©2001 The Ohio SBDC at Youngstown State University
The Ohio SBDC at Youngstown State University
One University Plaza Youngstown, OH 44555
Office: 330.746.3350 Fax:330.746.3324
One University Plaza Youngstown, OH 44555 330.746.3350 Fax: 330.746.3324 |
WASHINGTON - In a significant cost-saving move for small businesses, the Internal Revenue Service announced it has reduced paperwork for most small businesses currently required to file corporate income tax return forms. Starting with the
2002 tax year, companies with less than $250,000 of gross receipts and less than $250,000 in assets will no longer have to complete Schedules L, M-1 and M-2 of Form 1120; Parts III and IV of Form 1120-A; and Schedules L and M-1 of Form 1120S.
These Changes could save 2.6 million small businesses an estimated 61 million staff hours. This is staff time now spent preparing these forms. "These changes will mean a significant financial savings for small businesses," said Charles O.
Rossotti, IRS commissioner. "This is part of an on-going effort by the IRS to ease the burden on America's taxpayers wherever possible." The exemption for small businesses will allow them to use record keeping based on their checkbook or
cash receipts and disbursements journal instead of additional accounting methods for tax reporting. The companies will still be required to maintain records detailing assets, liabilities, equity accounts and adjustments used to arrive at
taxable income. Schedule L (Part III of Form 1120-A) provides the beginning and end of the year balance sheets based on the corporation's books. Small businesses typically prepare this form only because it is required for tax purposes.
Schedule M-1 (Part IV of Form 1120-A) provides reconciliation of income or loss in accounting records with income or loss on the tax return. Schedule M-2 reflects unappropriated retained earnings. For most small businesses Schedule M-1 and M-2
reflect little more than the beginning balance as affected by current income or loss and the ending balance. For larger companies, these schedules are necessary tools in the examination of corporate returns. However, for most small
businesses, these schedules have a limited application.
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