Small Business Taxes & ManagementTM--Copyright 2018, A/N Group, Inc.
We've developed a business checklist to assist you in preparing your partnership or LLC return. The checklist assumes you're starting with an income statement and balance sheet, that is, you're using your accounting income and applying it to your tax return. Thus, you should already have accounted for all your income and expenditures. The checklist will help you put the numbers on your tax return. For example, using the 50% rule for meals and entertainment expenses, claiming the Sec. 179 expense election. Caution. If you're using a computer program to prepare the return (and you should) the software may handle many items automatically if you enter them in the correct spot.
___ Review last year's return
___ Review last year's return K, M-1 schedules
___ Review minutes of board/members/partners' meetings
___ Review carryover information
___ Review partnership/operating agreement. Agrees with actual operation? Sec. 704(b)?
___ Changes in partner names, addresses
___ Changes in capital interests? profits interests?
___ Contributions of property to partnership by partner? Post March 31, 1984? Post Oct 22, 2004?
___ Analyze partnership debt-recourse? nonrecourse? allocation of basis
___ Family partnership?
___ Schedule M-3 required?
___ Audit adjustments made by IRS or state tax authorities
___ Changes in loans to/from business by partners
___ Additional capital contributions
___ Partnership partner in lower-tier partnership? Allocation of lower-tier liabilities
___ Change in tax matters partners?
___ If spouse only other partner consider qualified joint venture
___ Technical termination of partnership?
___ Any partners a disregarded entity, trust, estate or nominee? (Schedule B)
___ Any ownership by foreign person or entity? Ownership in foreign entity (Schedule B)
___ State filings other than home state?
___ Any special allocation of losses?
___ Minimum gain calculation required for proper allocation of deductions?
___ Changes in partner loan guarantees?
___ New debt? Qualified nonrecourse debt?
___ Sec. 1017 election to reduce basis of assets for cancellation of debt
___ Transfer of capital or profits interest to creditor in satisfaction of debt?
___ Deduction of guaranteed payments to partners for services or use of capital
___ Any forgiven debt?
___ Sec. 754 election in effect? Make election?
___ Sec. 743(b) or 734(b) optional basis adjustment
___ Any distribution of property from Sec. 1031 exchange?
___ Receipt of interest by partner for services?
___ Recapture of 5-year prior Sec. 1231 losses?
___ Any below market-rate loans?
___ Loans to/from business by related parties documented?
___ 1099-INT, 1099-DIV, 1099-MISC for payments to related parties
___ Make sure all questions on forms and schedules answered
___ If cash basis accounting is accrual required?
___ Can cash basis be elected?
___ Check accruals for economic performance, recurring item exception, and related party transactions
___ 3-1/2, 8-1/2 month rules
___ Check conformance with prior accounting methods and treatment
___ Related party transactions (Sec. 267, 707, 1239)
___ Check business codes for changes
___ 2-1/2 month rule for deductions
___ Related entities; common control rules
___ Losses in Presidentially declared disaster area
___ Net unrealized built-in gains that must be reported
___ Review financial statements and footnotes
___ Prior year installment sale carryovers
___ Cancellation of debt income?
___ Significant modification of debt
___ Lessee improvements of property that revert to lessor
___ Bartering transactions
___ Elect out of installment sale
___ Change in accounting for any items?
___ Transactions with related foreign individuals or entities?
___ Interest in foreign financial accounts? FinCEN 114 required?
___ Compare sources of income year-to-year, examine differences
___ Change in interest or dividend income?
___ Separate reporting of interest, capital gain, (portfolio income) etc. income and expenses for K-1
___ Equalization distributions for state composite returns, withholding payments
___ Fixed asset sales, abandonments, involuntary conversions?
___ Sales of investment assets?
___ Depreciation recapture
___ Section 1250 unrecaptured gain
___ Property distributed to partner? Gain on assets?
___ Increased personal use of business property
___ Like-kind exchanges (Form 8824)
___ Party to applicable asset acquisition (Form 8594)
___ Difference in basis of assets sold for state or AMT purposes
___ Rental real estate activities reportable on Form 8825
___ Long-term contracts?
___ Income for tax, not books
___ Income for books, not tax (e.g., prior year tax)
___ Advance payments that can be deferred
___ Write-off of bad debts for tax, not book
___ Treatment of prepaid expenses
___ Net investment income reporting requirements
___ Documentation for loans
___ Computation of debt basis
___ Self-charged interest reporting requirements
___ Deduction of business start-up and organization expenses
___ Categorization of rent expense--lease or purchase?
___ Inventory writedowns
___ Partner health insurance
___ Vacation pay accrual
___ Uniform capitalization rule for inventories
___ Book/Tax accounting differences
___ Details for balance sheet entries
___ Passive/nonpassive activities, grouping
___ 100% deduction for meals & entertainment
___ 50% deduction for meals & entertainment
___ Per-diem vs. actual expenses for travel
___ Documentation for T&E, mileage
___ Nondeductible (personal) expenses
___ Sale of qualified community assets
___ Special rules in disaster areas
___ Sale of livestock on account of weather
___ Replacement property acquired for casualty losses (disaster area rules)
___ Adequate disclosure for accuracy-related penalty
___ Reportable transaction disclosure
___ Forms 5500 filings for retirement and welfare benefit plans
___ Retirement plans in conformance with latest required changes
___ Contribution for retirement plans made?
___ Forms 1099, 1098, 1042 filed
___ Reporting of reimbursement of employee moving expenses, tuition reimbursement
___ Spousal travel reported on W-2
___ Special rules for foreign entities
___ Reporting requirements for cash payments received in excess of $10,000
___ Form 8308 for sale of partnership interests
___ Losses or credits suspended due to at-risk limitations
___ Losses or credits suspended due to basis limitations
___ Losses on transactions between related parties
___ At risk rules
___ Distributions in excess of basis
___ Material participation by partner/member? Documentation needed?
___ Recapture of credits?
___ Personal use reported on employee's W-2 (1099-MISC for independent contractor)
___ Cents-per-mile vs. annual lease method for personal use of vehicles
___ Adequate records to substantiate business use
___ Lease inclusion amount for luxury vehicles
___ Allocation of business/personal use including expenses
___ Definition of auto/truck/SUV/nonpersonal use
___ Special rules for vehicle donations
___ More than 50% business use of vehicle other listed property
___ Questions on usage of listed property
___ State filing requirements, nexus
___ State-federal differences (e.g., depreciation, Sec. 179 limit)
___ Partner requirements to file nonresident personal return; composite returns
___ Withholding for nonresident partners
___ Apportionment factors, unitary filing
___ State S corporation, LLC, partner status
___ Annual report, license filings current
___ Depreciation methods--Sec. 179; 50%; elect out of bonus
___ Repair or capital expenditure
___ Section 179 election for off-the-shelf software or 36-month depreciation
___ Special rule for property received in a like-kind exchange
___ Check property classes for assets
___ Mid-quarter convention applicable?
___ Special rules for qualified leasehold improvements, qualified restaurant property and qualified retail property (15-year; Sec. 179)
___ Cost segregation analysis for new/improvements to buildings
___ Use of slower depreciation more advantageous? (Election by class)
___ Rev. Proc. 2002-54 to correct prior year underdepreciation
___ Capitalization of leased property or equipment?
___ Determine if listed property rules apply, required recordkeeping
___ On Form 4562 reconcile to asset/depreciation worksheets
___ Difference state/federal depreciation?
___ Account for AMT depreciation
___ Sale of asset basis differences for state tax; AMT tax; book/tax difference
___ Expense/amortize startup and organizational expenditures
___ Remove assets abandoned, sold or otherwise disposed of
___ Charitable contributions--qualified organizations
___ Charitable contribution or advertising expense?
___ Charitable contribution vs. cost of goods sold
___ Property contributions--special rules, food, etc.
___ Special rules for contributions of appreciated property
___ Reduction of contribution for services or goods received
___ Required documentation for contributions
___ Lobby activities not deductible
___ Penalties not deductible
___ Club dues
___ Capitalization of professional fees or salaries required?
___ Partially worthless debts?
___ Accrued rent, interest, etc. between related parties
___ Sec. 409A deferred compensation rules applicable?
___ Proper allocation of interest expense made
___ Association dues include lobbying expenses?
___ Contributions to retirement plans made?
___ Sec. 266 election to capitalize carrying charges on non-productive property
___ Tangible property regulations
___ Amortization of acquired intangible assets
___ Deduction for domestic production activities, Form 8903
___ Deduction for state and local income taxes
___ Credit for taxes paid on fuels (Form 4136)
___ Credit for increasing research activities
___ Credit for building rehabilitation
___ Energy credits
___ Disabled access credit
___ Qualified alternative motor vehicle or electric vehicle credit
___ Credit for employer social security and Medicare taxes paid on certain tips
___ Credit for renewable energy
___ Credit for contributions to community development corporations
___ Work opportunity tax credit (WOTC, Form 5884)
___ New markets tax credit (Form 8874)
___ Credit for small employer pension startup costs (Form 8881)
___ Credit for employer provided child care expenses (Form 8882)
___ Credit for small employer health care premiums (Form 8941)
___ Reduction in liabilities of partnership
___ Gain recognition on distribution of appreciated property. Sec. 732(b) adjustment
___ Distributions of property to partner who contributed appreciated property? Sec. 737
___ Distributions of property as guaranteed payment?
___ Charitable contributions; appraisal requirements; listing
___ Self-charged interest
___ Domestic production activities deductions
___ Distributions; distributions in excess of basis
___ At-risk information
___ State adjustments for basis, at risk, income
___ Tax preference items
___ Recapture information
___ Correct amortization period for intangibles
___ Purchase price adjustment in asset purchase
___ Reconcile beginning and ending partners' capital accounts
___ Debt-financed distributions
___ Grouping activities passive activity rules; net investment income rules
___ Life insurance officers and key employees
___ Leasehold improvements, rent adjustments
___ Replacement period for casualty losses
___ Worthless securities
___ Asset abandonments
___ Special rules for short-year returns
___ Transfer of property for services
___ Deductibility of interest
___ Environmental cleanup expenses
___ Fringe benefits for partners
___ Long-term leases deferred payments
___ Casualty or theft loss
___ Guaranteed payments matchng rule
___ Life insurance purchased by partnership?
___ Noncash charitable contribution
___ Disability insurance premiums
___ Report of Employer-Owned life insurance policies
___ Transactions subject to economic substance rules
___ Composite return for nonresident partners
___ Capital account method checked on K-1
Elections and Statements
___ Form 3115, Application for Change in Accounting Method needed?
___ Tangible property-de minimis safe harbor statement
___ Building expenses-expenses safe harbor for small taxpayers
___ Capitalization of amounts paid or incurred for employee compensation or overhead
___ Capitalization of repair and maintenance expenditures
___ Capitalization of rotable, temporary, or standby emergence spare parts
___ Partial asset disposition
___ Election to expense or amortize organization expense
___ Amortization of business start-up costs
___ Election to claim straight-line depreciation for MACRS property
___ Research and experimental election
___ Recurring item exception from economic performance
___ Treatment of real property taxes
___ Expense $10,000 reforestation expenses
___ Qualifying disaster losses on preceding year's tax return
___ Replacement of casualty loss property compensated by insurance
___ Cancellation of debt, Sec. 108; adjustment of basis Sec. 1017
___ Below market interest rate
___ Carrying charges--election to capitalize (Sec. 266)
___ Charitable contributions (inventory, scientific or research equipment, etc.)
___ Long-term contracts, simplified cost-to-cost method
___ Statement of merger or division of partnership (Reg. Sec. 1.708-1)
___ Applicable asset acquisition? Form 8594
Copyright 2018 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject. Copyright is not claimed on material from U.S. Government sources.--ISSN 1089-1536
--Last Update 02/27/18