This article will help you understand how the M-1 is calculated and where to enter adjustments for the Schedule M-1. Click on your tax type below to get started.
Corporate (Form 1120)
The Form 1120 Schedule M-1, line 1, net income per books, is calculated as follows:
- Schedule M-1, line 10 (income or loss from page 1, line 28)
- + Schedule M-1, Lines 7 & 8 (increases)
- - Schedule M-1, Lines 2-5 (decreases)
- = Schedule M-1, Line 1 (net income per books)
Lacerte will automatically generate most increases and decreases based on your entries throughout the return that indicate a difference between book and tax amounts.
If you need to enter an M-1 adjustment manually, or override an automatic increase or decrease:
- Go to Screen 39.1, Schedule M-1 (Book-Tax Adjustments).
- To alter the M-1, line 2, enter an amount in Federal income tax (automatic if accruing).
- To alter the M-1, line 3, enter an amount in Excess of capital losses over capital gains [O].
- To alter the M-1, line 4, enter an amount in the Income Subject to Tax Not Recorded on Books subsection.
- To alter the M-1, line 5, enter an amount in the Expenses Recorded on Books not Included on this Return subsection.
- To alter the M-1, line 7, enter an amount in the Income Recorded on Books not Included on this Return subsection.
- To alter the M-1, line 8, enter an amount in the Deductions not Charged Against Book Income subsection.
S Corporate (Form 1120S)
The Form 1120S Schedule M-1, line 1, net income per books, is calculated as follows:
- Schedule M-1, line 8 (income or loss from Schedule K, line 18)
- + Schedule M-1, Lines 5 & 6 (increases)
- - Schedule M-1, Lines 2 & 3 (decreases)
- = Schedule M-1, Line 1 (net income per books)
Lacerte will automatically generate most increases and decreases based on your entries throughout the return that indicate a difference between book and tax amounts.
If you need to enter an M-1 adjustment manually, or override an automatic increase or decrease:
- Go to Screen 31.1, Schedule M-1.
- To alter the M-1, line 2, enter an amount in the Income on Schedule K Not Recorded on Books section.
- To alter the M-1, line 3, enter an amount in the Expenses Recorded on Books not Included on Schedule K section.
- To alter the M-1, line 5, enter an amount in the Income Recorded on Books not Included on Schedule K section.
- To alter M-1, line 6, enter an amount in the Deductions on Schedule K not Charged Against Book Income section.
Partnership (Form 1065)
The Form 1065 Schedule M-1, line 1, net income per books, is calculated as follows:
- Schedule M-1, line 9 (income or loss from Form 1065, page 5, line 1)
- + Schedule M-1, Lines 6 & 7 (increases)
- - Schedule M-1, Lines 2-4 (decreases)
- = Schedule M-1, Line 1 (net income per books)
Lacerte will automatically generate most increases and decreases based on your entries throughout the return that indicate a difference between book and tax amounts.
If you need to enter an M-1 adjustment manually, or override an automatic increase or decrease:
- Go to Screen 27.1, Schedule M-1.
- To alter the M-1, line 2, enter an amount in the Income on Schedule K Not Recorded on Books section.
- To alter the M-1, line 3, see Entering and allocating guaranteed payments in Lacerte.
- To alter the M-1, line 4, enter an amount in the Expenses Recorded on Books not Included on Schedule K section.
- To alter the M-1, line 6, enter an amount in the Income Recorded on Books not Included on Schedule K section.
- To alter M-1, line 7, enter an amount in the Deductions on Schedule K not Charged Against Book Income section.
