Schedule A. | | | | expenses, parking fees and tolls, postage, printing, sales |
| 2. Deductions. This section is located on page 1, lines | | | | and promotion expenses, security, small tools and |
| 7-18. This is where you deduct many of the most | | | | equipment, supplies, telephone, utilities. |
| common expenses found in any business. There are | | | | |