dcrews02
New Member

How do I reconcile Quickbooks net income with Turbotax net income?

I have an S-corp using cash accounting.  My beginning inventory for 12/31/16 was $ 8,468.  I don’t use quickbooks inventory for tracking purposes and my physical count of inventory on 12/31/17 was $ 15,582.  I created a journal entry ( $ 7,114) to adjust year end 12/31/17 inventory to the new amount $ 15,582.

My Quickbooks P&L shows a COGS of $ 33,795.  Turbo Tax subtracts the $ 7,114 increase in inventory from my COGS making my Turbo Tax COGS $ 26,681.  Since this decreases my COGS my Turbo Tax Net Income goes up by $ 7,114, to $ 16,660. 

During the Reconciliations and Balance Sheet step of turbo tax (my state requires a balance sheet for tax purposes)  the two items that keep my book income from being equal to my turbo tax income are the     $ 7,114 inventory difference and a $1,508 disallowed meals & entertainment deduction. 

Turbo tax automatically inserted the disallowed meals deduction on the 1120S Schedule M-1 worksheet and my question is do I enter the inventory adjustment $ 7114 as an expense item on the M-1 worksheet? Turbo Tax gives you a step to enter what it considers uncommon book/tax differences.  Is this where I should enter the $ 7114 inventory adjustment?  And, what description should I enter for it? 

Why does turbo tax consider this an uncommon difference?  I would think any increase in inventory over prior year end that is still in stock would always cause this situation to occur and there would be a line item to reflect this difference on the tax forms.


CathiM
New Member

Get your taxes done using TurboTax

No, do not enter your inventory adjustment as an uncommon difference on the M-1 worksheet.  You need to go back to QuickBooks and reduce your COGS by the $7,114 inventory adjustment.  Go back to your Journal Entry where you made the adjustment to increase inventory by $7,114 and make sure the other part of the entry is reducing COGS.  This might require that you create a new General Ledger account called something like "Increase/Decrease in Inventory".  That will reduce your QuickBooks COGS to $26,681 to match Turbo Tax.  The only M-1 adjustment will be the disallowed meals & entertainment deduction.

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naturallypet
New Member

Get your taxes done using TurboTax

Will "Increase/Decrease in Inventory" be an asset account?