Small Corporations Say Good-bye to Schedules L and M
The IRS announced last week that beginning with tax year 2002, companies with less than $250,000 in gross receipts and less than $250,000 in assets can bypass filling out the Schedules L, M-1, and M-2 on their corporate income tax returns. Corporations who file Form 1120-A and who are under the $250,000 threshold no longer have to prepare Parts III and IV of their 1120-A.
The immediate result of this ruling will be a significant reduction in record-keeping and paperwork for small businesses. Many small businesses will no longer need to struggle to learn accounting rules. Instead they will be able to prepare their annual income tax return forms by using recordkeeping based on the information in their company checkbooks. According to an IRS news release on the new ruling, small businesses typically only prepare balance sheets based on the company's books because they are required to do so for tax purposes.
IRS Commissioner Charles O. Rossotti spoke favorably of the ruling: "These changes could save 2.6 million small businesses an estimated 61 million staff hours. This is staff time now spent preparing these forms. These changes will mean a significant financial savings for small businesses."
Many members of Congress also spoke glowingly of the new ruling. Senator John Kerry of Massachusetts, chairman of the Senate Small Business and Entrepreneurship Committee, referred to the ruling as one that will "benefit all Americans." Congresswoman Nydia Velazquez, D-NY, spoke of the "time wasted on paperwork" by small businesses who are required to fill out the tax forms. Congressman Don Manqullo of Illinois, chairman of the House Small Business Committee, referred to the "countless hours and endless amounts of money [spent by small businesses on] figuring their tax returns."