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Kentucky 720S PDF Template

The Kentucky 720S form is an important document for S corporations operating within the state. It serves as the S Corporation Income Tax and Limited Liability Entity Tax (LLET) Return, which businesses must file annually with the Kentucky Department of Revenue. This form reports the income, deductions, tax credits, and tax liabilities of S corporations, ensuring compliance with state tax regulations. If you're preparing to tackle your business taxes, understanding the 720S form is crucial. Click the button below to begin filling out your form confidently.

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Structure

The Kentucky 720S form is a comprehensive document designed by the Commonwealth of Kentucky Department of Revenue for S corporations to file their income tax and Limited Liability Entity Tax (LLET) returns. Its coverage spans a myriad of financial specifics from the taxable period start and end dates, the corporation's name, federal and state identification numbers to the number of shareholders and Qualified Subchapter S Subsidiaries (QSSSs) included in the return. Furthermore, this form allows entities to report different income sources, tax exemptions, credits, and deductions, thus providing a detailed financial picture for the tax period in question. It mandates attachments for various schedules, such as K-1s for shareholder income, credits, and deductions, as well as specific instructions for calculating LLET and income tax, highlighting its role in ensuring tax compliance and proper financial reporting. Additionally, the form accommodates changes in corporation details, accounting period adjustments, and amended returns, signifying its adaptability to various reporting scenarios. Its intricate components, including sections for ordinary income computation and shareholder-specific entries, underline the necessity of accurate and meticulous record-keeping for S corporations operating within Kentucky. Designed to cater to both initial and consecutive filings, the Kentucky 720S form integrates elements crucial for the systematic enforcement of tax obligations and facilitates a transparent dialogue between S corporations and the state's revenue department.

Kentucky 720S Sample

720S

Commonwealth of Kentucky

Department of Revenue

1900030256	KENTUCKY S CORPORATION
	INCOME TAX AND LLET RETURN

2019

See instructions.

Taxable period beginning _______________ , 20 ____ , and ending _______________ , 20 ____ .

ALLET

Exemption Code Enter Code

_____ _____

BIncome Tax Exemption Code Enter Code

_____ _____

CNumber of Shareholders (Attach K-1s)

_____________

Number of QSSSs Included in This Return (Attach Schedule)

_____________

D Federal Identiﬁcation

Kentucky Corporation/LLET

Number

__ __ – __ __ __ __ __ __ __

Account Number (Required)

__ __ __ __ __ __

Name of S Corporation

 Change of Name

Taxable Year Ending

M M

Y Y

Number and Street

State and Date of Incorporation

Principal Business Activity in KY

City

State

ZIP Code

Telephone Number

NAICS Code Number in KY

(See www.census.gov)

F Check if applicable:  Qualiﬁed investment partnership

 Final return (Complete Part IV)

G Provider 3-Factor

 Initial return

 Short-period return (Complete Part IV)

Apportionment Code

 LLC

 Change of accounting period

 Amended return (Complete Part V)

			PART I—LLET COMPUTATION											PART II—INCOME TAX COMPUTATION

1	Schedule L, Section D, line 1 (Page 6)				...	1			00		1	Excess net passive income tax			1		00
2	...............................Tax credit recapture					2			00		2	Built-in gains tax			2		00
3	Total (add lines 1 and 2)					3			00		2	Built-in gains tax			2		00
3	Total (add lines 1 and 2)					3		3	00		Tax installment on LIFO recapture			3		00
4	Nonrefundable LLET credit from							3			Tax installment on LIFO recapture			3		00
	.....................Kentucky Schedule(s) K-1					4			00		4	Total (add lines 1 through 3)			4		00
5	Nonrefundable tax credits										5	Estimated tax payments			5		00
	(attach Schedule TCS)					5			00		5	Estimated tax payments			5		00

											6	Extension payment			6		00
6	LLET liability (greater of line 3 less										6	Extension payment			6		00
	..........lines 4 and 5 or $175 minimum)					6			00		7	Prior year’s tax credit			7		00
7	Estimated tax payments					7			00		7	Prior year’s tax credit			7		00
								8			LLET overpayment from Part I,

8	Certiﬁed rehabilitation tax credit					8				00
8	Certiﬁed rehabilitation tax credit					8				00
9	Film industry tax credit					9			00			line 17			8		00
												line 17			8		00
10	Extension payment					10			00
10	Extension payment					10		9	00		Income tax paid on original return			9		00
11	Prior year’s tax credit					11		9		00				9		00
								10	Income tax overpayment on original

12	Income tax overpayment from
	Part II, line 13	........................................				12			00			return			10		00

13	LLET paid on original return					13			00
13	LLET paid on original return					13		11	00		Income tax due (lines 4 and 10 less
14	LLET overpayment on original							11			Income tax due (lines 4 and 10 less
14	LLET overpayment on original
	return					14			00			lines 5 through 9)			11		00
15	LLET due (lines 6 and 14 less lines 7										12	Income tax overpayment (lines 5
	through 13)					15			00		12	Income tax overpayment (lines 5
	through 13)					15			00
16	LLET overpayment (lines 7											................through 9 less lines 4 and 10)			12		00
	.............through 13 less lines 6 and 14)					16			00		13	Credited to 2019 LLET			13		00
17	Credited to 2019 income tax					17			00		13	Credited to 2019 LLET			13		00
17	Credited to 2019 income tax					17		14	00		Credited to 2019 interest			14
18	Credited to 2019 interest					18		14			Credited to 2019 interest			14
18	Credited to 2019 interest					18

19	Credited to 2019 penalty					19					15	Credited to 2019 penalty			15
20	...........................Credited to 2020 LLET					20			00		16	Credited to 2020 corporation income tax..			16		00
21	Amount to be refunded					21					16	Credited to 2020 corporation income tax..			16		00

											17	Amount to be refunded			17
											17	Amount to be refunded			17

			TAX PAYMENT SUMMARY											OFFICIAL USE ONLY
LLET				INCOME									P
1 LLET due				1 Income tax due									W
1 LLET due				1 Income tax due									2
	(Part I, Line 15)	$	.		(Part II, Line 11)		$					.	2
	(Part I, Line 15)	$	.		(Part II, Line 11)		$					.	0
													0
2	Interest	$	.	2	Interest		$					.	4

3	Penalty	$	.	3	Penalty		$					.	V
3	Penalty	$	___________________	3	Penalty		$	___________________					V
													A
4	Subtotal	$	.	4 Subtotal			$					.	A
4	Subtotal	$	___________________	4 Subtotal			$	___________________					L

TOTAL PAYMENT (Add Subtotals)						 $	.						#

41A720S (10-19)

Page 1 of 6

FORM 720S (2019)

*1900030257*

Page 2 of 6

PART III—ORDINARY INCOME (LOSS) COMPUTATION

1	Federal ordinary income (loss) (see instructions)	1	00
ADDITIONS
2	State taxes based on net/gross income	2	00
3	Federal depreciation (do not include IRC §179 expense deduction)	3	00
4	Related party expenses (attach Schedule RPC)	4	00
5	Other (attach Schedule O-PTE)	5	00
6	Total (add lines 1 through 5)	6	00
SUBTRACTIONS
7	Federal work opportunity credit	7	00
8	Kentucky depreciation (do not include IRC §179 expense deduction)	8	00
9	Other (attach Schedule O-PTE)	9	00
10	Kentucky ordinary income (loss) (line 6 less lines 7 through 9)	10	00

PART IV—EXPLANATION OF FINAL RETURN AND/OR SHORT–PERIOD RETURN

¨ Ceased operations in Kentucky		¨ Change in ﬁling status
¨	Change of ownership	¨	Merger
¨	Successor to previous business	¨	Other _________________________________________________

PART V—EXPLANATION OF AMENDED RETURN CHANGES

OFFICER INFORMATION

Attach a schedule listing the name, home address, and Social Security number of the vice president, secretary, and treasurer.

Has the attached ofﬁcer information changed from the last return ﬁled?			Yes	No
President’s Name			President’s Home Address
President’s Social Security Number

Date Became President	/	/
Date Became President

Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.

Sign	Signature of Ofﬁcer			Date
Sign
Here	Name of Ofﬁcer			Title

	Signature of Preparer			Date
Paid
Paid	Name of Preparer or Firm			ID Number
Preparer	Name of Preparer or Firm			ID Number
Preparer
Use
Use	Email and/or Telephone No.			May the DOR discuss this return with this preparer?
	Email and/or Telephone No.			May the DOR discuss this return with this preparer?
				¨ Yes ¨ No

	Include federal Form 1120S with all supporting	Refund	Kentucky Department of Revenue
Enclose	Include federal Form 1120S with all supporting	or No	P. O. Box 856905
Enclose	schedules and statements.	or No	P. O. Box 856905
	schedules and statements.	Payment	Louisville, KY 40285-6905
		Payment	Louisville, KY 40285-6905
	Check Payable: Kentucky State Treasurer	With	Kentucky Department of Revenue
Payment	Check Payable: Kentucky State Treasurer	With	P. O. Box 856910
Payment	E-Pay Options: www.revenue.ky.gov	Payment	P. O. Box 856910
	E-Pay Options: www.revenue.ky.gov	Payment	Louisville, KY 40285-6910
			Louisville, KY 40285-6910

41A720S (10-19)

FORM 720S (2019)

*1900030341*

Page 3 of 6

SCHEDULE Q— KENTUCKY S CORPORATION QUESTIONNAIRE

IMPORTANT: Questions 3—12 must be completed by all S corporations. If this is the S corporation’s initial return or if the S corporation did not ﬁle a return under the same name and same federal I.D. number for the preceding year, questions 1 and 2 must be answered. Failure to do so may result in a request

for a delinquent return.

1Indicate whether: (a)  new business; (b) successor to previously existing business which was organized as:

(1) corporation; (2) partnership; (3) sole proprietorship; or (4)  other __________________________________________

If successor to previously existing business, give name, address, and federal I.D. number of the previous business organization.

______________________________________________________

2If a foreign S corporation, enter the date qualiﬁed to do business in Kentucky. __ __ / __ __ / __ __

3List the following Kentucky account numbers. Enter N/A for any number not applicable.

KY Secretary of State Organization______________________

Nonresident Income Tax Withholding____________________

Employer Withholding ________________________________

Sales and Use Tax Permit ______________________________

Consumer Use Tax ____________________________________

Unemployment Insurance _____________________________

Coal Severance and/or Processing Tax __________________

4The S corporation’s books are in care of: (name and address)

______________________________________________________

5Are disregarded entities included in this return?  Yes  No. If yes, list name, address, and federal I.D. number of each entity.

______________________________________________________

6(a) Was the S corporation a partner or member in a pass-through entity doing business in Kentucky?  Yes  No. If yes, list name and federal I.D. number of each pass-through entity.

______________________________________________________

6(b) Was the S corporation doing business in Kentucky other than through its interest held in a pass-through entity doing business in Kentucky?  Yes  No

7Are related party costs per KRS 141.205(1)(l) included in this return ?  Yes  No. If yes, attach Schedule RPC, Related Party Costs Disclosure Statement, and enter any related party cost additions on Form 720S, Part III, Line 4.

8Is the entity filing this Kentucky tax return organized as a limited cooperative association per KRS Chapter 272A?  Yes  No

9Is the entity ﬁling this Kentucky tax return organized as a statutory trust or a series statutory trust per KRS Chapter 386A?  Yes  No

If yes, is the entity ﬁling this Kentucky tax return a series within a statutory trust?  Yes  No

If yes, enter the name, address, and federal I.D. number of the statutory trust registered with the Kentucky Secretary of State:

______________________________________________________

10Was this return prepared on: (a)  cash basis, (b)  accrual basis, (c)  other _____________________________________

11Did the S corporation file a Kentucky tangible personal

property tax return for January 1, 2020?  Yes  No

If yes, list the name and federal I.D. number of entity(ies) ﬁling return(s):______________________________________________

______________________________________________________

12Is the S corporation currently under audit by the Internal Revenue Service?  Yes  No

If yes, enter years under audit ________________________

If the Internal Revenue Service has made final and unappealable adjustments to the corporation’s taxable income which have not been reported to the department, check here  and file an amended Form 720S for each year adjusted. Attach a copy of the ﬁnal determination to each amended return.

41A720S (10-19)

FORM 720S (2019)

*1900030258*

Page 4 of 6

SCHEDULE K—SHAREHOLDERS’ SHARES OF INCOME, CREDITS, DEDUCTIONS, ETC.


SECTION A			Pro Rata Share Items				Total Amount

Income (Loss) and Deductions
1	Kentucky ordinary income (loss) from trade or business activities
	(page 2, Part III, line 10)					1		00
2	Net income (loss) from rental real estate activities (attach federal Form 8825)					2		00
3	(a)	Gross income from other rental activities		3(a)	00
	(b)	Less expenses from other rental activities
		(attach schedule)		(b)	00
	(c)	Net income (loss) from other rental activities (line 3(a) less line 3(b))				3(c)		00
4	Portfolio income (loss):
	(a)	Interest income				4(a)		00
	(b)	Dividend income				(b)		00
	(c)	Royalty income				(c)		00
	(d)	Net short-term capital gain (loss) (attach federal Schedule D and Kentucky
		Schedule D, if applicable)				(d)		00
	(e)	Net long-term capital gain (loss) (attach federal Schedule D and Kentucky
		Schedule D, if applicable)				(e)		00
	(f)	Other portfolio income (loss) (attach schedule)				(f)		00
5	IRC §1231 net gain (loss) (other than due to casualty or theft) (attach federal
	Form 4797 and Kentucky Form 4797)					5		00
6	Other income (loss) (attach schedule)					6		00
7	Charitable contributions (attach schedule)					7		00
8	IRC §179 expense deduction (attach federal Form 4562 and Kentucky
	Form 4562)					8		00
9	Deductions related to portfolio income (loss) (attach schedule)					9		00
10	...............................................................................Other deductions (attach schedule)					10		00

Investment Interest

11	(a)	Interest expense on investment debts	11(a)
	(b)	(1) Investment income included on lines 4(a), 4(b), 4(c), and 4(f) above	(b)(1)
	(b)	(2) Investment expenses included on line 9 above	(b)(2)

Tax Credits (see instructions)
12	Enter the applicable tax credit
12	Enter the applicable tax credit
	(a)	...................................................... _______________________________________	12(a)
	(b)	...................................................... _______________________________________	(b)
	(c)	...................................................... _______________________________________	(c)
	(d)	...................................................... _______________________________________	(d)
	(e)	...................................................... _______________________________________	(e)

41A720S (10-19)

FORM 720S (2019)

*1900030259*

Page 5 of 6

SCHEDULE K—SHAREHOLDERS’ SHARES OF INCOME, CREDITS, DEDUCTIONS, ETC.

SECTION A—continued		Pro Rata Share Items		Total Amount

Other Items
13	(a) Type of IRC §59(e)(2) expenditures >		13(a)
	(b) Amount of IRC §59(e)(2) expenditures		(b)		00

14	Tax-exempt interest income		14		00
15	Other tax-exempt income		15		00
16	Nondeductible expenses		16		00
17	Total property distributions (including cash) other than dividends reported on
	line 19 below		17		00
18	Other items and amounts required to be reported separately to shareholders
	(attach schedule)		18
19	Total dividend distributions paid from accumulated earnings and proﬁts		19		00


SECTION B—LLET Pass-through Items (Required)

1	Kentucky gross receipts from Schedule L, Section A, Column A, line 2		1		00

2	Total gross receipts from Schedule L, Section A, Column B, line 2		2		00

3	Kentucky gross proﬁts from Schedule L, Section A, Column A, line 5		3		00

4	Total gross proﬁts from Schedule L, Section A, Column B, line 5		4		00
5	Limited liability entity tax (LLET) nonrefundable credit from page 1, Part I, the
	total of lines 4 and 6, less $175		5		00
SECTION C—Apportionment Pass-through Items

1	Kentucky receipts from Schedule A, Part I, line 1		1		00

2	Total receipts from Schedule A, Part I, line 2		2		00

SECTION D—Apportionment for Providers (KRS 141.121 (1)(e))

1	Kentucky property from Schedule A, Part I, line 5		1		00

2	Total property from Schedule A, Part I, line 6		2		00

3	Kentucky payroll from Schedule A, Part I, line 8		3		00

4	Total payroll from Schedule A, Part I, line 9		4		00

41A720S (10-19)

FORM 720S (2019)

*1900030277*

Page 6 of 6

SCHEDULE L—LIMITED LIABILITY ENTITY TAX COMPUTATION

Check this box and complete Schedule L-C, Limited Liability Entity Tax—Continuation Sheet, if the corporation or limited liability pass-through entity ﬁling this tax return is a partner or member of a limited liability pass-through entity or general partnership doing business in Kentucky. Enter the total amounts from Schedule L-C in Section A of this schedule.

SECTION A—Computation of Gross Receipts and Gross Proﬁts

			Column A		Column B
			Kentucky		Total

1(a)	Gross receipts less returns and allowances	1(a)		00		00
(b)	Kentucky statutory gross receipts reductions (see instructions)	(b)		00
2	Adjusted gross receipts (line 1(a) less line 1(b))	2		00		00
3(a)	Cost of goods sold (attach Schedule COGS)	3(a)		00		00
(b)	Kentucky statutory cost of goods sold reductions (see instructions) ....	(b)		00
4	Adjusted cost of goods sold (line 3(a) less line 3(b))	4		00		00
5	Gross proﬁts (line 2 less line 4)	5		00		00

If Section A, Column B, Line 2 or 5 is $3,000,000 or less,

STOP and enter $175 in Section D, line 1 below.

SECTION B—Computation of Gross Receipts LLET


1 If gross receipts from all sources (Column B, line 2) are greater than
$3,000,000, but less than $6,000,000, enter the following:
(Column A, line 2 x 0.00095) –		[		$2,850 x ($6,000,000 – Column A, line 2)	]
		[		$3,000,000	]
but in no case shall the result be less than zero						1	00
2 If gross receipts from all sources (Column B, line 2) are $6,000,000
or greater, enter the following: Column A, line 2 x 0.00095						2	00
3 Enter the amount from line 1 or line 2						3	00

SECTION C—Computation of Gross Proﬁts LLET

1 If gross proﬁts from all sources (Column B, line 5) are greater than
$3,000,000, but less than $6,000,000, enter the following:
(Column A, line 5 x 0.0075) –	[		$22,500 x ($6,000,000 – Column A, line 5)		]
	[			$3,000,000	]
but in no case shall the result be less than zero						1	00
2 If gross proﬁts from all sources (Column B, line 5) are $6,000,000
or greater, enter the following: Column A, line 5 x 0.0075						2	00
3 Enter the amount from line 1 or line 2						3	00

SECTION D—Computation of LLET

1Enter the lesser of Section B, line 3 or Section C, line 3 here and on Page 1, Part I, Line 1. If less than $175, enter the minimum of $175 here and on

Page 1, Part I, line 1

41A720S (10-19)

Free Kentucky 720S File

Form Features

Fact	Description
Basic Purpose	The 720S form is used by S corporations in Kentucky for income tax and Limited Liability Entity Tax (LLET) returns.
Governing Laws	Kentucky Revised Statutes (KRS) Chapter 141 governs the taxation of S corporations and the requirements for the 720S form.
Required Attachments	The form mandates attaching Federal Form 1120S, K-1s for each shareholder, and other schedules as necessary.
Dual Reporting	Besides reporting income, the 720S form also requires computation and reporting of the LLET.
Tax Period	Corporations must indicate the taxable period’s beginning and ending dates, adapting the form for different fiscal years.
Special Conditions	Includes sections for indicating changes in name, state of incorporation, accounting periods, and final or amended returns.
Apportionment and Credits	The form includes detailed sections for the apportionment of income and non-refundable tax credits.
Filing Deadlines and Payment	Specific due dates are set for filing and paying any owed taxes, with options provided for extension payments and electronic payment.

Detailed Steps for Using Kentucky 720S

Filling out the Kentucky 720S form is an important step for S corporations operating within the state to comply with tax obligations. This task can be complex, requiring attention to detail and an understanding of tax regulations. The Kentucky 720S form is used by S corporations to report income, gains, losses, deductions, credits, and to calculate their Kentucky tax liability and Limited Liability Entity Tax (LLET). Properly completing and submitting this form ensures that the corporation remains in good standing and avoids potential penalties for non-compliance. To help simplify the process, the following steps have been outlined:

Begin with the taxable period: Enter the start and end dates of the fiscal year for which you are filing.
Fill in both the "ALLET Exemption Code" and "Income Tax Exemption Code" if applicable to your corporation.
For "Number of Shareholders" and "Number of QSSSs Inlcuded in This Return," enter the respective amounts.
Provide the Federal Identification Number and the Kentucky Corporation/LLET Account Number.
Detail the S corporation name, any changes in name, the taxable year ending, and the address including number and street, city, state, and ZIP code.
Note the state and date of incorporation, principal business activity in KY (using the NAICS code), and telephone number.
Indicate if any of the checkboxes apply, such as "Qualiﬁed investment partnership," "Final return," "Initial return," "Short-period return," "LLC," "Change of accounting period," or "Amended return."
Jump to Part I—LLET Computation and fill out the applicable lines based on your financial information.
In Part II—Income Tax Computation, calculate the income tax due by adding the excess net passive income, tax credit recapture, built-in gains tax, and tax installment on LIFO recapture as applicable.
For Part III—Ordinary Income (Loss) Computation, report federal ordinary income (loss) and make necessary adjustments listed from items 2 through 10.
Complete Section A of Schedule K, detailing each shareholder's share of income, credits, deductions, etc.
If the form is a final, amended, short-period, or initial return, complete Part IV or V as applicable, offering explanations for the return status change.
Sign and date the return. If prepared by someone other than the taxpayer, the preparer's information, including signature, must also be included.
Include federal Form 1120S with all supporting schedules and statements.
Lastly, select the appropriate payment method and address for mailing the completed form and any payment due.

After properly completing the Kentucky 720S form and ensuring all relevant schedules and documentation are attached, the next step involves submitting the form to the Kentucky Department of Revenue. Make sure to follow the submission guidelines closely, including deadlines, to ensure your S corporation complies with Kentucky tax laws. Timely filing and accurate completion of the form help avoid potential penalties and keep your corporation in good standing within the state.

Obtain Clarifications on Kentucky 720S

What is the Kentucky 720S form used for?

The Kentucky 720S form is utilized by S corporations for filing their annual income tax and Limited Liability Entity Tax (LLET) return in Kentucky. This form allows such entities to report their income, deductions, credits, and taxes due to the state. S corporations are businesses that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. The Kentucky 720S form ensures that the income of the S corporation is taxed at the shareholder level rather than at the corporate level, in alignment with federal tax treatment of S corporations.
Who needs to file the Kentucky 720S form?

Any S corporation that conducts business in Kentucky or derives income from Kentucky sources is required to file the Kentucky 720S form. This includes S corporations that are physically located in Kentucky as well as those outside of Kentucky with Kentucky shareholders or business activities. It's important for such entities to report their income accurately and provide all necessary schedules and attachments, including Schedule K-1s for each shareholder.
What are the deadlines for filing the Kentucky 720S form?

The filing deadline for the Kentucky 720S form is the 15th day of the fourth month following the end of the corporation's tax year. For most S corporations that operate on a calendar year, the due date would be April 15th of the following year. If the due date falls on a weekend or legal holiday, the deadline extends to the next business day. For those who need more time to file, Kentucky allows for an extension, but it's crucial to note that an extension to file is not an extension to pay any taxes owed.
Are there any specific codes that need to be entered on the Kentucky 720S form?

Yes, there are specific codes required on the Kentucky 720S form for both the ALLET Exemption Code and the Income Tax Exemption Code, along with others. The form also asks for the North American Industry Classification System (NAICS) code that best describes the principal business activity in Kentucky. It's essential for S corporations to use the correct codes to ensure proper handling of their tax return and to avoid processing delays.
What schedules or additional forms might need to be attached to the Kentucky 720S form?

In addition to the main form, S corporations may need to attach various schedules and forms, including but not limited to: Schedule K-1s for each shareholder, detailing their share of the corporation's income, deductions, and credits; Schedule Q if answering specific questions about the corporation is required; and other schedules for deductions, credits, and additional income items as relevant. Furthermore, corporations should include their federal Form 1120S and all supporting federal schedules and statements to ensure compliance and proper tax treatment.
How can an S corporation amend a previously filed Kentucky 720S form?

To amend a previously filed Kentucky 720S form, the S corporation must complete a new Form 720S indicating that the filing is an amended return. This is done by checking the appropriate box on the form. The amended return should correct any errors and provide accurate information as required. Additionally, it's important to attach an explanation of the changes being made and, if applicable, any changes to the corporation's federal income tax return should be noted. Including a copy of the federal amendment or a statement detailing the federal changes can help expedite the processing of the amendment.

Common mistakes

Filling out the Kentucky 720S form, an important document for S corporations reporting income tax and Limited Liability Entity Tax (LLET), is a task that requires careful attention to detail. Unfortunately, many people make errors that can result in processing delays or incorrect tax liabilities. Below are nine common mistakes to avoid:

Incorrect or Missing Tax Period Dates: All S corporations must clearly indicate the start and end dates of the taxable period they are reporting for. Omissions or mistakes here can lead to confusion regarding the applicable tax year.
Failing to Enter the ALLET and Income Tax Exemption Codes: Each S corporation should know and correctly enter its exemption codes for both the ALLET and the income tax. Incorrect codes can lead to improper tax calculations.
Inaccurate Number of Shareholders Reported: Each Kentucky 720S form must include the precise number of shareholders, along with attached Schedule K-1s for each. Missing or misreported shareholder counts can impact the tax liability.
Errors in Federal and Kentucky Identification Numbers: It is vital to correctly enter the Federal Identification Number and Kentucky Corporation/LLET Account Number. These identifiers are crucial for the Department of Revenue to process returns accurately.
Not Indicating Changes in Name or Filing Status: If the S corporation underwent a name change or a shift in filing status since its last return, this must be indicated on the form. Neglecting to report such changes can cause discrepancies and potential processing holdups.
Overlooking Attachments: Specific lines and sections of the form require attachments, like federal Form 1120S, Schedule K-1s, and others, for detailed reporting. Failing to attach these documents can lead to incomplete returns and possible penalties.
Incorrect LLET Computation: Part I of the form requires accurate computation of LLET liability or exemption. Common mistakes include incorrect calculations and misunderstanding of minimum tax requirements.
Miscalculations in Income Tax Computations: Part II demands precise calculations of income tax, including deductions, credits, and payments. Inaccuracies here can result in either underpayment or overpayment of taxes.
Misinterpretation of Schedules and Additional Documents: Schedules K, L, and others require detailed financial information about income, deductions, credits, and shareholders. Misinterpreting what needs to be reported in these schedules can cause critical errors in tax reporting.

Avoiding these mistakes requires a thorough review of the form's instructions and double-checking all entered information. If in doubt, consulting with a tax professional familiar with Kentucky's specific requirements for S corporations can help ensure that the Kentucky 720S form is filled out correctly and completely.

Documents used along the form

Filing your Kentucky S Corporation Income Tax and LLET Return is a multifaceted process that often requires additional forms and documents to accurately report and calculate your taxes. Understanding each of these supplementary documents can streamline your filing process, ensuring that your submission is complete and compliant with Kentucky tax laws. Here are some of the forms and documents commonly used alongside the Kentucky 720S form:

Form 720S Schedule K-1: Used to report each shareholder’s share of income, deductions, and credits. It ensures that the corporation's income is correctly reported and taxed on the shareholders' individual returns.
Form 720S Schedule L: Required for reporting adjustments to income and contains sections for LLET computation. It's essential for corporations subject to the Limited Liability Entity Tax.
Form 720S Schedule Q: A questionnaire that gathers additional information about the S corporation, including its activities and status in Kentucky. It helps in determining the tax obligations of the corporation.
Federal Form 1120S: The U.S. Income Tax Return for an S Corporation. It must be submitted with Form 720S to ensure consistency between federal and state tax reporting.
Federal Schedule K-1 (Form 1120S): Reports each shareholder's share of the corporation's income, credits, and deductions on their personal tax returns. This form aligns the federal and state tax obligations of the shareholders.
Schedule RPC (Related Party Costs Disclosure Statement): Required if the corporation has transactions with related parties. It aids in identifying and documenting transactions that might impact the corporation’s tax liability.
Schedule O-PTE (Other Additions and Subtractions for Pass-Through Entities): Used for adjusting the income calculation by adding or subtracting specific items not included in the federal income calculation.
Form 4562: Depreciation and Amortization Report. Kentucky requires a state version of this form if the corporation is claiming depreciation or amortization deductions.

Each document serves a unique purpose in the process of reporting your S Corporation's income and calculating its taxes. Timely and accurate submission of these forms, along with the Kentucky 720S, ensures compliance with state regulations and contributes to a smoother tax filing experience. It is important to review each document carefully and consult with a tax professional if you are unsure about any requirements or calculations.

Similar forms

The Form 1120S, U.S. Income Tax Return for an S Corporation, is quite similar to Kentucky's Form 720S as they both cater to S corporations, albeit at different levels of government. Form 1120S is used by S corporations to report their income, gains, losses, deductions, credits, and other financial information to the federal government. Like the 720S, it also includes schedules for reporting shareholder's proportionate shares of the corporation's income and losses, ensuring that the income is only taxed at the individual shareholders' level, not at the corporate level.

Another form with a notable resemblance to Form 720S is the Form 1065, U.S. Return of Partnership Income. Although Form 1065 is designed for partnerships and not S corporations, it serves a parallel purpose by reporting a partnership's financial information. This includes income, deductions, gains, and losses. Its schedules are used to report each partner's share of the partnership's income or loss, similar to how Form 720S includes schedules for shareholders' shares of income and deductions.

The Kentucky Form 741, Kentucky Fiduciary Income Tax Return, also shares similarities with Form 720S, particularly in its function of allocating income to beneficiaries or shareholders. While Form 741 is specifically for estates and trusts detailing income, deductions, and credits, it parallels the 720S in its role of ensuring income is taxed at the beneficiary level, following the principle of pass-through taxation similar to that applied in S corporations.

Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, though primarily focusing on unemployment tax, shares a commonality with Form 720S in its requirement for employer identification numbers (EIN) and the reporting of business activity within a specific period. Both forms necessitate detailed business operation information, even though for different aspects of tax.

The Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc., is directly analogous to parts of the Kentucky Form 720S that deal with allocating the S corporation's income and deductions to its shareholders. The Schedule K-1 serves to report each partner's share of a partnership's income, deductions, and credits, mirroring the 720S's role in distributing the S corporation's financial activities among its shareholders.

Form 990, Return of Organization Exempt From Income Tax, while primarily for tax-exempt organizations, aligns with the 720S in its structure of reporting income, expenses, and contributions. Both are comprehensive, requiring detailed financial disclosures and adherence to specific tax codes. Form 990 ensures transparency and accountability for nonprofit organizations, similarly to how the 720S regulates S corporations' financial reporting.

The Kentucky Form LLET (Limited Liability Entity Tax), which is actually a component of the Form 720S, but can stand as a distinct requirement for certain business entities. It focuses on the minimum business tax obligation in Kentucky, emphasizing the entity's gross receipts or profits, paralleling the broader income and tax liability reporting on the 720S.

Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation, is closely similar to sections of the 720S that focus on income or losses from rental real estate. This form is used by partnerships and S corporations to report income and deductible expenses from rental properties, reflecting a specific aspect of the broader financial reporting covered in the 720S.

Form CT-3, the New York State Corporation Franchise Tax Return, is akin to the Kentucky Form 720S as both are state-level corporate income tax returns. The CT-3 serves the same primary purpose for New York-based corporations, including S corporations, requiring detailed financial data to calculate tax liability, similar to the Kentucky form's requirements for S corporations operating within Kentucky.

Finally, the Form 2553, Election by a Small Business Corporation, shares a preparatory kinship with the 720S. While not a tax return, it is used by corporations to elect S corporation status under the Internal Revenue Code. This election directly influences the relevance and necessity of filing the 720S for Kentucky-based entities, establishing the foundation for the pass-through taxation mechanism that underlies the 720S's reporting structure.

Dos and Don'ts

Filing your Kentucky 720S Form correctly is crucial to avoid unnecessary complications with your S corporation's tax returns. Here are some tips to ensure that you do it right:

Do ensure you have all the relevant documents and information before you start filling out the form. This includes your federal tax return, details of income, deductions, credits, and any other pertinent financial information.
Don't forget to check the box that applies to your return status. Whether it's an initial return, amended return, final return, or any other status, selecting the correct option is vital for processing your return accurately.
Do attach all required schedules and supporting documentation, such as Schedule K-1s for each shareholder and any other schedules outlined in the form’s instructions. Omitting these can lead to processing delays or audits.
Don't leave any sections incomplete. If a section does not apply to your corporation, ensure you enter "N/A" (not applicable) instead of leaving it blank to avoid any misunderstandings.
Do review the return for accuracy before submission. Verify the federal identification number, the Kentucky Corporation/LLET Account Number, and all financial figures. Accidental errors can result in discrepancies and potential penalties.
Don't miss the deadline for filing the form. Timely submission is essential to avoid penalties and interest charges. If necessary, file for an extension to give you additional time to gather information.
Do consider consulting with a tax professional if you're uncertain about any aspects of your return. Kentucky tax laws can be complex, and professional guidance can help ensure your form is completed correctly.

By following these dos and don'ts, you can navigate the complexities of the Kentucky 720S form more effectively, ensuring your S corporation remains in good standing with the Kentucky Department of Revenue.

Misconceptions

When dealing with the Kentucky 720S form, several misconceptions can lead to confusion and potential errors in filing. Understanding these misconceptions is essential for taxpayers to ensure their S corporations comply with Kentucky tax law.

Misconception 1: The Kentucky 720S form is only for income tax reporting. While the Kentucky 720S form does involve reporting income tax, it also includes the calculation and reporting of the Limited Liability Entity Tax (LLET). The distinction is crucial because the LLET is a separate consideration from income tax, and it has a minimum threshold requirement.
Misconception 2: All S corporations are exempt from Kentucky income tax. While certain income tax exemptions may apply to S corporations, this does not mean they are completely exempt from filing or paying taxes in Kentucky. The specifics of exemptions should be meticulously reviewed, as eligibility criteria apply, and certain exemptions specifically relate to income types or business activities.
Misconception 3: The number of shareholders and QSSSs does not impact tax liabilities. The number of shareholders and Qualified Subchapter S Subsidiaries (QSSSs) can indeed affect tax computations and obligations. Including accurate information in these sections is essential for correct tax calculation and reporting.
Misconception 4: An S corporation needs to file the Kentucky 720S form only if it operates for a full year. This form must be filed even if the S corporation did not operate for the entire year. Short-period returns are required if the S corporation began or ceased Kentucky operations within the tax year. Furthermore, final returns are necessary when the S corporation is dissolved or withdraws from Kentucky.

Understanding and addressing these misconceptions can help ensure that S corporations file their Kentucky 720S forms accurately, thereby avoiding potential penalties and complications with the Kentucky Department of Revenue.

Key takeaways

Filing the Kentucky 720S form, designated for S corporations operating within the state, is a crucial annual task that demands attention to detail and an understanding of specific requirements. Here are key takeaways to ensure compliance and optimize the filing process:

The Kentucky 720S form is used by S corporations for reporting income tax and the Limited Liability Entity Tax (LLET) to the Kentucky Department of Revenue.
A taxable period for the Kentucky 720S form begins and ends on the dates filled in by the corporation, adhering to the fiscal or calendar year they operate under.
Both the number of shareholders and the number of Qualified Subchapter S Subsidiaries (QSSSs) included in the return are required fields, emphasizing the need for accurate shareholder records and attachments such as K-1s.
The form asks for identification numbers such as the Federal Identification Number and the Kentucky Corporation/LLET Account Number, which are essential for tracking the corporation's tax obligations within the state.
Careful attention is required for indicating exemptions under the ALLET and Income Tax Exemption Codes, as incorrect codes can lead to processing delays or errors in tax liability assessment.
For corporations making changes such as name alterations or adjustments to the accounting period, specific boxes need to be checked off to inform the Department of Revenue about these changes.
Part I and II of the form focus on the computation of LLET and income tax, respectively, necessitating precise financial data to ensure correct tax calculation and credit application.
Sections detailing the Ordinary Income (Loss) Computation and information about the corporation’s operational status, such as final or short-period returns, require thorough documentation and substantiation.
The completion and attachment of Schedule K—Shareholders’ Shares of Income, Credits, Deductions, Etc., is mandatory, highlighting the need for S corporations to maintain detailed records of each shareholder’s proportionate share of the fiscal outcomes.
S corporations need to be prepared to provide additional information upon request, including federal forms like 1120S and detailed schedules for deductions, income, and tax credit claims associated with their Kentucky operations.

Being diligent in the completion of the Kentucky 720S form is not just about compliance. It also represents an opportunity for S corporations to systematically review their financial health, operational efficiency, and tax planning strategies. Therefore, understanding these key aspects can significantly ease the bureaucratic process while ensuring that the corporation fulfills its state tax obligations effectively and efficiently.

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