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Entering and calculating the Schedule M-1 in ProConnect Tax

SOLVED•by Intuit•5•Updated over 1 year ago

Below are instructions for entering the Schedule M-1 adjustments in the Corporate, S-Corporate and Partnership modules of the program, along with explanations of how the program calculates the M-1. Select the applicable return type below for more information.

Line 1, net income (loss) per books, of the Schedule M-1, is calculated on Form 1120:

Schedule M-1 lineDescription
Line 1, Net income (loss) per booksThe calculation for this line is as follows:
(line 10 + line 7 + line 8) - (line 2 + line 3 + line 4 + line 5) = line 1
Line 2, Federal income tax per booksThis is part of decreases.
Line 3, Excess of capital losses over capital gainsThis is part of decreases. It's based off amounts entered in the Dispositions (Sch. D/4797/etc.) screen.
Line 4, Income subject to tax not recorded on books this year (itemize)This is part of decreases.
Line 5, Expenses recorded on books this year not deducted on this return (itemize)This is part of decreases.
Line 7, Income recorded on books this year not included on this return (itemize)This is part of increases.
Line 8, Deductions on this return not charged against book income this year (itemize)This is part of increases.
Line 10, Income (page 1, line 28) - line 6 less line 9This is income or loss from 1120, page 1, line 28.

The program will automatically apply any increases and/or decreases when PTO recognizes a difference between book and tax.

Follow these steps to enter a Schedule M-1 adjustment manually:

  1. Go to the Input Return tab.
  2. From the left of the screen, select Balance Sheet and choose Schedule M-1, M-3.
  3. Choose Schedule M-1.
  4. Enter the Federal income tax (automatic if accruing), if applicable.
    • This is Schedule M-1, line 2.
  5. Enter the Income subject to tax not recorded on books (Ctrl+E), if applicable.
    • This is Schedule M-1, line 3.
  6. Enter all applicable amounts under the Expenses Recorded on Books not Included on this Return subsection.
    • This is Schedule M-1, line 5.
  7. Enter all applicable amounts under the Income Recorded on Books not Included on this Return subsection.
    • This is Schedule M-1, line 7.
  8. Enter all applicable amounts under the Deductions not Charged Against Book Income subsection.
    • This is Schedule M-1, line 8.

Line 1, net income (loss) per books, of the Schedule M-1, is calculated on Form 1120-S:

Schedule M-1 lineDescription
Line 1, Net income (loss) per booksThe calculation for this line is as follows:
(line 8 + line 5 + line 6) - (line 2 + line 3) = line 1
Line 2, Income included on Schedule K, lines 1, 2, 3c, 4, 5a, 6, 7, 8a, 9, and 10, not recorded on books this year (itemize)This is part of decreases.
Line 3, Expenses recorded on books this year not included on Schedule K, lines 1 through 12 and 14p (itemize)This is part of decreases.
Line 5, Income recorded on books this year not included
on Schedule K, lines 1 through 10 (itemize)		This is part of increases.
Line 6, Deductions included on Schedule K, lines 1 through 12 and 14p, not charged against book income this year (itemize)This is part of increases.
Line 8, Income (loss) (Schedule K, line 18). Subtract line 7 from line 4This is income or loss from Schedule K, line 18.

The program will automatically apply any increases and/or decreases when PTO recognizes a difference between book and tax.

  1. Go to the Input Return tab.
  2. From the left of the screen, select Balance Sheet, M-1, M-2, M-3 and choose Schedule M-1, M-3.
  3. Choose Schedule M-1.
  4. Enter all applicable amounts under the Income on Schedule K Not Recorded on Books (+) section.
    • This is Schedule M-1, line 2.
  5. Enter all applicable amounts under the Expenses Recorded on Books not Included on Schedule K (+) section. 
    • This is Schedule M-1, line 3.
  6. Enter all applicable amounts under the Income Recorded on Books not Included on Schedule K (-) section.
    • This is Schedule M-1, line 5.
  7. Enter all applicable amounts under the Deductions on Schedule K not Charged Against Book Income (-) section.
    • This is Schedule M-1, line 6.
 

Clicking the + button in any of these fields will open multi-line input.  

Follow these steps to enter a Schedule M-1 adjustment manually:

Line 1, net income (loss) per books, of the Schedule M-1, is calculated on Form 1065:

Schedule M-1 lineDescription
Line 1, Net income (loss) per booksThe calculation for this line is as follows: (line 9 + line 6 + line 7) - (line 2 + line 3 + line 4) = line 1
Line 2, Income included on Schedule K, lines 1, 2, 3c, 5, 6a, 7, 8, 9a, 10, and 11, not recorded on books this year (itemize)This is part of decreases.
Line 3, Guaranteed payments (other than health insurance)This is part of decreases.
Line 4, Expenses recorded on books this year not included on Schedule K, lines 1 through 13d, and 16p (itemize)This is part of decreases.
Line 6, Income recorded on books this year not included on Schedule K, lines 1 through 11 (itemize)This is part of increases.
Line 7, Deductions included on Schedule K, lines 1 through 13d, and 16p, not charged against book income this year (itemize)This is part of increases.
Line 9, Income (loss) (Analysis of Net Income (Loss), line 1).This is line 1 of the Analysis of Net Income (Loss) section of Form 1065; which is calculated as (Sum of lines 1-11 of Schedule K) - (Sum of Schedule K, lines 12 through 13d, and 16p).
  1. Go to the Input Return tab.
  2. From the left of the screen, select Balance Sheet, M-1, M-2, M-3 and choose Schedule M-1, M-3.
  3. Choose Schedule M-1.
  4. Enter all applicable amounts under the Income on Schedule K Not Recorded on Books (+) section.
    • This section relates to Schedule M-1, line 2.
    • Hold down Ctrl+E on your keyboard in the Other (Ctrl+E) field, if applicable. Then, enter Description and Amount and click OK.
 

Refer to this article for information on entering and allocating partners' guaranteed payments for Schedule M-1, line 3.  

  1. Enter all applicable amounts under the Expenses Recorded on Books not Included on Schedule K (+) section. 
    • This is Schedule M-1, line 4.
  2. Enter all applicable amounts under the Income Recorded on Books not Included on Schedule K (-) section.
    • This is Schedule M-1, line 6.
  3. Enter all applicable amounts under the Deductions on Schedule K not Charged Against Book Income (-) section.
    • This is Schedule M-1, line 7.

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