- 1). Choose the type of tax form you will file in the company settings. Your choices include 1040 (Sole Proprietor); Form 1065 (Partnership); Form 1120 Corporation; and Form 1120S (S Corporation). This will affect the Tax Line Assignments you can make to accounts.
- 2). Use the preset Charts of Accounts available through QuickBooks New Company Setup Assistant. The presets will provide a base of accounts and tax line assignments, though you can make changes and add more accounts.
- 3). Open the Chart of Accounts to create new expense and income accounts, and choose the "Tax Line" from the drop down menu to select the line where the amount needs to be entered. For instance, if you select "Schedule C: Car and Truck Expense," QuickBooks will track expenses from that account to enter on Schedule C of your federal tax return.
- 4). Verify you have a record of all tax-related income and expenses by selecting "Other Reports" from the "Reports" menu and choosing "Income Tax Summary." At the end of the report, double-click the amount for "Tax Line Unassigned (income/expense)."
- 5). Check the result in the report that opens for transactions that should be included on your tax return but where the tax line for the account was left unassigned. Select each of those accounts from your Chart of Accounts, click "Edit," and choose the appropriate line from the Tax Line list.
- 6). Choose "Income Tax Detail" from Other Reports if some of the amounts reported in the summary appear incorrect, such as a transaction entered under a wrong account. Change the account for any incorrectly distributed amounts.
- 7). Run the Income Tax Summary report again when you have made your corrections, and save as a PDF or print the report to use when you file your taxes.
Source...