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M-1 and M-2 amounts are different

The amount that TurboTax calculated for M-1 is the amount that agrees with my books, The amount calculated for M-2 is 10,000 more, which is the amount of a loan  from the partnership to the partners. This just decreased the loan balance and I don't see how that affects anything else. I have made 2 calls to Turbotax but each person I spoke to was unable to help me. I'm thinking it must be a turbotax error. Can someone please help me?

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5 Replies

M-1 and M-2 amounts are different

did you do the return manually from scratch or did you import from accounting software? can't help if it was all manual entry, but if you imported then it's possible bad tax coding for the loan activity is causing your issue. 

 

M-1 and M-2 amounts are different

The beginning figures were transferred from last year's Turbotax and I entered the 2023 amounts using the Quickbooks Profit & Loss Statement and the Balance Sheet. 

ThomasM125
Employee Tax Expert

M-1 and M-2 amounts are different

I assume you mean by the M-2 balance being off that the ending balance on line 9 is not equal to the balance sheet amount in line 21 of Schedule L, Partners' capital accounts. 

 

The M-2 schedule should show the beginning balance equal to the ending balance from the previous year. To that you add income stated on the tax return, deduct distributions to the owners, add capital contributed to arrive at the ending balance. You may also have other adjustments for income or expenses that are on the books but not on the tax return, or vice versa. So, you need to look at those entries and determine which one of them is wrong to resolve your issue.

 

The loan from the partnership to the partners should not affect their capital accounts so it shouldn't appear on the Schedule M-2. The book entry for that would be a debit to loan receivable partners and credit to cash. You need to make sure it isn't included on line 6 of schedule M-2, distributions.  

 

 

 

 

 

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M-1 and M-2 amounts are different

I was referring to the total of Line 1 Schedule M-1 Net income or loss per books and Line 3 Schedule M-2 Net income and loss.

There was no loan to partners only loan repayment from business to partners which was recorded in the bookkeeping as a normal loan repayment. As I'm doing error check the error that comes up is about just the date of sending the return and then I get a message saying Check M2 income/loss amount reported on Schedule M-2. This amount should be the net income/loss on the partnership books used in maintaining the partners tax basis capital accounts for the purposes of Schedule K-1. I don't know more to do since it looks like everything is in order but I'm not sure it is an error or just information

PatriciaV
Employee Tax Expert

M-1 and M-2 amounts are different

Balance sheet reconciliations are very difficult to troubleshoot without seeing the actual forms. 

If you would be willing to send us a “diagnostic” file that has your “numbers” but not your personal information, perhaps we can identify the issue. Please follow these instructions: 

 

In TurboTax Desktop, open your return and go to Online in the TurboTax header. 

  1. Choose Send Tax File to Agent.
  2. You will see a message explaining what the diagnostic copy is.  Click Send on this screen and wait for the Token number to appear. 
  3. Reply to this thread with your Token number and tag (@) the Expert requesting the token from you. Please include any States that are part of your return. 

If we are able to determine the cause, we'll reply here and provide you with a resolution. 

 

@lavtren 

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