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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
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Experience:  10 years experience
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My name is ***** *****. Having an issue with Form 1120S

Customer Question

My name is ***** *****. Having an issue with Form 1120S Schedule L not balancing on lines 15 and 27. The issue is that my software keeps adding in my Capital Stock which equals 100 at beginning of the year which balances, but at end of the year equals 100 and makes Total Liabilities be 100 too much. Should I not have any Capital Stock at the end of the year?
JA: Thanks. Can you give me any more details about your issue?
Customer: Having an issue with Form 1120S Schedule L not balancing on lines 15 and 27. The issue is that my software keeps adding in my Capital Stock which equals 100 at beginning of the year which balances, but at end of the year equals 100 and makes Total Liabilities be 100 too much. Should I not have any Capital Stock at the end of the year?
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Submitted: 12 months ago.
Category: Tax
Expert:  BK-CPA replied 12 months ago.

Hello and thank you for your question.

Your capital stock should remain unchanged if your s-corp didn't issue more or cancel shares, so if it was 100 at the beginning of the year, it should be 100 at the end of the year. It sounds like your software has that one correct.

There are any number of reasons why you are not in balance and it's impossible to tell you without reviewing both your tax return and books. Most likely the return has adjusted retained earnings based on your entry of income and expenses and the adjustment can't reconcile with the rest of your ending balance sheet because it's not accurate. Maybe you forgot to record distributions too. There is one thing that is fairly certain though: you have made a mistake.

There are a lot of twists and turns in preparing a corporate tax return and ignorance is bliss. TurboTax can only find mechanical errors, like when numbers don't add up, but doesn't help otherwise. Staying in balance is tax prep 101. I mean well here, but to be completely honest, by asserting that total liabilities are too much (ie, you meant equity) and by asking if you should not have capital stock at the end of the year, you have made it very clear that you lack the knowledge to be preparing corporate tax returns. My honest and again well meaning advice is that you stop and get some professional help. Good tax preparers almost always save you more than what they charge you. Seriously.