Instructions For Form 1120-Pc - 2001 (Page 5 of 20) in pdf

Stock ownership in foreign

Recordkeeping

million. See section 448(c). However,

corporations. Attach the statement

qualifying taxpayers and eligible

Keep the corporation’s records for as long

required by section 551(c) if the

businesses of qualifying small business

as they may be needed for the

corporation:

taxpayers are excepted from using the

administration of any provision of the

accrual method and may account for

1. Owned 5% or more in value of the

Internal Revenue Code. Usually, records

inventoriable items as materials and

outstanding stock of a foreign personal

that support an item of income, deduction,

supplies that are not incidental. For

holding company and

or credit on the return must be kept for 3

details, see Notice 2001-76.

2. Was required to include in its gross

years from the date the return is due or

income any undistributed foreign personal

Under the accrual method, an amount

filed, whichever is later. Keep records that

holding company income from a foreign

is includible in income when:

verify the corporation’s basis in property

•

personal holding company.

All the events have occurred that fix the

for as long as they are needed to figure

right to receive the income, which is the

the basis of the original or replacement

Transfers to a corporation controlled

earliest of the date (a) the required

property.

by the transferor. If a person receives

performance takes place, (b) payment is

The corporation should also keep

stock of a corporation in exchange for

due, or (c) payment is received and

copies of all filed returns. They help in

•

property, and no gain or loss is

The amount can be determined with

preparing future and amended returns.

recognized under section 351, the person

reasonable accuracy.

(transferor) and the transferee must each

See Regulations section 1.451-1(a) for

Depository Method of Tax

attach to their tax returns the information

details.

required by Regulations section 1.351-3.

Payment

Generally, an accrual basis taxpayer

can deduct accrued expenses in the tax

The corporation must pay the tax due in

Assembling the Return

year when:

full no later than the 15th day of the 3rd

•

To ensure that the corporation’s tax return

All events that determine the liability

month after the end of the tax year. The

is correctly processed, attach all

have occurred,

two methods of depositing corporate

•

schedules and other forms after page 8,

The amount of the liability can be

income taxes are discussed below.

Form 1120-PC and in the following order:

figured with reasonable accuracy, and

Electronic Deposit Requirement

•

1. Schedule N (Form 1120).

Economic performance takes place

The corporation must make electronic

2. Form 8302.

with respect to the expense.

deposits of all depository taxes (such as

3. Form 4136.

There are exceptions to the economic

employment tax, excise tax, and

4. Form 4626.

performance rule for certain items,

corporate income tax) using the

5. Form 851.

including recurring expenses. See section

Electronic Federal Tax Payment System

6. Additional schedules in alphabetical

461(h) and the related regulations for the

(EFTPS) in 2002 if:

order.

rules for determining when economic

•

The total deposits of such taxes in

7. Additional forms in numerical order.

performance takes place.

2000 were more than $200,000 or

•

Complete every applicable entry space

Change in Accounting Method

The corporation was required to use

on Form 1120-PC. Do not write “See

Generally, the corporation must get IRS

EFTPS in 2001.

Attached” instead of completing the entry

If the corporation is required to use

consent to change the method of

spaces. If more space is needed on the

EFTPS and fails to do so, it may be

accounting used to report taxable income

forms or schedules, attach separate

subject to a 10% penalty. If the

(for income as a whole or for any material

sheets using the same size and format as

item). To do so, it must file Form 3115,

corporation is not required to use EFTPS,

the printed forms. If there are supporting

Application for Change in Accounting

it may participate voluntarily. To enroll in

statements and attachments, arrange

Method. For more information, see Pub.

or get more information about EFTPS,

them in the same order as the schedules

538, Accounting Periods and Methods.

call 1-800-555-4477 or 1-800-945-8400.

or forms they support and attach them

To enroll online, visit

The corporation may also have to

last. Show the totals on the printed forms.

Depositing on time. For EFTPS

make an adjustment to prevent amounts

Also, be sure to put the corporation’s

deposits to be made timely, the

of income or expense from being

name and EIN on each supporting

corporation must initiate the transaction at

duplicated or omitted. This is called a

statement or attachment.

least 1 business day before the date the

section 481(a) adjustment, which is taken

deposit is due.

into account over a period not to exceed 4

Accounting Methods

years. For example, a corporation

Deposits with Form 8109

An accounting method is a set of rules

changes to the cash method of

used to determine when and how income

If the corporation does not use EFTPS,

accounting. It accrued sales in 2000 for

and expenses are reported.

deposit corporation income tax payments

which it received payment in 2001. It must

(and estimated tax payments) with Form

Figure taxable income using the

report those sales in both years as a

8109, Federal Tax Deposit Coupon. If you

method of accounting regularly used in

result of changing its accounting method

do not have a preprinted Form 8109, use

keeping the corporation’s books and

and must make a section 481(a)

Form 8109-B to make deposits. You can

records. Generally, permissible methods

adjustment to prevent duplication of

get this form by calling 1-800-829-1040.

include:

income.

•

Be sure to have your EIN ready when you

Cash,

See Rev. Proc. 99-49, 1999-2 C.B.

•

call.

Accrual, or

725, to figure the amount of this

•

Any other method authorized by the

Do not send deposits directly to an IRS

adjustment for 2001. Include any positive

Internal Revenue Code.

office; otherwise, the corporation may

section 481(a) adjustment on Schedule A,

The gross amounts of underwriting

have to pay a penalty. Mail or deliver the

line 13. If the section 481(a) adjustment is

and investment income should be

completed Form 8109 with the payment

negative, report it on Schedule A, line 31.

computed on the basis of the underwriting

to an authorized depositary, i.e., a

and investment exhibit of the NAIC

commercial bank or other financial

Rounding Off to Whole

annual statement to the extent not

institution authorized to accept Federal

Dollars

inconsistent with the Internal Revenue

tax deposits. Make checks or money

Code and its Regulations. In all cases,

orders payable to that depositary.

The corporation may show amounts on

the method used must clearly show

the return and accompanying schedules

To help ensure proper crediting, write

taxable income.

as whole dollars. To do so, drop amounts

the corporation’s EIN, the tax period to

Generally, a corporation must use the

less than 50 cents and increase any

which the deposit applies, and “Form

accrual method of accounting if its

amount from 50 cents through 99 cents to

1120-PC” on the check or money order.

average annual gross receipts exceed $5

the next higher dollar.

Be sure to darken the “1120” box on the

-5-

Instructions For Form 1120-Pc - 2001 Page 5

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