Have a Tax Question? Ask a Tax Expert
I am trying to fill out an 1120S schedule L form. In my corporate book's balance sheet, under capital, there is a line that is "net income". This is added to the other liabilities and capital to balance out with the total assets and these balances. On the schedule L, it has sections for assets (no problem, this works fine), and then liabilities and shareholder's equity. There is a place for everything in my balance sheet EXCEPT for net income. If I leave net income out, lines 15 (total assets) and 27 (total liabilities and shareholders' equity) don't balance. How do I get these two lines to balance?
The net income is part of the retained earnings on the balance Sheet.
Yes, I know that. But my problem is figuring out how to balance lines 15 and 27.
If all your assets are correct and you have included your net income after all adjustments on Line 24 than your Line 15 and Line 27 should balance. I would suggest you to complete sch M-2 below the Sch L and transfer the balance from line 8 on M-2 to Line 24 on Sch L.
Let me know if you have any questions.
What amount are you showing on Sch M2?
Can you list the entries from M2?
Line 8 on M2 should match your retained earnings plus net income. If it does not then there is an error.
From limited information, it is difficult for me to point it out.
Are you saying line 8 of M2 and line 24 of L are supposed to be equal to retained earnings plus net income? (Are there two different definitions for retained earnings?)Would it be easier to attach a copy of the balance sheet and tax page in question? I still do not understand how to put in the information. Is there a way to attach a file, email or tax it to you?
Yes, Line 8 in most cases should match Line 24 on Sch L
You can email the file to [email protected] and ask them to forward to me.
I will let you know the answer once I get the forwarded statements from you.
What was the amount on Line 24 on your last years form 1120S?
I have reviewed your complete tax return and financials and few things that I have noted-
Last year your retained earnings on Balance Sheet, Sch L was $46,167 but your Balance sheet as per financial statement shows the retained earnings as $57,054. So there is some adjustment or some changes that have affected the balance. This difference needs to be figured out. Normally the closing retained earnings balance on the Sch L should match with the opening retained earnings(as per financials) balance for next year
On the tax return- expenses side- You have meals and entertainment recorded twice as Travel ($2,435) and meals (50% at $1218). If you delete the figures from travel(since travel expense is recorded separately under the itemized listing)- Your profit will on Sch M-1 will match your profit and loss account.
Once you figure out the reason for the difference in retained earnings your balance sheet will balance and also Line 24 on Sch L will tie to Line 8 on Sch M2.