I am doing an income statement for a homework assignment. It's for a bed and breakfast. How do I calculate the income taxes for this statement? In other words, what is the formula for calculating income taxes?
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Determine your operating income. This identifies your company's revenues before interest and tax payments. It should be on your income statement.
Access IRS Form 1120. This is the form that records corporate tax returns.
Look for the form online, at www.irs.gov. The IRS lists all forms on
its website, and you can download them to fill out or print them out
before you work with them
Record your operating income on page 1, line 28.
Record any net operating losses on line 29. You can use net
operating losses from prior years to offset the current year's profit.
Talk to your tax advisor or accountant about the best way to record and
use operating losses from year to year.
Subtract the net operating loss from the operating income. This is
your company's taxable income. The amount of tax you calculate on your
income depends on this number. Record the taxable income on line 30.
Locate the tax table. The tax table will show you how much tax
you need to deduct from your income.
Use the IRS formula to arrive at the tax amount for your company's
income. For example, if your taxable income is $500,000, you would
deduct $335,000 for a total of $165,000. Multiply the $165,000 number by
the 0.34 tax rate for a tax amount of $170,000.
Record the income tax that is payable to the IRS on line 31 of Form 1120