Form 1065 Partners Capital Account not balancing

[mlbs11]

I am using Turbotax Business.  In Form 1065, my Partners' end of tax year capital accounts from Schedule L line 21 do not match the Balance at end of year from Schedule M-2.  To attempt to research, I went to Forms then chose Form 1065 pg 4-5.  I selected the cell for Partner' capital accounts End of Year balance then clicked on the magnifying glass to go to supporting forms.  The supporting form balance does not match.  (Note: my Schedule K-1 Capital Account Analysis matches Schedule M-2, not Schedule L).

[Anonymous_]

Balance sheet issues are very difficult, if not impossible, to troubleshoot without the user posting a lot of details (basically, almost all of the figures entered in that section).

[Mike9241]

apparently, schedule L capital accounts balance with all the k-1s at the start of the year. the 2022 income/loss allocation should be automatic. however, if you had guaranteed payments they may have been entered in the wrong area. other than that it would probably be misentering either capital contributions or withdrawals. look at how much you're off and then look for an entry of that amount.  this may not solve your issue as noted we don't have access to the file. 

[Rick19744]

@mlbs11 You are good to go based on your facts.

This is confusing since the IRS mandated that the K-1 reflect a tax capital account basis.

As a result, Schedule L is based on your books and records and Schedule M-2 is based on the changes during the tax year in the partners' tax basis capital.

So if your Schedule K-1 capital account analysis agrees to Schedule M-2, you are good to go.

Schedule L and Schedule M-2 will generally not agree.

[Pazzy]

I am having the same problem. This is definitely helpful to hear that the info in Schedule L and M2 may not agree. My main concern is that to resulting Capital Account Balance on the Partner's Schedule K1's (both beginning and ending) do not match my books even though I have made an effort to balance the books each year, including "Closing prior year earnings to partner equity". Can you explain why the books would not match the info on the M2 (same as the total of the K1's)  would not match the books?

[Rick19744]

@Pazzy this is most likely the result of book to tax differences; known as M-1's.