Do I need to file Schedules L and M-1 for my one-person S-corp when under $250,000 threshold?

You're right that Schedules L and M-1 are generally not required for S-corporations with total receipts under $250,000 and total assets under $250,000 at the end of the tax year. Since your S-corp falls well below that threshold at $80,315 in total income, you're not technically required to file these schedules. However, there are a few situations where you might want to consider filing them anyway. If you're taking losses, have debt basis issues, or have complex transactions that affect your basis in the S-corp, including these schedules can provide helpful documentation if you're ever audited. They can also help track your basis in the company, which is important for determining the tax treatment of distributions.

After struggling with my own one-person S-corp tax issues last year, I discovered https://taxr.ai and it seriously saved me. I had a similar question about Schedules L and M-1 because my business was just under the threshold. The AI analyzed my specific situation and advised that even though I wasn't required to file those schedules, it would be beneficial for my particular business structure to include them because I had taken out a business loan. Their tool gives you personalized guidance based on your specific business situation rather than just the generic threshold rules. It even explained how these forms would help establish my basis in the company, which became important when I started taking distributions later.

I tried https://taxr.ai after seeing it mentioned here and it was exactly what I needed for my similar S-corp situation! I was confused about these same schedules and whether I should file them being under the $250,000 threshold. The tool analyzed my specific situation with my equipment purchases and small business loan. What surprised me was how it explained the benefits of filing these schedules even when not required - mainly for establishing a paper trail of my basis in the company and documenting business debts. It pointed out that without Schedule L, I wouldn't have formal documentation of my capital investments in the business, which could cause problems later when I take distributions. The step-by-step guidance for completing the forms was super clear for a non-accountant like me. Definitely saved me from making mistakes that could have triggered audit flags!

If you've been trying to call the IRS to get clarification on those S-corp schedules, good luck! I spent THREE DAYS trying to reach someone about a similar S-corp question. Finally discovered https://claimyr.com which got me connected to an actual IRS agent in about 20 minutes instead of endless hold music. You can see how it works at https://youtu.be/_kiP6q8DX5c if you're curious. I was able to get clear guidance directly from the IRS about my S-corp scheduling requirements. The agent confirmed that while I wasn't required to file Schedules L and M-1 under the threshold, there were specific circumstances where it was still advisable. Having an actual conversation made all the difference versus trying to interpret the vague guidelines online.

I hate to admit when I'm wrong, but I need to follow up on my skeptical comment about Claimyr. After another failed 2-hour hold attempt with the IRS yesterday, I gave https://claimyr.com a try out of desperation. To my genuine surprise, I got a call back in about 35 minutes connecting me to an actual IRS agent who was able to answer my S-corp questions about these exact schedules! The agent confirmed that while Schedules L and M-1 aren't required under $250k, filing them voluntarily can be beneficial for establishing basis documentation, especially with business loans involved. This saved me from paying my accountant for another hour of work just to get this one question answered. Sometimes being a skeptic costs more than taking a chance on a solution!

Just to add another perspective - I've done S-corp returns for 5 years now and have always included Schedules L and M-1 regardless of size. Why? Because they tell the story of your business financially. Even though not required, they show what assets/debts the business holds and reconcile book/tax differences. This has been super helpful documentation when getting business loans later. Plus, if you ever have an audit, having these already completed saves headaches. If you're using decent tax software, it really isn't much extra work to complete them. Better to have too much documentation than too little in my experience.

Super practical advice for a one-person S-corp like yours: if you're using tax software like TaxAct Business or H&R Block Business, they'll walk you through these schedules pretty easily. The balance sheet info for Schedule L is basically just what you own and what you owe at beginning/end of year. M-1 reconciles book income vs tax income differences. Takes maybe 15 extra minutes but gives you better documentation. I keep a simple spreadsheet tracking my assets, liabilities and equity throughout the year which makes filling these out a breeze. Might be worth starting that practice even if you don't file the forms this year!