Enter Equity Adjustment

[Lkgarcia52]

This question is for TurboTax Business.  Last year was my first year doing my own return with TurboTax.  This year has gone smoothly up to the "Enter Equity Adjustment".  There is an amount for last year that I don't think I should have put here.  It is my shareholder equity amount from 2020. (member equity minus prior year retained earnings).  If I don't put an amount in that section for this year, my "Total Liabilities, Capital & Retained Earnings" is off by that amount from the end of 2020.  Can anyone explain this?  Do I go ahead and put last years amount into this years adjustment?

[AliciaP1]

Can you clarify if you entered 2020 beginning or ending shareholder equity?  And also did you use prior to 2020 retained earnings or ending 2020 retained earnings?  Did you subtract because RE was a loss?

@Lkgarcia52

[Lkgarcia52]

Thank you for responding. 

There is a section called "Adjustments to Shareholders Equity".   On my 2020 return I put an amount here that consisted of 2020 Member Equity  of 128,000 Less 2019 Retained Earning of -930.  

On my 2021 return I am out of balance if I do not include this same amount somewhere, presumably in the same section of "Adjustments to Shareholders Equity".   

Did I put those 2020 Retained Earnings in the correct spot and is it correct that I need to enter this same amount on my 2021 return?

[AliciaP1 · Accepted solution]

It seems you entered an inaccurate adjustment.

Shareholder Equity (or Basis) is calculated within TurboTax by inputting your income and expenses and any contributions and distributions.  Retained Earnings is calculated within TurboTax when you enter your income and expenses and either roll your prior year return over or enter your beginning info from a return processed outside of TurboTax.

So, depending on where you got your numbers, you may have almost double stated your equity by entering the adjustment.  If you are required to report your balance sheet (Gross receipts for 2020 >$250,000 or Total assets for 2020>$250,000) you need to amend your tax return for 2020 and eliminate this adjustment.  This only effects your basis calculation so you do not need to amend your personal return.

If you are not required to report your balance sheet for 2021 (Gross receipts or Total assets >$250,000) you should elect to not report it and move forward. 

Also, make sure you did not enter this adjustment on your books.  If you did, you need to reverse it and when you have to report your balance sheet in the future you will still be in balance.

[Lkgarcia52]

Thank you.  This answers my question.