Originally Posted by pashi
#1;We're a new C-Corp (less than 1 yr old), no income, no employees. Product is web+mobile app. 85%+ of our expenses are contracted services for web development. Where do I enter these on form 1120? Do they go into Other deductions with schedule attached?
#2; Do they go into COGS (even though we have no goods sold to speak of)?
#3;Total amount of contracted work expense is <$7K and all the work was conducted abroad by non-US companies. Are there additional forms I need to file? Thank you!
#1; I guess on line 26; COGS in the service industry will be the cost of the persons / machines directly applying the service. The accounts affected will most likely be salaries and depreciation. Other items like electricity to run the machines and helpers to the main human service providers will usually be classified as operating expenses because they are indirect or overhead which is after COGS is calculated on the income statement to arrive at the net profit. Supplies used and consumed in the business are other exp.So, a service company can have a cost of goods sold as long as it has something physical along with it's service. The
#2;As mentioned above.
#3; When an American company has a subsidiary overseas, the sub is regarded as a foreign company and not an American one; Generally, a foreign sub of a U.S. corporation is not subjected to the current U.S. tax on its foreign source income unless that income is within the range of what the tax law calls Subpart F income, i.e., every type of passive investment income. Also included is the income of a foreign corporation owned and controlled by U.S. persons or entities derived from favorable pricing in transactions with related or affiliated U.S. entities or persons. foreign sub is by and large independent of the U.S. parent company in the sense that the sub has its own office and the facilities necessary to conduct business in the foreign country