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Balance sheet

Schedule L end-of-year retained earnings

You can get an 1120-S Corporation's Schedule L end-of-year retained earnings to reflect the end-of-year Schedule M-2 balances. Certain fields on the
L-2
 screen have to be blank. Be sure there are no amounts in these fields:
  • Retained earnings - Unappropriated
  • Accumulated adjustments account (S Corp)
  • Undistributed taxed income (S Corp)
  • Other adjustments account (S Corp)
  • Retained earnings timing difference (S Corp)
Also, be sure Accounting CS or Workpapers CS tax codes 467, 468, 469, or 470 are not in these fields.
When these fields are blank, the Schedule L end-of-year retained earnings reflect the sum of the Schedule M-2 accounts from the Retained Earnings Reconciliation Worksheet. The Retained Earnings Reconciliation Worksheet has the following Schedule M-2 accounts:
  • Accumulated Adjustments Account
  • Undistributed Previously Taxed Income
  • Accumulated Earnings and Profits
  • Other Adjustments Account
  • Retained Earnings Timing Differences
The last account, Retained Earnings Timing Differences, tracks S Corporation book and tax timing differences. It is not in Schedule M-2 on Form 1120-S, Page 5.
If you reconcile Schedule M-2 to Schedule L:
  • On a tax basis, use the Retained Earnings Timing Differences account.
  • On a book basis, you should never use this account.
There shouldn't be any amounts in the
Timing Differences
 column in the
Ms
 screen.
note
When you prepare Schedule M-1, you can have the retained earnings from Schedule M-2 to agree with the end-of-year retained earnings on the balance sheet. Go to the
Ms
 screen. Select a code in the
Sch M-2
 column in the statement windows. If you have book/tax depreciation differences, book/tax gain, or loss differences, select a code in the
Carry book/tax difference to Schedule M-2
 field.
If you want UltraTax CS to transfer the Schedule M-1 differences to the same Schedule M-2 account for all S Corporation clients, go to
Setup
,
1120 Corporation
,
Federal
 tab,
Other Return Options
, then the
Return Presentation
. Select the account. Don't complete the
Sch M-2
 column or the
Carry book / tax difference to Schedule M-2
 field.
When you prepare Schedule M-3, you can have the retained earnings from Schedule M-2 agree with end-of-year retained earnings on the balance sheet. Go to the
Book/Tax Differences
 section in the
M3S-2
 screen. In the
M3S-2
 screen in the
Book/Tax Differences
 section, select a code in the
Sch M-2
 column in the statement dialogs for the applicable fields.

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