Our partnership has under $1MM in assets and $250K in sales so Schedule M-2 and Schedule L on Form 1065 is technically not required to be provided per the IRS, however TurboTax populated this and this was filed with the IRS.
Our Schedule L on Form 1065 (our book basis) has the correct partner's capital account amount which reflects a large capital distribution back to the partners. Unfortunately, this was not updated on Schedule M-2 (our tax basis). So right now our capital account on Schedule M-2 is over stated compared to our partner's capital account on Schedule L. Normally a discrepancy will require a letter or explanation to the IRS to explain the book to tax differences but in our case both schedules (Schedule L and Schedule M-2) were not "required".
Looked into filing a amended return but Form 1065X does not have place on the form to file an amended Schedule M-2 to update the partner's capital account.
What should I do about this discrepancy between Schedule L and Schedule M-2 which was "optional" but was filed with the IRS by TurboTax anyways? Or what is the best way to handle/update this in our 2025 taxes?
