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1065 Partner Capital Reconciliation- Turbo Tax modifies the Starting Capital Amount

In the Balance Sheet section, under Partnership Capital Reconciliation Summary, I enter the beginning and ending Partner capital amounts. In the next screen the product produces a starting capital amount that is not what I entered. This is the first time I have used TT for this partnership, so it does not have old info. I looked at 1065 instructions for this section, but there was no obvious addition/subtraction needed.

 

The net of this is my 1065, Schedule M2, Line 1 shows an incorrect starting capital summary. This ends up showing also in the third (of 3) partner's K1. The first 2 K1s show a capital balance that is correct, but the third partner inherits the phantom adjustment. Anyone notice something like this?

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3 Replies
PatriciaV
Employee Tax Expert

1065 Partner Capital Reconciliation- Turbo Tax modifies the Starting Capital Amount

To avoid calculation errors, enter the beginning capital balances on the Schedule K-1 Wks (Sch K-1 Wks) using Forms Mode. This form has an internal scroll bar to let you move between partners. Capital and Basis columns appear on the left side of each partner "page." The total of your entries on this worksheet will carry over to Form 1065 p5-6, Schedule M-2 Line 1.

 

If the total you manually entered on Sch M-2 was greater than the sum of beginning capital balances entered for the first two partners, the program most likely adjusted the third partner's balance to make the two totals match.

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1065 Partner Capital Reconciliation- Turbo Tax modifies the Starting Capital Amount

Alas, even in forms mode I am unable to manipulate the incorrect number. My Schedule L,Line 21 shows the correct Partners Capital Account total for both start and end of year. However, In M-2,Line 1, rather than seeing the correct number from Sched L,  there is some number that I did not enter and cannot figure out where it comes from. Further, when in Forms mode, it is not changeable. It is this incorrect number that is used in the Sched K1 worksheet which causes the discrepancy. 

 

I guess I will contact Turbo Tax and see if they can help.  I am usually not so pedantic,but since this is the first time using TT for this partnership, I want this to match up 100% with last years forms and be correct in applying this years info. That way future years returns will take less effort.

PatriciaV
Employee Tax Expert

1065 Partner Capital Reconciliation- Turbo Tax modifies the Starting Capital Amount

Capital reconciliations are difficult to diagnose without actually seeing the forms and entries.

 

If the TurboTax Support agents are not able to resolve this for you, consider using TurboTax Live Assisted Business. This online service provides step-by-step guidance from a tax expert whenever you need assistance, either over the phone or by screensharing. 

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