Business & farm
It appears you are missing a book/tax difference adjustment on the M-1 Schedule. The purpose of Schedule M-1 is to reconcile the entity’s accounting income (book income) with its taxable income. Because tax law is generally different from book reporting requirements, book income can differ from taxable income. When you have non-deductible expenses like 50% of meals it creates a permanent book- tax difference. Below is a list of common book-tax differences found on Schedule M-1.
Examples of Expenses on books, not included on tax returns:
- Book depreciation in excess of tax depreciation
- 50% of travel/meals and entertainment not deductible
- Fines and penalties
- Political contributions
- Officer's life insurance premium, etc.
Review your M-1 worksheet as shown on the screenshot below, and enter your book/tax differences as applicable.
