Balance sheet for simple rental property out of balance

[jaredhandshoe]

In the balance sheet section of my LLC taxes, its my first year with a rental property.  275k value of the home beginning of year with 9,794 depreciation in the asset section.

In the liability section, I have my beginning principal balance of my mortgage owed (224,081) and ending principal balance (216,709).  I kept the cash at 0 beginning and 0 end (balanced by paying out all profits to myself)

What am I supposed to do to make it balance? The 27.5 year depreciation isn't going to match up to the actual mortgage balances owed.  Beginning and end is supposed to show 0 but its 60,919 and the end is showing 58,497.

any advice would be appreciated.

thanks!

[Rick19744]

Attempting to pull together a balance sheet in a forum such as this is very difficult.  There are too many unknowns since the limited facts are only a point in time.

A few thoughts:

• You need to utilize some type of software that will provide your annual details and help in making sure that your tax return is accurate; ie: Quickbooks
• Since this is your initial year form 1065, your beginning of the year columns should be blank
• Based on your limited facts, your end of the year balancing figure is partners' capital 
• Due to the recent change in the partnership return presentation, your Schedule L and Schedule M-2 will most likely not agree.  This is the result of the M-2 being based on tax capital and any book to tax adjustments running through the M-2.  
• Read the 1065 instructions once competed so you understand the Schedule L, Schedule M-2 and the analysis of net income per return sections.
• Not sure what you mean by "paying out all profits".  This can have many meanings.
• Finally, your facts of "my LLC" and "paying out all profits to myself" can lead to the conclusion that this is a single member LLC.  If that is in fact the case, and you have not elected to be taxed as an association with an S corporation election, you should not be preparing a partnership return; my assumption of the return being prepared based on the limited facts.  A single member LLC, by default, is a disregarded entity.  If that is the case, you should most likely be reporting the activity on your 1040 Schedule E.

[jaredhandshoe]

It is a LLC taxed as an S Corp with my spouse.  After all other deductions, expenses, depreciation, I am paying  all other profits as wages to us as a K-1's.   I wasn't even sure if a balance sheet was required or not with this return. Is there a live help option with the turbo tax business tax software I would be able to have assist me with this?  This forum was the only option I have found.  

[RobertB4444]

A balance sheet is required if you have gross sales or assets over $250,000, which you do.  

There is a TurboTax business live help option if you are using the TurboTax online product.  It's not available in every state yet so you may not be eligible but you can check it out here.

In the meantime, the out of balance amount sounds like it is not extremely large.  And as @Rick19744 says it is almost certainly fixed by adjusting the partners capital accounts.

@jaredhandshoe 

[Rick19744]

A few follow-up comments:

• First, hopefully you are preparing a form 1120-S and NOT a form 1065.
• Since you are an S corporation, your balancing account on Schedule L is retained earnings.
• I would also recommend that you meet with a tax professional in your area; see next bullet.
• You indicate that you are paying out "profits as wages as a K-1".  The amounts on the K-1 Part III line 1 are not wages (nor are distributions considered wages).  Wages paid out are accomplished by issuing a W-2 and those amounts are reflected on the 1120-S page 1 line 7.  You also have payroll filing requirements and remittances.
• If you answered "no" to schedule B question 11, then you are not required to complete the balance sheet.  
• Finally, I am not sure if you received any professional advice in setting up your structure, but it is extremely rare that a taxpayer would have real estate inside an S corporation.  This is not the recommended entity structure.

[Mike9241]

balanced by paying out all profits to myself - how many members if 1 there is no federal return to file. if more it raises the question of why the other member (s) are not getting distributions. what do you mean value of the home? it's supposed to be the same as its tax basis which can be substantially different than its value.

first-year. balance sheet has nothing in the beginning of the year column because it had nothing.   see a tax pro to learn basic bookkeeping and how to properly prepare the 1065 if it is needed.  maybe even consult on getting a desktop app for doing the bookkeeping once you learn the basics. 

[jaredhandshoe]

Thanks for the advice, I'm reaching out to a tax pro for advice. 

[PISSEDatworsetsoftware]

TURBOTAX IS GARBAGE, COST ME DAYS.  JUNK SOFTWARE!!!  NOW THEY WANT US TO DO THEIR TECH SUPPORT.