Retained Earnings incorrect at beginning of Tax Year

[kevfowler1]

We are a Sub S and last year (2018) was our first year using TurboTax.   Our 2018 tax return we failed to enter a # in the retained earnings field for the beginning of the 2018 tax return, so the retained earnings amount was just for that year.  Is there a way to fix/override the retained earnings on form 1120-s or M2?  on 1120S the Retained Earnings is grayed out (not editable) ?

[MaryK4]

The retained earnings is usually the last thing that is calculated on the Balance Sheet- so the only way to change it is to change other entries on the Balance Sheet.  You would have to adjust the other fields (or entries on the M-2) which causes problems because the 2018 return was already filed.

[88MIR]

I have a similar issue.  I starting using turbotax in 2016 and realized now that my retained earnings for all prior years until now is incorrect.  Is the best course of action to re-file prior year returns?

Thanks.

[SmallBusinessSCorp11]

Also looking for a response to this question. I switched from a sole proprietor to an S-Corp in 2016 and did not correctly enter retained earnings upon filing that first year as an S-Corp with TurboTax Business. I have been carrying this mistake in the balance sheet. Is there a way to correct this now in my 2021 return? Thank you.

[PatriciaV]

Yes, you may be able to correct your beginning Retained Earnings using Forms Mode.

1. Click the Forms icon in the TurboTax header.
2. Look for "Form 1120S p3-5" in the left column. Click the form name to open it in the large window.
3. Scroll down to Schedule L (Balance Sheet per Books). 
4. Enter the correct amount of prior year Retained Earnings on Line 24(b).
5. Note that when you revise this number, the Balance Sheet will no longer be in balance. You will need to adjust other numbers on the prior year balance sheet to bring it back in balance. The form has a line under the Balance Sheet to help you with this.
6. When you're finished, click "Step-by-Step" in the header to return to the interview.

Note that you should edit only numbers that appear in blue. Overriding calculated numbers invalidates the return for e-filing (you will need to mail the return). This is an IRS constraint. 

[rgonz]

1. Enter the correct amount of prior year Retained Earnings on Line 24(b).

This line cannot be edited in this form.

[RobertB4444]

If you made a mistake in a prior year that has left you with a retained earnings error in this year then the easiest solution is to fix it in the prior year. 

Amend your 2020 return and make a corrective entry into the balance sheet to get your retained earnings where you want them.  Then don't file the amended return. 

When you begin your 2021 return the balance sheet information from the 2021 return will carry over for you.