I have an S corp that started in 2018- small, simple but I must file Schedule L (BS) and M-2.
My AA/Retained earnings accounts matched my schedule L balance sheet line 24 retained earnings only 1 time. My tax accountant made errors in 2019 entering no starting basis. I also have had PPP that was mishandled, etc.
No surprise that my 2023 YE AAA(M-2) ending does NOT equal my Line 24 Retained earnings on the balance sheet yet again.
My TT live agent says these two numbers MUST match in order to file electronically through TT. So, I have two options:
1. fudge the balance sheet number to match my AAA ending balance from M-2 or
2. Call a outside CPA to do my return which would be annoying given I completed this return entirely myself except for this 1 issue.
What are your thoughts?
Also, should I download the desktop version and file? It's 1/2 or even less of the cost of online. I heard some folks could not file electronically with desk which is non-starter. I used desktop last year for 1040 and it was great. Easier to use than online by far.
If you can identify the source(s) of the discrepancies from prior year returns, you may adjust the current year return to report the beginning balance as it should be. Ideally, you would amend the prior year returns to correct Schedule M-2, but often that is not worth the effort. Retain your workpapers to document how you adjusted the balance, both for your records and in case the IRS has questions (unlikely).
Since you have nearly completed the S-Corp return, you should stick with it until you can e-file. Next year, buy the desktop software so you have more control and access to the forms.
I can't believe that Sch L Balance Sheet retained earnings and AAA must agree.
Those two accounts will rarely agree.
One example is that retained earnings will have a full deduction for any meals and entertainment, while the AAA will not.
Additionally, distributions will always impact retained earnings, but they cannot cause AAA to go negative.
The retained earnings follows book income, while AAA follows tax.
I think you need to get a second opinion from TT.
@PatriciaV the advice provided to the OP certainly can't be correct?
I am not on a Windows environment, so no access to TT Business.