Solved

Schedule M-1 and M-2 are different

Forum|Forum|2 years ago
February 22, 2024
1 reply
0 views

The total loss on Schedule M-1 and M-2 are not the same. Aren't they supposed to be the same. M-1 is correct and M-2 is incorrect. In fact it is off by the amount of the loan repayment made to partners. Can I just change M-2 manually? The system allows me to but I want to do it the correct way.

TurboTax Business Windows

Best answer by lavtren

Here is the message Turbotax has on my return (Important note: If the net income per tax return shown on Schedule M-1 or M-3 does not reflect the net income (loss) used in maintaining the partners' tax basis capital accounts, the amount on Schedule M-2 must be adjusted to reflect the amount for tax basis capital accounts. The program will make the adjustments from the Schedule M-2, Line 3 Smart Worksheet.The adjusted amount will be used for Schedule K-1, Section L. All amounts on Schedule K-1, Section L, must now be computed using tax basis capital accounts. I am not sure what my response is supposed to be

M

Mike9241

M-1 line 9 should equal M-2 line 3.

loans from partners should be on kine 19a and thus repayments should not affect capital accounts.

could be a bug in the software or you entered the loan repayments where they didn't belong

overriding the M-2 will prevent e filing and the effect of the error on other parts of the return and K-1's is unknown.

L

lavtrenAuthor

The only place on Turbotax to record loan repayment that I see, is to show reduction in loan balance. If there is a bug in the software what is my recourse?

L

lavtrenAuthorAnswer

Here is the message Turbotax has on my return (Important note: If the net income per tax return shown on Schedule M-1 or M-3 does not reflect the net income (loss) used in maintaining the partners' tax basis capital accounts, the amount on Schedule M-2 must be adjusted to reflect the amount for tax basis capital accounts. The program will make the adjustments from the Schedule M-2, Line 3 Smart Worksheet.The adjusted amount will be used for Schedule K-1, Section L. All amounts on Schedule K-1, Section L, must now be computed using tax basis capital accounts. I am not sure what my response is supposed to be