What Is Included in Gross Income From an S Corp?
Gross income for an S corporation is calculated by adding any income from interest, stocks, dividends, rents or royalties to the total of all monies received on receipts or sales, and subtracting the cost of any of the goods sold.
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Gross Receipts or Sales
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This includes the money the corporation received for selling any items, any fees collected for services, or other charges that were paid to the company. If a product or service was paid for in advance, the income should be added to the gross sales for the year in which the money was received.
Interest Received
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If the corporation had money in a bank or other financial institution that earned interest, that falls under this category. This also includes interest payments that the S corporation receives for loans they have made to their clients if the corporation provides financing or charges interest on balances due.
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Stocks and Dividends
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This includes any taxable earnings that the S corporation may have made from the trading of stocks or bonds.
Other Included Amounts
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If the corporation received any rental income, that would fall into the rent category. Royalties are considered any compensation that is paid to an owner for the right to use his product, idea or words. For example, musicians receive royalties, or payments, every time someone downloads their songs on iTunes. For information on other forms of payment that are included, see the instructions for the federal tax form 1120S.
Cost of Goods Sold
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The cost of goods sold is calculated using a Schedule A for form 1120S. In order to calculate this amount, you need to know the price of inventory at the beginning of the year, the cost of any purchases made that year, the cost of labor, and any other miscellaneous costs. After adding these costs together, you then subtract the price of inventory remaining at the end of the year to come up with the cost of goods sold.
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