If the income is not taxable, then you don't enter it on your business tax return form 1120-S as taxable income. You enter it on page 4 of form 1120-S as Other Tax Exempt Income. If your receipts for the year were less than $250,000 and your assets at the end of the year are less than $250,000, you do not have to submit a balance sheet. Just check the boxes on line 11 on form 1120-S page two.
If you need to submit a balance sheet, use schedule M-1 and M-2 on page five of form 1120-S to reconcile your tax income to your book income and balance sheet.
@turtle11220 @AmeliesUncle
[Edit 1/25/21 1:17PM PST]
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