Error: Schedule M-1 Items Worksheet: Book-TxExmpt In-OutState

[TaxGuru1]

I am getting below error for filing my S-Corp Business Tax Return: 

Error: Schedule M-1 Items Worksheet: Book-TxExmpt In-OutState If you want to use the Scheduled M-1 worksheet, please delete entries made on Schedule K, Line 16b and/or the Smart Worksheet above it and re-enter tax-exempt income items on the Schedule M-1 worksheet instead. 

I don't have anything to enter for Book-TxExmpt In-OutState, and it should not be giving me this error. I tried to manually overwrite Schedule K, Line 16b (which was auto filled by TurboTax), yet I am getting the same error. So, I put the value back in Schedule K, Line 16b. 

Please help. 

Thank you

[AliciaP1]

If you are correctly reporting amounts from forgiveness of a PPP loan to your business you will have information on line 16b.  There must also be an accidental entry for tax-exempt interest income under Investment Income.

To check this amount please:

1. Under the Federal Taxes tab in TurboTax Business, click Update next to Interest and dividend income under "Investment Income".
2. Click Continue past the Enter Taxable Interest Income page.
3. Click Continue past the U.S. Obligation Interest income page,
4. Clear any amounts that may be in the boxes on the Tax-Exempt Interest page and click Continue.

If there are amounts that are supposed to be under Tax-Exempt Interest as they were reported to the business, then you will need to choose to "complete my balance sheet" under the balance sheet section.

[TaxGuru1]

I followed these steps as well as redo everything again several times, yet I get the same error. There is definitely something wrong with the product. It is not letting me E-File before clearing this error. 

Please help me!

Thank you!

[graygeotech]

We are having exactly the same problem, and can't complete the e-file because of it.

- We have reported our PPP loan which is shown on line 16b

- We have no Tax-Exempt Interest or any other investment income to report, and I have checked that these boxes do not have an entry.

- This is our final return and the balance sheet is zero, so thought we don't need to file Schedule M-1? Previous years assets have been under $250,000.

[PatriciaV]

@graygeotech
Try entering zero for Tax-Exempt interest - in state under Direct Entry on the Schedule M-1 Items Worksheet (Forms Mode). This may resolve the e-filing issue you are experiencing - run Federal Review Error Check to be sure.

[Peppelarson]

We're having the same problem.  Setting the amounts to zero does nothing, as the error message repeats.

In theory we're supposed to add PPP forgiveness amounts here, but even when we do we continually get errors.

[DM007]

I use TurboTax Business desktop edition for my S Corp and I'm coming across the exact issue. Did anyone find a solution?

[TaxGuru1]

Hi AliciaP1 (Expert),

We don't have any amount of for interest or dividend earned and so have left all these sections blank. 

We have reported PPP loan which is showing on the Schedule K-1: line 16b. 

I have tried to manually clear these values, enter 0 in them and almost every possible way I could, but the TurboTax Business Desktop software doesn't not let me move pass this issue. It won't let me e-file nor allows me to print and mail option, as suggested by the support.

Please help ASAP. 

Thank you,

-----

1. Under the Federal Taxes tab in TurboTax Business, click Update next to Interest and dividend income under "Investment Income".
2. Click Continue past the Enter Taxable Interest Income page.
3. Click Continue past the U.S. Obligation Interest income page,
4. Clear any amounts that may be in the boxes on the Tax-Exempt Interest page and click Continue.

[TaxGuru1]

PPP Loan Forgiven amount is "Nontaxable income". However, while importing from QuickBooks, TurboTax Business questions this amount with a drop-down menu with the most logical option to select "Other Income". However, TurboTax adds this amount to Net Income and makes you pay taxes on this. 

How can we have TurboTax correct this QuickBooks import as "Nontaxable income" and fill in Schedule M-1 with adjusted Line 1 and Line 5 (w/ PPP Loan Forgiven amount)? And NOT put it in 1120S Line 5 on total other income? 

[Peppelarson]

Here's the workaround we tried that worked

1. Go to the Step-by-step section where TT asks about if you received PPP forgiveness, and answer 'no'
2. Go to the forms section, open the PPP form and then add the forgiven amount in there.
3. Add the PPP amount on the M-1 form (we added it under 'other permanent income items')
4. We then verified that the amount was listed on the K-1(s) in line 16b
5. Run the federal error check to make sure it works

I don't recall if we did step 2 before 3, or step 3 before 2.  If it doesn't work in the order listed above, swap 2 and 3 and try again.

[polignani]

This (suggestion by TTax expert) didn't work.       The manual deletion suggested by Peppelarson below did work..      This is a bug in the program.     Please have it fixed.

[tberry668]

Having this exact same issue. Peppelarson's solution worked. Thank you!

[iqtech]

Thanks, this method worked for me. You have to click a QuickZoom link to the PPP form from line 16b on the 1120S pages 3-5 form.

[jamiewatson12]

This workaround worked for me.  TT needs to get their house in order.  Do they not beta test this before it goes live???

[bgclonts]

I am having the same error.  I can't e-file because of this error.  I have done it several time.