M-1 Reconciliation

[Snaggletooth]

How do Dividends affect the M-1 Reconciliation?

Obviously, they are a part of the difference between one year and the next.
But there is no provision on the M-1 Reconciliation for anything other than
Income and Deductions.

How is the best way to account for Dividends in the M-1/Retained Earnings?

[outwest]

You are correct ..

that the M-1 just reconciles the tax income to book income. Dividends don't affect income so they don't show up on the M-1. Actually, for that matter a reconciliation of beginning and ending retained earnings really doesn't show up any where on the return per se. However, a good deal of the reconciliation is on the M-3.

M-3 caution on S Corps: AAA is not always the same as Retained Earnings. Though often they will balance to each other you may find situations where they don't.

[Maribeth]

that the M-1 just reconciles the tax income to book income. Dividends don't affect income so they don't show up on the M-1. Actually, for that matter a reconciliation of beginning and ending retained earnings really doesn't show up any where on the return per se. However, a good deal of the reconciliation is on the M-3.

M-3 caution on S Corps: AAA is not always the same as Retained Earnings. Though often they will balance to each other you may find situations where they don't.

And it is always amazing to me that so many accountants do not have workpapers that reconcile retained earnings back to AAA, or for that matter, that have workpapers that reconcile the book/tax depreciation. I am venting today because I have just picked up one such client from another CPA, and of course, there are no reconciling workpapers. %$#@!

Maribeth