Form 1065-Schedule M-2 vs Schedule L

[Acecheck]

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?

[PatriciaV]

Generally, you don't need to file an amended partnership return if the corrections have no effect on the income reported to the partners. You can fix Schedule M-2 next year, usually with a Prior Period Adjustment. Or simply revise the prior year Schedule M-2 to match the prior year balance sheet. Be prepared to answer questions from the partners should they ask. 

Also, you might consider filing an extension next year in case you need to fix something after you first file the partnership return. The rules allow you to file a "superseding" return within the filing deadline (including extensions) rather than the formal process of an amended return.