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CCH Axcess Tax

Introduction to the Iowa S Corporation Return

The Iowa S Corporation return is prepared for calendar, fiscal, and short year S Corporations. Using entries from the federal return and Iowa input, the following forms and statements are prepared for the Iowa return:

• Form IA 8453-C, S Corporation Income Tax Declaration for an E-file Return
• Form IA 1120V-EXT, Iowa Corporation Tax Extension Payment Voucher
• Form IA-1120V-C, Iowa Corporation Tax Payment Voucher
• Form IA 1120S, Iowa Income Tax Return for an S Corporation
• Computation of Iowa S Corporation Tax
• Form IA 1120F-EXT, Iowa Franchise Tax Extension Payment Voucher
• Form IA 1120F-ES, Iowa Franchise Estimated Payment Worksheet and Voucher
• Form IA 1120FV, Iowa Franchise Tax Payment Voucher
• Form IA 1120F, Iowa Franchise Tax Return for Financial Institution
• Form IA Schedule 59F, Iowa Franchise Schedule 59F
• Form IA 2220, Iowa Underpayment of Estimated Tax
• Form IA Schedule K-1, Iowa Schedule K-1
• Form IA 4562A, Iowa Depreciation Adjustment Schedule
• Form IA 4562B, Iowa Depreciation Accumulated Adjustment Schedule
• Form IA 128, Iowa Research Activities Credit
• Form IA 128, Iowa Research Activities Credit for Innovative Renew Energy Generation
• Form IA 128S, Iowa Simplified Research Activities Credit
• Form IA 133, Iowa New Job Credit
• Form IA 135, Iowa E85 Gasoline Promotion Tax Credit
• Form IA 137, Iowa Ethanol Promotion Tax Credit
• Form IA 138, Iowa E15 Plus Gasoline Promotion Tax Credit
• Form IA 8864, Iowa Biodiesel Blended Fuel Tax Credit
• Form IA 148, Iowa Tax Credit Schedule
• Form IA 4136, Iowa Motor Fuel Tax Credit
• Form IA 1040V-EXT, Iowa Composite Extension Payment Voucher
• Form IA 1040V, Iowa Composite Tax Payment Voucher
• Form IA 1040C, Iowa Composite Individual Income Tax Return

A copy of the federal return is attached to file with the Iowa return.

Federal Notes and Features

Generic S Corporation Consolidated Return

A state S Corporation consolidated tax return is processed for Iowa Corporations by submitting the state input with the consolidating unit. The state consolidated tax return generated under this input scheme is also known as the state "generic" consolidated tax return because we process the return as if it is a regular S Corporation return except we use federal consolidated income, deductions and shareholder information as the starting point.

For those states that do not start with federal ordinary income or loss, items of income and deduction flow from the federal S Corporation Consolidated return, as they would for a regular non-consolidated return.

We produce detailed supporting statements from state input, depreciation, gains and losses on sale of assets. However, we do not produce all detailed supporting statements for trade or business income (loss), Schedule K income and deductions, balance sheet, Schedules M-1, M-2 and M-3 items. Therefore, you may want to attach a copy of the federal S Corporation consolidated return as supporting documentation.

State Common Input Data

Presence of state data on a state input form is no longer necessary to create a state return. You may create one state or multiple states in a return by simply choosing from the list of states and cities on the State/City Generation worksheet located under the common State Category.

Various state and city general information which is common to all or a majority of states may be entered on the State/City Common Data worksheet under the Common State category. Please refer to the State Common Data section for more information.

Iowa Depreciation Adjustment

Iowa has adopted the federal laws increasing the Section 179 expensing allowance for tax years beginning on or after January 1, 2003, and January 1, 2008.

In addition, Iowa does not allow the 50% bonus depreciation provisions of the federal Economic Stimulus Act of 2008 for assets acquired after December 31, 2007, and before January 1, 2010. Form IA 4562A must be filed for these assets to account for the difference between Iowa and federal depreciation.

Further state depreciation differences are reported on IA 4562B and are computed from depreciation entries on the "Federal Depreciation and Amortization" section.

If the federal Income / Deductions worksheet, Business, Depreciation and Amortization -Totals is used, no automatic Iowa adjustment will be made. Use the Iowa Income / Deductions worksheet, Additions or Subtractions section, Depreciation adjustment - override to enter the adjustment.

Due Dates

Iowa corporation calendar year returns are due April 30. Fiscal year returns must be filed within four months after the end of the fiscal year. This due date prints on the transmittal letter and filing instructions. In addition, this date is used to compute the late payment interest. If a date is not entered on the Common State Forms and the late payment interest computation is requested, the federal filing date is used.

State Extension

To process Form 1120V-EXT, Iowa Corporation Income Tax Payment Voucher, enter the state code "IA".on the federal Other category, Extensions worksheet, State Extensions section. Entries to override the calculation may be made in this section. This entry is required to process Iowa Extension Payment Voucher. .

FS Codes

The Iowa return starts from federal ordinary income. FS codes are not required on the federal input to prepare the Iowa S corporation return.

Generally, additions and reductions to federal ordinary income are handled through entries on the Iowa input. The following items from the federal return carry to the Iowa return and do not require additional entries on the state input:

• Interest on U.S. Obligations
• Municipal Bond Interest from All States
• Excess Percentage Depletion Over Cost Depletion
• Employment/Jobs Credit Wage Reduction
• Fifty Percent of Federal Income Tax
• Shareholder Basic Information

U.S. Obligations

Interest on obligations of the United States entered on the federal Income/Deductions category, Interest worksheet carries to Form IA 1120S as a reduction to federal ordinary income.

Municipal Bond Interest

Iowa includes municipal bond interest from sources inside and outside the state in Iowa income. Interest entered as state and local obligations on the federal Income/Deductions category, Interest worksheet carries to Form IA 1120S as an addition to federal ordinary income.

Be sure to indicate the source of municipal bond interest. Enter the source of interest in the "State" box on the federal Income/Deductions category, Interest worksheet. Interest is considered to originate in the state entered on the federal worksheet if no state code is entered.

Tax Accrual

In an accrual - basis return, state and local taxes carry to the federal return when a "State and City Tax Accrual Option" is selected. This entry also accrues the taxes to the appropriate sections of the federal balance sheet.

If you do not choose a state tax accrual option, state taxes computed on the Iowa return neither carry to the federal return nor accrue to the balance sheet.

Depletion

The excess percentage depletion over cost depletion carries to Form IA 1120S as an "Other Addition". The excess is computed from entries on the federal Income/Deductions category, Depletion worksheet.

Employment/Jobs Credit Wage Reduction

Wages or salaries eligible for the federal Employment/Jobs Credit which were not deducted on the federal return carry to Form IA 1120S as an "Other Reduction".

Nonresident Shareholders

Iowa passes through the apportioned share of modifications to nonresident shareholders when there is income within and without the state. If a business activity ratio is not calculated or entered for the Iowa return, 100 percent of the federal K-1 amounts and Iowa modifications are apportioned to Iowa on the nonresident shareholder's Iowa Schedule K-1. Be sure to indicate the shareholder's state of residency in the "State of Residency" field on the federal Shareholders category, Shareholder Information worksheet.

If the entry is any other than "IA" or blank, the shareholder is considered to be an Iowa nonresident.

Iowa Special Allocations

Iowa uses federal Shareholders category, Special Allocations section to specially allocate Iowa distributive share items. All federal special allocation features (i.e., single entry of ratios, tiered allocation, residual suppression) are available for Iowa purposes. Iowa special allocation codes to be used include the following:

For additional information concerning special allocations and the various special allocation methods, refer to the instructions for Special Allocations Section.