Balance sheet for S Corp Return

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White Coat Investor
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Balance sheet for S Corp Return

Post by White Coat Investor » Wed Mar 14, 2018 12:05 am

So this is my first year doing an S Corp return, and I made enough that I do have to do the "balance sheet" sections (L, M1 and maybe M2). And I've realized that despite keeping incredibly detailed income and expense records, I don't think I've technically ever made a balance sheet for my little business. Part of that is because a great deal of the value is intangible- brand, trademark, etc which I can't put a balance on anyway apparently and the main part of the value is the website itself, the value of which is at least very fuzzy and extremely illiquid.

So what does that leave me with? Well, pretty much the cash in the bank account on Jan 1 as assets and whatever was due on the credit card bill as a liability. I guess I never really worried about this when I was filing as a sole proprietorship and a partnership (and really now) since it's all pass through income and fully taxable to me anyway, even if I leave it in the company bank account. So I just treated it as though the bank account had $0 in it every January 1st. But now I'm worried that reporting a bunch of zeros on this balance sheet is going to cause me problems, so I think I better create one, not only for the end of year, but also the beginning of the year.

Any tips for making your first balance sheet? Anybody have any idea how much the IRS actually cares about the accuracy of L, M1, and M2 on the 1120S?
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

fishmonger
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Re: Balance sheet for S Corp Return

Post by fishmonger » Wed Mar 14, 2018 8:42 am

You wouldn't record anything for the intangibles. Sounds like you are on the right path: cash, credit card liabilities and the remainder to equity.

In terms of Schedule M, the accuracy matters because that is the reconciliation of your book income to taxable income. There can be a lot of timing differences here, much less so if you are a cash basis business. But two would be half of your meals and entertainment, and any other non-deductible expenses on your books

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Hayden
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Re: Balance sheet for S Corp Return

Post by Hayden » Wed Mar 14, 2018 11:27 am

I am not an accountant. An accountant did the 1120S for my business for the first many years, and since then, i've done it myself following his format. Here's what's on my Schedule L:

Line 1: Checking account balance
Line 9: Basis of the Vanguard investment account
Line 10 a, b: depreciation
Line 15: total

Line 21: Rounding (either 0, 1, or -1) to get the top to match the bottom
Line 22: $1000
Line 23: the amount of money i put into the S Corp at start (minus the $1000 which is shown on Line 22)
Line 24: the earnings that have not yet been distributed from the company
Line 27: total

On Schedule M-1: just shows the 50% meals and entertainment, so that the tax return matches the books

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MP123
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Re: Balance sheet for S Corp Return

Post by MP123 » Wed Mar 14, 2018 12:26 pm

You likely already know but since it's your first year remember the 1120s has a due date of... tomorrow (March 15th).

spectec
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Re: Balance sheet for S Corp Return

Post by spectec » Wed Mar 14, 2018 12:49 pm

But there's trusty form 7004 (and whatever the state equivalent might be). The 7004 doesn't even require a signature. It gains you an extra 6 months and avoids the risk of a pretty hefty penalty.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

scorp_pccorp
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Re: Balance sheet for S Corp Return

Post by scorp_pccorp » Wed Mar 14, 2018 2:36 pm

But of course, you still need to figure out the state tax and pay it by tomorrow :) No postponement on the tax due.

As for the balance sheet question, Turbo Tax can do the schedules M1/M2/L for you. I always compare my Quickbooks numbers with Turbotax calculations and match them up. Turbotax will tell you if they are not in balance and where the discrepancies are so you can adjust either side as needed until they are in balance. I just did this last night :)

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White Coat Investor
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Re: Balance sheet for S Corp Return

Post by White Coat Investor » Wed Mar 14, 2018 10:09 pm

Thanks everyone for your help. It wasn't too bad. I had more trouble learning the partnership return a couple of years ago. And now I've got a balance sheet!

The state return was a bit painful of course.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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