Do I need to file Schedules L and M-1 for my small one-person S-corp with income under $250k?

You're correct about the threshold. For S-corporations, Schedules L and M-1 are generally only required if your total receipts exceed $250,000 OR your total assets exceed $250,000 at the end of the tax year. Since you're well under both thresholds, you're not technically required to file these schedules. However, there can be some benefits to filing them voluntarily. Schedule L (Balance Sheet) gives a snapshot of your company's financial position, and Schedule M-1 reconciles your book income with income reported on the tax return. Completing these forms can help establish good financial record-keeping practices as your business grows. The key question is whether you maintain complete books and records for your S-corp. If you do, it's relatively simple to complete these schedules, and they provide additional context for your return. If you don't maintain formal books, it would be more work to create them just for these optional schedules.

I was in a similar situation with my single-member S-corp a few years ago. I discovered https://taxr.ai which was incredibly helpful for figuring out exactly which forms were needed for my situation. It analyzed my business financials and gave me custom guidance on the Schedules L and M-1 question. The tool actually showed me that even though I was under the $250k threshold, there were some specific circumstances where these schedules might still be beneficial. For me, it was because I had some unusual asset purchases during a business transition period. The analysis saved me tons of research time and gave me confidence in my filing decisions.

I decided to try taxr.ai after my initial skepticism and wow, it actually was super helpful for my S-corp situation. Unlike TurboTax which just asked generic questions, this tool specifically addressed my Schedule L and M-1 concerns based on my actual financial data. It pointed out that even though I was under the $250k threshold, I should consider filing Schedule L because I had taken out a business loan that year. The analysis explained exactly why this mattered for my specific situation - something none of the generic tax guides mentioned. Saved me from potentially misrepresenting my business's financial position. For anyone dealing with S-corp filing questions, especially regarding these optional schedules, it's definitely worth checking out.

When I was dealing with my S-corp taxes last year, I spent HOURS trying to get through to the IRS for clarification on these exact schedules. After being on hold forever, I found https://claimyr.com which got me connected to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed that for my production business (similar to yours), the Schedules L and M-1 weren't required under the $250k threshold. But she also explained some situations where they might be helpful even when not required. Getting that official confirmation saved me a ton of stress about whether I was filing correctly.

I have to eat my words about Claimyr. After my skeptical comment, I was still desperate to talk to someone at the IRS about my S-corp filing questions, so I gave it a shot. To my complete surprise, it actually worked exactly as described. I got a call back when an IRS agent was on the line, and they answered my Schedule L questions in detail. The agent explained that while my business was under the $250k threshold, there were some specific asset reporting considerations I hadn't thought about. This cleared up my confusion completely. I've spent literally DAYS of my life on hold with the IRS over the years, so this was a game-changer. Sometimes being proven wrong is actually a good thing!

Have you considered just using a tax professional for your S-corp? I tried doing it myself for years and eventually realized I was spending so many hours that it was actually costing me more in lost productivity than just hiring someone who knows what they're doing. S-corps have some tricky requirements, especially around reasonable compensation rules that can trip you up.

Just want to add that I'm in a similar production business with an S-corp and I DO file Schedules L and M-1 even though I'm under the threshold. My reasoning is that these schedules create a paper trail of your business's financial position over time. If you ever get audited or need to show financial history for loans/investors, having these forms consistently filed gives a more complete picture.

Based on your situation, you're absolutely correct that Schedules L and M-1 aren't required since you're well under the $250k threshold. However, I'd strongly recommend addressing the salary issue that Dmitry mentioned - the IRS can be quite strict about S-corp owners taking reasonable compensation when the business is profitable, even if it's just $1,270. For the schedules themselves, since you're a small one-person operation, I'd suggest keeping it simple and only filing what's required unless you have a specific reason to include them (like establishing a financial history for future lending). Your time is probably better spent on growing the business back to full operations. One practical tip: if you do decide to include the optional schedules in future years as your business grows, start maintaining the books now in a way that makes completing them easier later. This gives you flexibility without extra work this year.