QuickBooks Balance Sheet and 1120S Balance Sheet do not match

[blohm515]

Greetings,

I have a new business client who I am doing his business and personal returns. I looked through his previous business returns (1120S) and noticed that the CPA that did the previous returns never reconciled the balance sheet with the QuickBooks balance sheet. Now, many years later, the balance sheets do not match. What is the best way to adjust the tax return this year so that it best matches the QuickBooks balance sheet?

[Koss]

Balance Sheet

How much is the discrepancy?

And have you figured out why they don't match?

If the amount in question is relatively small, then you might consider simply making an adjustment to the balance sheet on the tax return to bring it in line with the books, and calling it a "miscellaneous adjustment." But you can only pull that kind of sleight-of-hand with very small amounts. It won't stand up to any kind of scrutiny.

If the amount is at all significant, I don't think anyone can answer your question without knowing why the balance sheets don't match...

You might be looking at Form 3115.

BMK

[Uncle Sam]

QB Balance Sheet vs Tax Return

Was the corporation required to actually prepare the P. 4 balance sheet for any of those
years?

[geekgirldany]

I was in this same situation last year. I spent many hours trying to figure it out. What it came down to was that LFS account was being used as a clearing account by the previous accountant. If things were not jiving it was being adjusted to this account. I got tax returns going back 10 years and the bookkeeping to match it. I was able to track it down to a certain asset account. Basically the corporation was a mess and I had to clean it up.

I did as Koss suggested and made a adjustment, except mine was verily large but I did explain the reasoning behind it.

I was lucky that my client had all this information. Just try to make sure things have been recorded correctly and that the prior accountant's balance sheet is correct.... because the one I worked on wasn't.

I've notice some accountants just will not mess with entering in adjustments to Quickbooks to get it to match the balance sheet. A couple I know use a spreadsheet to mark adjustments to reconcile between QBs and what they put on the tax return. But they never do update QBs with the adjustments.

[AZUKHiker]

What basis cash or accrual

What is the 1120S basis, cash or accrual?

Remember QB can produce cash basis and accrual basis balance sheets, often the accrual is the default. Make sure you are comparing like with like.