Form 1125-a

What is form 1125-a?

Form 1125-A is a tax form used by businesses to report cost of goods sold and other expenses related to production that are deductible under the Internal Revenue Code. It provides a detailed breakdown of these expenses for accurate tax reporting.

What are the types of form 1125-a?

There are two types of form 1125-A: 1. Form 1125-A (Schedule A) - This is used by manufacturing, mining, wholesale trade, and transportation businesses to report the cost of goods sold and other expenses. 2. Form 1125-A (Schedule B) - This is used by farmers to report the cost of goods sold and other expenses related to agricultural production.

Form 1125-A (Schedule A)
Form 1125-A (Schedule B)

How to complete form 1125-a

Completing form 1125-A can seem daunting, but by following these steps you can easily navigate through the process:

01
Gather all necessary information and documents, such as receipts and invoices, related to cost of goods sold and other expenses.
02
Fill out the basic information section of the form, including the business name, address, and tax identification number.
03
Refer to your financial records and calculate the total cost of goods sold during the reporting period.
04
Carefully fill out the respective schedules based on your business type (Schedule A or Schedule B). Include all necessary details and ensure accuracy.
05
Attach any additional supporting documents, if required.
06
Review the completed form for any errors or missing information.
07
Sign and date the form.
08
Submit the form along with any required supporting documents to the appropriate tax authority.

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Video Tutorial How to Fill Out form 1125-a

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Questions & answers

Should an owner's compensation be recorded as an expense or in the Drawing account? If the enterprise is a sole proprietorship, the owner's compensation should be debited to the Drawing account. If the enterprise is a corporation, the owner's gross compensation should be debited to a salary expense account.
Enter on Line 7 the total compensation of all officers paid or incurred in the trade or business activities of the corporation.
Filers of Form 1120, 1120-C, 1120-F, 1120S, or 1065, must complete and attach Form 1125-A if the applicable entity reports a deduction for cost of goods sold. Generally, inventories are required at the beginning and end of each tax year if the production, purchase, or sale of merchandise is an income-producing factor.
The Formula for Cost of Goods Sold Beginning Inventory Costs (at the beginning of the year) Plus Additional Inventory Cost (inventory purchased during the year and other costs) Minus Ending Inventory (at the end of the year) Equals Cost of Goods Sold.
Enter on Line 7 the total compensation of all officers paid or incurred in the trade or business activities of the corporation.
Cost of goods sold (COGS) is an important line item on an income statement. It reflects the cost of producing a good or service for sale to a customer. The IRS allows for COGS to be included in tax returns and can reduce your business's taxable income.