need help with Schedule m1 and m2 of form 1120


L

L. T. Portella

can someone explain to me the relationship between these schedules and the
figures that appear on lines 24 and 25 of Schedule L. Thank you
 
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C

Chris Luper

m1 is your reconciliation of book income to taxable income.

m2 is your unappropriated retained earnings rollfforward which will include
book income. this will be your rollforward of line 25 on schedule L.
 
L

L. T. Portella

Understood but now the questions are:

1. M1 line 1 entitled Net income per books, should this amount be identical
to line 30 or should it be the net of line 30 less line 31of Page 1?
According to the small print of line 10 of M1 it should be the latter. Am I
right?
2. M1 line 2 may or may not agree with the total of prepayments of estimated
tax but shouldn't it be identical to page 1 line31entitled Total Tax?
3. Schedule L line 25 reads Retained Earnings Unappropriated. The question
here is should the difference between columns beginning tax year and end of
year be the net income per books or the net income per 1120 return.
4. Section m2 line 8 should agree with line 25 Schedule L and this as you
said is book income. So what happens to the tax paid
thank you for your help
 
C

Chris Luper

1. M1 line 1 entitled Net income per books, should this amount be identical
to line 30 or should it be the net of line 30 less line 31of Page 1?
According to the small print of line 10 of M1 it should be the latter. Am I
right?
Line 1 has nothing to do with Page 1. It is the Net Income per books, and then
your book-tax income differences are reported on M1 to get to line 10, which is
taxable imcome, which is what is reported on Page 1, Line 28. Page 1 is your
tax "income statement" and line 28 is your taxable income total.
2. M1 line 2 may or may not agree with the total of prepayments of estimated
tax but shouldn't it be identical to page 1 line31entitled Total Tax?
Line 2, is whatever you booked on your GAAP books for income tax expense. It
doesn't have anything to do with Page 1 or your prepayments, necessarily.
3. Schedule L line 25 reads Retained Earnings Unappropriated. The question
here is should the difference between columns beginning tax year and end of
year be the net income per books or the net income per 1120 return.
Net income per books plus or minus any other M2 adjustments. Schedule L are
your book balance sheets.
4. Section m2 line 8 should agree with line 25 Schedule L and this as you
said is book income. So what happens to the tax paid
Don't understand that question. The M2 is a book retained earnings
rollforward. It is basically to ensure that you aren't hiding income in your
retained earnings increases that you aren't reconciling to taxable income w/o
support.
 
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Schedule M-2

I am off on my Schedul M-2. I am actually lower than my Retained Earnings. What types of things should I look for that I might be missing? For example, what are some of the usual increase adjustments for the M2? Maybe that might trigger something that I have overlooked. Thanks.
 
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Thank you for posting this information...I would've been a little lost if it wasn't for this thread :confused:
 
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