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I am trying to straighten my balance sheet in business

Hi Pearl, I am...

Hi Pearl, I am trying to straighten my balance sheet in business turbotax and it looks like part of the problem is that the retained earnings are not being pulled below zero by the programs defaults

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

My balance sheet is -around 3900 but i checked my income and expenses and they seem accurate and also checked my bank accounts info(my only asset) and my credit card debt(my only liability) so it seems like a retained earnings problem

Accountant's Assistant: Is there anything else important you think the Accountant should know?

I am small business just me and lost money last year and had negative retained earnings but this year made money

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Answered in 14 hours by:
3/13/2018
LongTermTech
Category: Financial Software
Satisfied Customers: 12,788
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Hi, thank you for contacting JustAnswer.com. My name is Russell. I will do my best to provide the right answer to your tax prep question.

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It sounds to me as if one year (last year perhaps?) had a 'loss' on earnings for that year.

You would enter that as a 'loss' (not as a negative earnings balance, not necessarily) in the Schedule C equivalent (or sole-propietorship) area of the tax prep software.

Operating at a loss for the previous year, that you are preparing the return for, is an accepted happening in tax accounting. Regarding it as an 'earnings = none, loss = amount' situation is the normal way of accounting in the tax return for such a year.

Also, what was earned in the year of operating at a loss, may be separately entered from the expenses deductible from that extent of positive earnings, so that the + side is separate from the - side, even if the - side is predominant.

Perhaps that will resolve the difficulty. I'm not sure it will, so feel welcome to Reply and correct any misapprehension I may have about details, and I will continue to advise and help you as needed and as appropriate.

If this answers your question, please rate my answer. A five-star rating would be appreciated!

If you need more info, or have any comments, use Reply To Expert to respond.

Thanks.

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Customer reply replied 4 months ago
Thanks, Russell. Yes I had about $15k loss. I am S-corp so that enitire loss flowed through my personal taxes. I can not claim it again or carry it foward on my corp. so I am not sure if I am missing something on how to add to my S-corp taxes. The loss created negative retained earnings from last year. The profit I made this year flowed down to my retained earnings but my balance sheet didn't balance. Well when I looked closer part of the problem was turbotax was not subtracting owner distributions. I took from from the Turns out business turbotax automated calcs. won't let retained earnings go below zero. So I found guidance on how to manually adjust the retained earnings and that did the trick. So now my balance sheet balances. I chose this path because all the revenue and expense seemed accurate and the distributions i took as well(which from IRS perspective are the key components-not retained earnings). Does this make sense? I attached my balance sheet so you could take a look

In that Schedule L, as filled in, the Retained Earnings seem to equal the Total Assets minus the Liabilities and Equity.

As for why line 27 comes out the way it does - that would seem to be 'the maximum of the liability and equity that can be repaid out of the corporation assets to-date.'

Are you asking me whether this is correct filling-out of the Schedule K, in the IRS's view? or whether this, as filled in by TurboTax Business, is correct?

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Customer reply replied 4 months ago
Hi Russell,
Just checking if from IRS view this is correct filling out of the form. As I mentioned I am confident about the Revenue and Income and profits I entered in turbo tax. But this Balance Sheet seems a little funky since I don't have my accounting setup to do balance sheets on and on-going basis to check against this.

I am, I have to admit honestly, not an expert at this sort of IRS Form. So... I shouldn't pronounce any other opinion other than that the figures seem to add up. And the IRS - in case an audit is somehow triggered - will care very much about verifiability of every figure that makes up the component or added-up figures entered in their forms... so making sure that your audit trail is good and verifiable, is almost (if not quite) more important than filling-out-correctly.

Would you like an opinion from a different Expert here, with more expertise in IRS forms and accounting?

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Customer reply replied 4 months ago
Hi Russell,No, I think I am comfortable where I am now. Like you said have verifiable information is the most important and I my back up is good. I will be working getting quickbooks or something online this year so that I can get the balance sheet set up properly. Thanks for your help.

You're welcome.... I hope that I did indeed help with the question.

If you are done with the case, please rate my answers and my work, using the five-star rating interface at the top of the JustAnswer question page (cited below in case it's needed.) A five-star rating best expresses appreciation of the work I have done on your question. Thank you! and have a great day.

Question page to rate on: https://www.justanswer.com/accounting-software/b33cg-trying-straighten-balance-sheet-business.html

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