Timing differences

9 replies
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Turbo Tax calculated a timing difference on my return last year and it is carrying over on this year's return. I have not idea what it is for. We use cash accounting. What are possible reasons for a timing difference? Should the amount show up on multiple years? I know that's kind of vague but any help is appreciated.

Rick19744Answer

Level 13

It actually was 2020. It has been showing up in 2021 and 2022 as an accumulated tax/book timing difference on the M2. Ironically my retained earnings weren't off until this year so I didn't notice it. Now I'm unsure as to how to correct it.

I'm a little confused on your reply:

The M-2 tracks actual S corp pass through items on an annual and then cumulative basis
Where exactly is this amount showing up?
In the year of forgiveness, this amount should have been reflected on the M-2 column (a) line 3
- This then arrives at a net figure on line 8 balance at the end of the year
- Then the following year line 8 amount should be reflected in column (a) line 1
- At this point, the figure is gone as it is just a part of the cumulative AAA

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

Mike9241

Level 15

do you use quickbooks or other financial software for your business activities?

then its possible you're using the accrual method to see how you are actually doing financially but legally switch to cash basis when doing your tax returns.

Mike9241

CountingcatAuthor

Level 4

Thank you for the reply. We are using Quickbooks and set it up for cash accounting. The item, I discovered is the amount of forgiveness from the PPP we received. Should that amount remain on the return beyond the year in which it was received or should I remove it?

Rick19744

Level 13

A couple of questions:

How is the PPP reflected on QB?
- Essentially, what was the journal entry when you received the funds
When did the forgiveness occur?
- Based on the limited facts, I'm assuming 2022?
What did you do in QB once the "loan" was forgiven?
What type of entity structure are we dealing with?

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.