1120s and work opportunity credit

[imjulier]

Does anyone know how the form 5884 (work opportunity credit) and 3800 (General Business Credit) are cliamed and passed through from an S-corp. I'm reading the instructions which are about as helpful as those japanese instructions on polacing slot A in slot B etc.

Thanks for any help.

Julie

[Margaret CPA in OH]

Add Form 5884 to the 1120S and complete line. Line 4 should flow through to Line 13g on Sch. K and on through Sch. K-1. I have a Research Inv. TC for a client and it has flowed perfectly for several years (but I do wish it would go away!). At the shareholder level, if appropriate, us 5884 or 3800. Follow the instructions.

[imjulier]

Using the 5884 with the 1120 S does make it flow to sch. K and through the K-1 to the taxpayer. But, the income in the 1120S is increased by the amount of the credit (Line 8 Wages is reduced by employment credits). The result is that the taxpayer gets the credit passed to them but also gets more in ordinary income. I must be doing something wrong since this obviously nets to zero....so where's the credit?

Julie

[Margaret CPA in OH]

Did you add the 3800 to the shareholder's 1040? There are tabs at the bottom to follow. Look at the credit summary. It looks as if the ninth item down is the Work opportunity credit. You will have to read the instructions to determine whether you must add the 5884 OR the 3800 to the individual returns. For the investment research credit, I had to switch after a couple of years. But it works very well. The data entered from the K-1(1120S) should flow through as a credit. The shareholder might be limited in taking the credit by having income that is too high. Check that. One client ended up losing nearly $50,000 because she retired before she could use the carryforward. On page 2 of 1040, bunny hop back from line 54 to see where it takes you.

[imjulier]

Thanks Margaret for the info and guidance. I've got it now.

Julie

[Margaret CPA in OH]

So glad to actually help someone. I'm usually the one asking but this is one I've worked on for several years. If the income is too high, check to see about carry back first. I don't know the credit you have but maybe they are all similar. I did for the client I mentioned and got back many thousands, but she still had carryover that, alas, can now never be used as she no longer has any income from the activity.