7-2 Project Two Milestone

TAX 655 Project Two Milestone Guidelines and Rubric

Overview

Business owners consider economic and social factors when choosing initiatives for their entities. Entities want to save tax dollars and reduce their tax liability while also considering the social implications of an incentive. Ethical considerations play a key role in determining which incentive is best for a business. As a tax associate, it is imperative to consider today’s current tax laws to best advise your clients.

This milestone will help you with Project Two as you finalize your incentive and consider how you will advise your client based on ethical considerations.

Directions

For this milestone, research two different initiatives to present to SageGreen company. Then, prepare a short memo to your manager to have them review your findings. In your 1- to 2-page memo, explain why you think these initiatives may benefit the company and the ethical considerations, including tax violations, regarding these initiatives.

Specifically, you must address the following rubric criteria:

Memo

Discuss two new federal tax initiatives that SageGreen could add to its company for the next fiscal year. Consider the following in your overview:

Purpose or incentive

1. Government’s ideas to accomplish regarding this incentive

SageGreen’s implementation of this incentive

Summarize the advantages and disadvantages to your manager. Consider the following in your response:

1. Most beneficial to SageGreen
2. Least beneficial to SageGreen
3. Tax violations to avoid
4. Describe the ethical considerations of a tax preparer. Reference Circular 230 to support your arguments. Consider the following in your response:

Your responsibility in ethical advice

Any tax liabilities present

1. Consider how current tax laws impact this initiative. Consider the following in your response:
2. Current tax laws and impact on businesses
3. Initiative-specific regulations regarding tax law

1120
U.S. Corporation Income Tax Return
Form
Department of the Treasury
Internal Revenue Service
A Check if:
1a Consolidated return
(attach Form 851)
b Life/nonlife consolidated return .
.
2 Personal holding co.
(attach Sch. PH) .
For calendar year 2023 or tax year beginning
OMB No. 1545-0123
, 2023, ending
2023
, 20
Go to www.irs.gov/Form1120 for instructions and the latest information.
B Employer identification number
Name
SageGreen Computer Corporation
85-1234566
TYPE
Number, street, and room or suite no. If a P.O. box, see instructions.
OR
1234 Anywhere Blvd, Sun City, AZ 85351
PRINT
C Date incorporated
1/2/2022
D Total assets (see instructions)
City or town, state or province, country, and ZIP or foreign postal code
3 Personal service corp.
Income
Deductions (See instructions for limitations on deductions.)
Tax, Refundable Credits, and
Payments
10,815,000
$
(see instructions) .
4 Schedule M-3 attached
E Check if: (1)
(2)
Initial return
(3)
Final return
(4)
Name change
Address change
$32,000,000
1a
Gross receipts or sales .
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1a
b
c
2
Returns and allowances . . . . . .
Balance. Subtract line 1b from line 1a . .
Cost of goods sold (attach Form 1125-A) .
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1b
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1c
2
$32,000,000
$20,360,000
3
4
5
Gross profit. Subtract line 2 from line 1c . .
Dividends and inclusions (Schedule C, line 23)
Interest
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3
4
5
$11,640,000
$65,000
$20,000
6
7
8
Gross rents . . . . . . . . . . . . . .
Gross royalties . . . . . . . . . . . . .
Capital gain net income (attach Schedule D (Form 1120)) .
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6
7
8
$18,000
9
10
11
Net gain or (loss) from Form 4797, Part II, line 17 (attach Form 4797)
Other income (see instructions—attach statement) . . . . . .
Total income. Add lines 3 through 10 . . . . . . . . . .
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9
10
11
$11,743,000
12
13
14
Compensation of officers (see instructions—attach Form 1125-E)
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Salaries and wages (less employment credits)
Repairs and maintenance . . . . . .
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12
13
14
15
16
17
Bad debts . . .
Rents . . . .
Taxes and licenses
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15
16
17
18
19
20
Interest (see instructions) . . . . . . . . . . . . . . . . . . . . . . .
Charitable contributions . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation from Form 4562 not claimed on Form 1125-A or elsewhere on return (attach Form 4562) .
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18
19
20
21
22
23
Depletion . . . . . . . .
Advertising
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Pension, profit-sharing, etc., plans
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21
22
23
24
25
26
Employee benefit programs
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Energy efficient commercial buildings deduction (attach Form 7205) .
Other deductions (attach statement) . . . . . . . . . .
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24
25
26
$27,000
27
28
29a
Total deductions. Add lines 12 through 26 . . . . . . . . . . . . . . . . . . . .
Taxable income before net operating loss deduction and special deductions. Subtract line 27 from line 11. .
Net operating loss deduction (see instructions) . . . . . . . . . . .
29a
$32,500
Special deductions (Schedule C, line 24) . . . . . . . . . . . . .
29b
27
28
$867,000
$10,876,000
30
Add lines 29a and 29b . . . . . . . . . . . . .
Taxable income. Subtract line 29c from line 28. See instructions
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29c
30
$32,500
$10,844,000
31
32
33
Total tax (Schedule J, Part I, line 11) . . . . . .
Reserved for future use . . . . . . . . . .
Total payments and credits (Schedule J, Part II, line 23)
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31
32
33
$2,277,240
34
35
36
Estimated tax penalty. See instructions. Check if Form 2220 is attached
. . . . .
Amount owed. If line 33 is smaller than the total of lines 31 and 34, enter amount owed .
Overpayment. If line 33 is larger than the total of lines 31 and 34, enter amount overpaid
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34
35
36
Refunded
37
b
c
37
Sign
Here
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Enter amount from line 36 you want: Credited to 2024 estimated tax
$800,000
$40,000
$2,277,240
$2,277,240
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and
complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.
Signature of officer
Print/Type preparer’s name
Paid
Preparer
Use Only Firm’s name
Date
Preparer’s signature
May the IRS discuss this return
with the preparer shown below?
See instructions.
Yes
No
Title
Date
PTIN
Firm’s EIN
Firm’s address
For Paperwork Reduction Act Notice, see separate instructions.
Check
if
self-employed
Phone no.
Cat. No. 11450Q
Form 1120 (2023)
Page 2
Form 1120 (2023)
Schedule C
Dividends, Inclusions, and Special Deductions
(see instructions)
(a) Dividends and
inclusions
1
Dividends from less-than-20%-owned domestic corporations (other than debt-financed
stock) . . . . . . . . . . . . . . . . . . . . . . . .
2
Dividends from 20%-or-more-owned domestic corporations (other than debt-financed
stock) . . . . . . . . . . . . . . . . . . . . . . . .
3
Dividends on certain debt-financed stock of domestic and foreign corporations
4
Dividends on certain preferred stock of less-than-20%-owned public utilities
5
$65,000
(b) %
(c) Special deductions
(a) × (b)
50
$32,500
65
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See
instructions
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23.3
Dividends on certain preferred stock of 20%-or-more-owned public utilities .
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26.7
6
Dividends from less-than-20%-owned foreign corporations and certain FSCs
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50
7
Dividends from 20%-or-more-owned foreign corporations and certain FSCs
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65
8
Dividends from wholly owned foreign subsidiaries
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100
9
Subtotal. Add lines 1 through 8. See instructions for limitations
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10
Dividends from domestic corporations received by a small business investment
company operating under the Small Business Investment Act of 1958 . . . . .
100
11
Dividends from affiliated group members .
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100
12
Dividends from certain FSCs
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100
13
Foreign-source portion of dividends received from a specified 10%-owned foreign
corporation (excluding hybrid dividends) (see instructions) . . . . . . . . .
14
Dividends from foreign corporations not included on line 3, 6, 7, 8, 11, 12, or 13
(including any hybrid dividends) . . . . . . . . . . . . . . . . .
15
Reserved for future use .
16a
Subpart F inclusions derived from the sale by a controlled foreign corporation (CFC) of
the stock of a lower-tier foreign corporation treated as a dividend (attach Form(s) 5471)
(see instructions) . . . . . . . . . . . . . . . . . . . . .
b
Subpart F inclusions derived from hybrid dividends of tiered corporations (attach Form(s)
5471) (see instructions) . . . . . . . . . . . . . . . . . . .
c
Other inclusions from CFCs under subpart F not included on line 16a, 16b, or 17 (attach
Form(s) 5471) (see instructions) . . . . . . . . . . . . . . . . .
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$65,000 instructions
Global Intangible Low-Taxed Income (GILTI) (attach Form(s) 5471 and Form 8992) .
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18
Gross-up for foreign taxes deemed paid
19
IC-DISC and former DISC dividends not included on line 1, 2, or 3
20
Other dividends
21
Deduction for dividends paid on certain preferred stock of public utilities
22
Section 250 deduction (attach Form 8993)
23
Total dividends and inclusions. Add column (a), lines 9 through 20. Enter here and on
$65,000
page 1, line 4 . . . . . . . . . . . . . . . . . . . . . .
Total special deductions. Add column (c), lines 9 through 22. Enter here and on page 1, line 29b . . . .
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100
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17
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$32,500
100
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$32,500
Form 1120 (2023)
Page 3
Form 1120 (2023)
Schedule J
Tax Computation and Payment (see instructions)
Part I—Tax Computation
1
2
Income tax. See instructions . . . . . . . . .
Base erosion minimum tax amount (attach Form 8991) .
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1
2
3
4
5a
Corporate alternative minimum tax from Form 4626, Part II, line 13 (attach Form 4626) .
Add lines 1, 2, and 3 . . . . . . . . . . . . . . . . . . . .
Foreign tax credit (attach Form 1118) . . . . . . . . . . . . . . .
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5a
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3
4
b
c
d
Credit from Form 8834 (see instructions) . . . . . . .
General business credit (see instructions—attach Form 3800) .
Credit for prior year minimum tax (attach Form 8827) . . .
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e
6
7
Bond credits from Form 8912 . . .
Total credits. Add lines 5a through 5e
Subtract line 6 from line 4 . . . .
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6
7
8
9a
b
Personal holding company tax (attach Schedule PH (Form 1120)) .
Recapture of investment credit (attach Form 4255) . . . . .
Recapture of low-income housing credit (attach Form 8611) . .
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8
c
d
Interest due under the look-back method—completed long-term contracts (attach
Form 8697) . . . . . . . . . . . . . . . . . . . . . . .
Interest due under the look-back method—income forecast method (attach Form 8866)
9c
9d
e
f
g
Alternative tax on qualifying shipping activities (attach Form 8902)
Interest/tax due under section 453A(c) . . . . . . . . .
Interest/tax due under section 453(l) . . . . . . . . .
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9e
9f
9g
z
Other (see instructions—attach statement)
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Total. Add lines 9a through 9z . . . . . . . . . . .
Total tax. Add lines 7, 8, and 10. Enter here and on page 1, line 31
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9z
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10
11
10
11
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$2,277,240
5b
5c
5d
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5e
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9a
9b
$2,277,240
Part II—Payments and Refundable Credits
12
Reserved for future use .
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13
Preceding year’s overpayment credited to the current year .
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12
13
14
15
16
Current year’s estimated tax payments
. . .
Current year’s refund applied for on Form 4466 .
Combine lines 13, 14, and 15 . . . . . .
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14
15 (
16
17
18
19
Tax deposited with Form 7004 . . . .
Withholding (see instructions) . . . .
Total payments. Add lines 16, 17, and 18 .
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17
18
19
20
Refundable credits from:
Form 2439 . . . . .
Form 4136 . . . . .
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20a
20b
21
Reserved for future use . . . . . .
Other (attach statement—see instructions)
Total credits. Add lines 20a through 20z .
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20c
20z
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21
22
23
Elective payment election amount from Form 3800 . . . . . . . . . . . .
Total payments and credits. Add lines 19, 21, and 22. Enter here and on page 1, line 33 .
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22
23
a
b
c
z
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$2,277,240
)
$2,277,240
$2,277,240
Form 1120 (2023)
Page 4
Form 1120 (2023)
Schedule K
1
2
a
b
c
Other Information (see instructions)
Check accounting method: a
Cash
See the instructions and enter the:
Business activity code no.
b
Accrual
Yes
Other (specify)
c
No
Business activity
Product or service
3
Is the corporation a subsidiary in an affiliated group or a parent–subsidiary controlled group?
If “Yes,” enter name and EIN of the parent corporation
4
At the end of the tax year:
a
Did any foreign or domestic corporation, partnership (including any entity treated as a partnership), trust, or tax-exempt
organization own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of the
corporation’s stock entitled to vote? If “Yes,” complete Part I of Schedule G (Form 1120) (attach Schedule G) . . . . . .
✔
b
Did any individual or estate own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all
classes of the corporation’s stock entitled to vote? If “Yes,” complete Part II of Schedule G (Form 1120) (attach Schedule G) .
✔
5
At the end of the tax year, did the corporation:
a
Own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of stock entitled to vote of
any foreign or domestic corporation not included on Form 851, Affiliations Schedule? For rules of constructive ownership, see instructions
If “Yes,” complete (i) through (iv) below.
(i) Name of Corporation
(ii) Employer
Identification Number
(if any)
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6
7
(ii) Employer
Identification Number
(if any)
(iii) Country of
Organization
✔
(iv) Percentage
Owned in Voting
Stock
(iii) Country of
Incorporation
b Own directly an interest of 20% or more, or own, directly or indirectly, an interest of 50% or more in any foreign or domestic partnership
(including an entity treated as a partnership) or in the beneficial interest of a trust? For rules of constructive ownership, see instructions
If “Yes,” complete (i) through (iv) below.
(i) Name of Entity
✔
✔
(iv) Maximum
Percentage Owned in
Profit, Loss, or Capital
During this tax year, did the corporation pay dividends (other than stock dividends and distributions in exchange for stock) in
excess of the corporation’s current and accumulated earnings and profits? See sections 301 and 316 . . . . . . . .
If “Yes,” file Form 5452, Corporate Report of Nondividend Distributions. See the instructions for Form 5452.
If this is a consolidated return, answer here for the parent corporation and on Form 851 for each subsidiary.
At any time during this tax year, did one foreign person own, directly or indirectly, at least 25% of the total voting power of all
classes of the corporation’s stock entitled to vote or at least 25% of the total value of all classes of the corporation’s stock? .
For rules of attribution, see section 318. If “Yes,” enter:
(a) Percentage owned
and (b) Owner’s country
✔
✔
(c) The corporation may have to file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign
Corporation Engaged in a U.S. Trade or Business. Enter the number of Forms 5472 attached
8
9
10
Check this box if the corporation issued publicly offered debt instruments with original issue discount . . . . . . .
If checked, the corporation may have to file Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments.
$6,000
Enter the amount of tax-exempt interest received or accrued during this tax year $
Enter the number of shareholders at the end of the tax year (if 100 or fewer)
11
If the corporation has an NOL for the tax year and is electing to forego the carryback period, check here (see instructions) .
If the corporation is filing a consolidated return, the statement required by Regulations section 1.1502-21(b)(3) must be attached
or the election will not be valid.
12
Enter the available NOL carryover from prior tax years (do not reduce it by any deduction reported on page 1, line 29a) $
Form 1120 (2023)
Page 5
Form 1120 (2023)
Schedule K
13
Other Information (continued from page 4)
Are the corporation’s total receipts (page 1, line 1a, plus lines 4 through 10) for the tax year and its total assets at the end of the
tax year less than $250,000?
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yes
No
✔
If “Yes,” the corporation is not required to complete Schedules L, M-1, and M-2. Instead, enter the total amount of cash
distributions and the book value of property distributions (other than cash) made during this tax year $
14
Is the corporation required to file Schedule UTP (Form 1120), Uncertain Tax Position Statement? See instructions
If “Yes,” complete and attach Schedule UTP.
.
.
.
.
✔
15a
b
Did the corporation make any payments that would require it to file Form(s) 1099? .
If “Yes,” did or will the corporation file required Form(s) 1099? . . . . . . .
.
.
.
.
.
.
.
.
✔
✔
16
During this tax year, did the corporation have an 80%-or-more change in ownership, including a change due to redemption of its
own stock?
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
✔
17
During or subsequent to this tax year, but before the filing of this return, did the corporation dispose of more than 65% (by value)
of its assets in a taxable, non-taxable, or tax deferred transaction? . . . . . . . . . . . . . . . . . .
✔
18
Did this corporation receive assets in a section 351 transfer in which any of the transferred assets had a fair market basis or fair
market value of more than $1 million? . . . . . . . . . . . . . . . . . . . . . . . . . . .
✔
19
During this corporation’s tax year, did the corporation make any payments that would require it to file Forms 1042 and 1042-S
under chapter 3 (sections 1441 through 1464) or chapter 4 (sections 1471 through 1474) of the Code? . . . . . . . .
Is the corporation operating on a cooperative basis?
. . . . . . . . . . . . . . . . . . . . . .
✔
✔
20
21
22
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
During this tax year, did the corporation pay or accrue any interest or royalty for which the deduction is not allowed under
section 267A? See instructions
If “Yes,” enter the total amount of the disallowed deductions $
✔
Does this corporation have gross receipts of at least $500 million in any of the 3 preceding tax years? (See sections 59A(e)(2) and (3).)
✔
If “Yes,” complete and attach Form 8991.
23
24
a
b
c
25
26
Did the corporation have an election under section 163(j) for any real property trade or business or any farming business in effect
during this tax year? See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . .
Does the corporation satisfy one or more of the following? If “Yes,” complete and attach Form 8990. See instructions . . .
The corporation owns a pass-through entity with current, or prior year carryover, excess business interest expense.
The corporation’s aggregate average annual gross receipts (determined under section 448(c)) for the 3 tax years preceding the
current tax year are more than $29 million and the corporation has business interest expense.
The corporation is a tax shelter and the corporation has business interest expense.
Is the corporation attaching Form 8996 to certify as a Qualified Opportunity Fund?
. . . . . . . . . . . . .
If “Yes,” enter amount from Form 8996, line 15 . . . . . . . . . . . $
Since December 22, 2017, did a foreign corporation directly or indirectly acquire substantially all of the properties held directly or
indirectly by the corporation, and was the ownership percentage (by vote or value) for purposes of section 7874 greater than
50% (for example, the shareholders held more than 50% of the stock of the foreign corporation)? If “Yes,” list the ownership
percentage by vote and by value. See instructions . . . . . . . . . . . . . . . . . . . . . . .
Percentage: By Vote
By Value
27
At any time during this tax year, did the corporation (a) receive a digital asset (as a reward, award, or payment for property or
services); or (b) sell, exchange, or otherwise dispose of a digital asset (or a financial interest in a digital asset)? See instructions .
Is the corporation a member of a controlled group? . . . . . . . . . . . . . . . . . . . . . . .
If “Yes,” attach Schedule O (Form 1120). See instructions.
28
29
a
Corporate Alternative Minimum Tax:
Was the corporation an applicable corporation under section 59(k)(1) in any prior tax year?
.
.
.
.
.
.
.
.
.
.
.
✔
✔
✔
✔
✔
✔
If “Yes,” go to question 29b. If “No,” skip to question 29c.
b
c
30
a
Is the corporation an applicable corporation under section 59(k)(1) in the current tax year because the corporation was an
applicable corporation in the prior tax year? . . . . . . . . . . . . . . . . . . . . . . . . .
If “Yes,” complete and attach Form 4626. If “No,” continue to question 29c.
Does the corporation meet the requirements of the safe harbor method as provided under section 59(k)(3)(A) for the current tax
year? See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
If “No,” complete and attach Form 4626. If “Yes,” the corporation is not required to file Form 4626.
Is the corporation required to file Form 7208 relating to the excise tax on repurchase of corporate stock (see instructions):
Under the rules for stock repurchased by a covered corporation (or stock acquired by its specified affiliate)? . . . . . .
b
c
Under the applicable foreign corporation rules? . . . . . . . . . . . . . . . . . . . . . . . .
Under the covered surrogate foreign corporation rules? . . . . . . . . . . . . . . . . . . . . . .
If “Yes” to either (a), (b), or (c), complete Form 7208, Excise Tax on Repurchase of Corporate Stock. See the Instructions for
Form 7208.
31
Is this a consolidated return with gross receipts or sales of $1 billion or more and a subchapter K basis adjustment, as described
in the instructions, of $10 million or more? . . . . . . . . . . . . . . . . . . . . . . . . . .
If “Yes,” attach a statement. See instructions.
✔
✔
✔
✔
✔
Form 1120 (2023)
Page 6
Form 1120 (2023)
Schedule L
Balance Sheets per Books
Beginning of tax year
(a)
(b)
Assets
1
Cash
.
.
.
2a
b
3
4
5
6
7
8
9
10a
b
11a
b
12
13a
b
14
15
Trade notes and accounts receivable .
Less allowance for bad debts . . .
Inventories . . . . . . . . .
U.S. government obligations
. . .
Tax-exempt securities (see instructions)
Other current assets (attach statement)
Loans to shareholders . . . . .
Mortgage and real estate loans . . .
Other investments (attach statement) .
Buildings and other depreciable assets
Less accumulated depreciation . . .
Depletable assets . . . . . . .
Less accumulated depletion . . . .
Land (net of any amortization) . . .
Intangible assets (amortizable only)
.
Less accumulated amortization . . .
Other assets (attach statement) . . .
Total assets
. . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
End of tax year
(c)
(d)
$10,815,000
(
)
(
)
$0
$0
(
)
(
)
(
)
(
)
(
)
(
)
$10,815,000
Liabilities and Shareholders’ Equity
16
17
18
19
20
21
22
23
24
25
26
27
28
Accounts payable . . . . . . . . .
Mortgages, notes, bonds payable in less than 1 year
Other current liabilities (attach statement) . .
Loans from shareholders . . . . . . .
Mortgages, notes, bonds payable in 1 year or more
Other liabilities (attach statement) . . . .
a Preferred stock . . . .
b Common stock . . . .
Additional paid-in capital . . . . . . .
Retained earnings—Appropriated (attach statement)
Retained earnings—Unappropriated . . .
Adjustments to shareholders’ equity (attach statement)
Less cost of treasury stock . . . . . .
Total liabilities and shareholders’ equity . .
Capital stock:
Schedule M-1
$10,815,000
(
)
(
)
$10,815,000
Reconciliation of Income (Loss) per Books With Income per Return
Note: The corporation may be required to file Schedule M-3. See instructions.
1
Net income (loss) per books .
.
.
.
.
.
2
Federal income tax per books
.
.
.
.
.
3
Excess of capital losses over capital gains
4
Income subject to tax not recorded on books
this year (itemize):
5
.
a
b
c
Expenses recorded on books this year not
deducted on this return (itemize):
Depreciation . . . . $
Charitable contributions . $
27,000
Travel and entertainment . $
6
Add lines 1 through 5 .
Schedule M-2
1
2
3
4
.
.
.
.
.
.
.
$10,815,000
7
Income recorded on books this year
not included on this return (itemize):
6,000
Tax-exempt interest $
8
Deductions on this return not charged
against book income this year (itemize):
a Depreciation . . $
b Charitable contributions $
27,000 9
10,864,000 10
Add lines 7 and 8 . . . . . .
Income (page 1, line 28)—line 6 less line 9
$22,000
6,000
6,000
$10,858,000
Analysis of Unappropriated Retained Earnings per Books (Schedule L, Line 25)
Balance at beginning of year
Net income (loss) per books .
Other increases (itemize):
Add lines 1, 2, and 3 .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
0
$10,815,000
$10,815,000
5
6
7
8
Distributions: a Cash . .
b Stock
.
c Property .
Other decreases (itemize):
.
.
.
.
.
.
.
.
.
Add lines 5 and 6 . . . . . .
Balance at end of year (line 4 less line 7)
$0
$10,815,000
Form 1120 (2023)
1
SageGreen Computer Corporation: Reflection
Christine Sarkissian
Southern New Hampshire University
TAX-655: Federal Income Tax of Corporations and Partnerships
Professor Russell Jacques
September 14, 2024
2
SageGreen Computer Corporation: Reflection
Filling Accuracy
When completing Form 1120 for Part One of my project, I maintained filing accuracy and
completeness by employing several verification techniques. To ensure that the filled figures on the
tax form matched the source documents, I had to double-check with other source documents such
as the Comprehensive Statement of Income.
Further, instead of relying on the software’s results, I cross-checked all the calculations
manually to make sure all the figures were correct as evidenced by the data analysis as this is very
critical according to Thompson et al. (2024). To ensure the work was as accurate as possible, I
went through the work three more times. Specifically, each had the aim of evaluating whether
there was anything that could be deemed inconsistent or missing so that I could submit a muchimproved tax form. This was critical in ensuring that the tax filing process was not compromised.
Specific tax laws, regulations, and codes are deemed relevant to enable accurate
computation of tax liability so as not to understate or overstate the figures (Ellinwood & Finley,
2023). This was important in aspects such as compliance with the tax laws in order to avoid
incurring penalties and interest. Adherence to these regulations was also instrumental in explaining
the decreased overall tax liability for the firm. This measure helped to verify the correctness of all
the deductions and credits made. Through proper legal research on the taxation laws, I managed
to prepare a Form 1120 that complied with the law as well as enhanced the firm’s taxation standing.
Potential Variations in Preparation of Form 1120
The preparation of Form 1120 had differences. These emerged mainly in the process of
comparing book income with taxable income in Schedule M-1. By going through this
reconciliation process, the distinction between financial accounting and tax reporting became
3
clear. In the case of SageGreen Computer Corporation, there is a significant difference between
the net income of $10,858,000 per books and the taxable income of $10,876,000. This variance
results from the difference between temporary and permanent factors. Temporary differences that
reversed over time included differences in the depreciation of assets or the expense recognition for
revenues under the book and tax systems.
In essence, the witnessed differences are due to $6,000 in tax-exempt interest and other
adjustments not captured in the above schedule like the 50% reduction of meals (Josephs, 2021).
In an attempt to explain these discrepancies, I sought to make a provision for the meal adjustment.
This process demonstrates the complexity of tax reporting and the importance of proper treatment
of book-tax disparities to produce appropriate financial and tax statements.
4
References
Ellinwood, T., & Finley, C. (2023). Investigating Legal Source Income Tax Cases. Dep’t of Just.
J. Fed. L. & Prac., 71, 23.
Josephs, S. R. (2021). Federal Tax Update 1. California CPA, 90(6), 13-21.
Thompson, A. S., Omwenga, M. M., & Johnson, B. W. (2024, May). Text Extraction and
Classification for Automated Balance Sheet Data Entry from Form 1120. In 2024 IEEE
International Conference on Electro Information Technology (eIT) (pp. 229-234). IEEE.