Additional Information: Jims Auto Body Inc Or LLC 1122 Sesam

Additional Informationjims Auto Body Inc Or Llc1122 Sesame Stree

Additional Information for Jim’s Auto Body Inc., or LLC, located at 1122 Sesame Street, New York, NY, 10002, includes details about ownership, financial transactions, depreciation, and tax obligations. Jim Jameson owns the company, and Fred is a partner holding a 50% stake in profits, losses, and capital. The business began operations on January 1, 2010, with an EIN assigned to the corporation. Jim’s Auto Body reports revenue of $28,000 from services, with total expenses amounting to $6,400, including salary, rent, utility, depreciation, insurance, and supplies, resulting in a net income of $21,000.

This document provides critical financial and operational data for the fiscal year, including depreciation calculations for equipment, quarterly estimated tax payments, and specific IRS requirements based on the company’s asset and revenue thresholds. The company's balance sheet shows total assets of $180,000, liabilities of $11,000, and shareholders' equity of $169,000. The depreciation of equipment, classified as 7-year property placed into service mid-year, uses the IRS half-year convention and relevant depreciation tables. The business's tax filings are influenced by the IRS stipulation that corporations and LLCs with less than $250,000 in total receipts and assets need not complete certain schedules.

Paper For Above instruction

The financial reporting and tax compliance of Jim's Auto Body Inc. illustrate fundamental aspects of small business taxation and asset management under U.S. federal tax laws. As a corporation with a partnership component, the proper classification and depreciation of assets, alongside accurate reporting of income and expenses, are essential for compliance and optimal tax strategy. This paper explores the critical components of the company's financials—focusing on depreciation, profit sharing, and IRS compliance—to provide a comprehensive understanding of small business taxation in the United States.

Introduction

Small businesses such as Jim's Auto Body Inc. play a vital role in the U.S. economy by providing specialized services while managing complex financial and tax obligations. Proper reporting involves understanding the classification of assets, income, expenses, and the specific IRS requirements for small entities. The company's financial data from 2015 offers a case study to analyze depreciation methods, profit-sharing arrangements, and filing requirements for LLCs and corporations with relatively modest revenues and assets.

Ownership Structure and Profit Allocation

Jim’s Auto Body operates as either a corporation or LLC, with Jim Jameson as the principal owner and Fred as a 50% partner. The partnership arrangement indicates thatprofits, losses, and capital are divided equally between Jim and Fred. In terms of tax filings, LLCs that are treated as partnerships are required to submit Schedule K-1, detailing each partner’s share of income and deductions; however, in this case, there isn't enough information to complete parts 2 K, L, or M of Schedule K-1. The profit-sharing agreement impacts how income is reported and taxed for each partner, emphasizing the importance of accurate internal recordkeeping.

Depreciation of Equipment

Equipment costing $55,000 and classified as 7-year property is a significant aspect of asset management and tax deductions for Jim’s Auto Body. Placed into service in the middle of the year, it’s subject to the IRS half-year convention, which assumes assets are placed into service evenly throughout the year, allowing for depreciation deduction in the year of acquisition. According to IRS Publication 946, the depreciation for 7-year property can be calculated using the IRS table for the applicable year, considering the half-year convention.

Specifically, since the equipment was placed into service in the middle of the year, only half-year depreciation applies. Using the IRS depreciation table for 2015, the depreciation expense for the first year is calculated by multiplying the cost basis by the percentage allowed for the half-year convention. With a cost of $55,000, the depreciation expense would be approximately $4,455 in the first year, reducing taxable income accordingly. Proper calculation ensures compliance with IRS rules and maximizes allowable deductions.

Tax Payments and Filing Requirements

Jim made four quarterly estimated tax payments of $800 each, totaling $3,200. These payments are essential for aligning tax obligations with income, especially for small businesses that do not have payroll withholding. The IRS presumes that corporations or LLCs with total receipts and assets below $250,000 are not required to complete Schedule L (balance sheet), M-1 (reconciliation of income), or M-2 (partner’s capital accounts). Accordingly, Jim’s Auto Body is justified in omitting these schedules from their tax return, simplifying the filing process.

Furthermore, the company's income of $28,000 and total expenses of $7,000 yield a net income of $21,000, which must be reported on the appropriate tax forms. For LLCs taxed as partnerships, Schedule K-1 is used to allocate income to partners, but given the limited data, parts 2 K, L, and M cannot be completed. Additionally, the corporate nature of Jim’s Auto Body suggests filing Form 1120, subject to corporate tax rules, including the treatment of guaranteed payments and officer compensation.

Balance Sheet and Financial Position

As of April 30, 2015, Jim’s Auto Body reported assets totaling $180,000, with cash holdings of $101,800, accounts receivable of $20,000, equipment worth $55,000, and supplies valued at $2,600. Liabilities totaled $11,000, comprising accounts payable and salary payable, leaving shareholders’ equity at $169,000. This financial position indicates a healthy liquidity ratio and capital foundation, but also underscores the importance of consistent depreciation and expense management for sustainable profitability and tax compliance.

Conclusion

In conclusion, Jim’s Auto Body exemplifies a small business navigating complex tax rules, asset management, and profit-sharing arrangements. Accurate depreciation calculations, understanding IRS filing thresholds, and diligent recordkeeping are critical for minimizing tax liabilities and ensuring compliance. As tax laws evolve, small business owners must stay informed and seek professional guidance to optimize their tax outcomes while maintaining adherence to federal requirements.

References

• Internal Revenue Service. (n.d.). Publication 946: How to Depreciate Property. Retrieved from https://www.irs.gov/publications/p946
• IRS. (2015). Instructions for Form 1120. Internal Revenue Service. Retrieved from https://www.irs.gov/forms-pubs/about-form-1120
• IRS. (2015). Schedule K-1 (Form 1065). Instructions. Retrieved from https://www.irs.gov/forms-pubs/about-schedule-k-1
• U.S. Small Business Administration. (2020). Small Business Taxes and Accounting. SBA.gov.
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• Brigham, E. F., & Houston, J. F. (2015). Fundamentals of Financial Management. Cengage Learning.
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