Schedule M-1 ADDS back non-deductibles to tax-basis further reducing LOSS. Error: "Form 1120S p3-5: M-1, difference line - Schedule M-1 is out of balance by $-1433.00"

[nick@grbdesignbu]

Book income is negative (loss). Sched M-1 correctly shows tax basis Loss after removing non-deductibles. However it ADDS back (positive) non-deductibles to the (negative) tax basis loss to calculate book income but instead reduces the loss by that amount instead of increasing the lass to book income/loss.

[AliciaP1]

It would be helpful to have a TurboTax ".tax2022" file that is experiencing this issue.

You can send us a “diagnostic” file that has your “numbers” but not your personal information.  If you would like to do this, here are the instructions: 

At the top menu in the black line at the top of the page go to Online. 

1. From the menu, select Send Tax File to Agent. 
2. You will see a message explaining what the diagnostic copy is.  Click Send and then you will get a Token number. 
3. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

nick@grbdesignbu 

[nick@grbdesignbu · Accepted solution]

Thanks, but I think I solved the problem. I opened Forms and it displayed the M-1 schedule. I changed the sign on the non-deductible item from positive to negative. The recalculated book value was then correct and everything balanced. Review did not find any problems.

[toyiah]

Hi there, can you please assist me?

My Token is 1101074

Thank you!

[nick@grbdesignbu]

Here is how I fixed the problem that occurs in a LOSS scenario:

1) click on forms (upper right menu bar)

2) scroll down the left menu under "Form 1120S: S Corps" to "Sch M-1 Wks"

3) For each non-deductible expense item: remove the negative sign in the "Per Books" column

4) Click "Step-by-Step" in the upper right menu bar to return to the previous mode.

Disclaimer: I'm not a tax expert.

[AliciaP1]

Schedule M-1 provides the reconciliation between your book income and taxable income for the year.  Neither your income nor your balance sheet is in balance on your return.  You need to complete the interview process for the Balance Sheet section of your return before you review the Schedule M-1.

To get to this section in TurboTax Business please follow these steps:

1. Within your return click on the Federal Taxes tab
2. Click on Balance Sheet
3. Verify your End-of-Year Assets total and Continue
   • Based on your entry you are not required to complete this section, but you can still complete it (as you have marked)
4. Proceed through the whole process to balance your income and then enter your balance sheet as it shows on your company's books

@toyiah 

[toyiah]

That worked! Thank you!

[toyiah]

Thank you!