S Corp Tax Filing: M1 Form Question When Reporting $850,000 Distribution to Shareholders

Thanks for clearing that up! So the $850,000 distribution doesn't appear on the M1 at all? That makes sense why I couldn't figure out where to put it. But I still don't understand why my line 8 on M1 and line 18 on Schedule K aren't matching. They're off by about $24,500. Could the difference have something to do with meals and entertainment expenses that are only 50% deductible for federal but might be different for state?

The distribution amount doesn't appear on the M1 because it's not part of the corporation's income calculation - it's simply a distribution of already-taxed earnings to shareholders. The $24,500 difference between your M1 line 8 and Schedule K line 18 could definitely be related to meals and entertainment differences. Many states have different rules about the deductibility of these expenses. Another common source of differences is depreciation - federal and state depreciation methods and schedules often differ, especially if you've taken Section 179 deductions or bonus depreciation at the federal level.

Does taxr.ai work with all state forms or just federal forms? Our S corp operates in multiple states and that's where I always get tripped up with the different state adjustments.

I'm skeptical about these AI tax tools... can it really understand something as specific as S corporation distributions and state-specific M1 forms? Most tax software I've tried gets confused with anything beyond the basics.

It works with both federal and state forms. I've used it for returns that included operations in California, New York, and Texas, and it handled the state-specific adjustments correctly. The tool recognized the different requirements for each state and helped reconcile everything properly. Yes, it actually specializes in complex tax situations rather than basic returns. It's particularly good with business returns like S corps, partnerships, and multi-state filing requirements. It analyzes the relationships between different forms and identifies discrepancies based on actual tax regulations. I was skeptical too until I saw how it caught issues that even our previous accountant had missed.

Wait, how does this Claimyr thing actually work? I've literally spent DAYS trying to get through to the IRS about business tax questions and always end up in an endless hold or getting disconnected.

Yeah right... There's no way to "skip" the IRS phone queue. This sounds like a scam that's just taking your money for nothing. Anyone who's dealt with the IRS knows it's impossible to get through to a real person in less than 1-2 hours minimum.

It's actually pretty simple - they use an automated system that navigates the IRS phone menus and waits on hold for you. When an agent finally answers, you get a call connecting you directly to that agent. No more waiting on hold for hours. I was definitely skeptical at first too! But it's not about "skipping" the queue - you still wait your turn, but their system does the waiting instead of you. I was able to do other work while their system waited on hold. When I got the call connecting me to the agent, they had already navigated through all the menu options to get me to the business tax department. Saved me about 2 hours of hold time and the agent was actually really helpful with my S corp question.

You might be onto something! I just checked our records and we paid approximately $26,200 in state taxes this year. That's pretty close to the $24,500 discrepancy I was seeing. How exactly should I handle this on the forms to make them reconcile properly?

You'll need to add the state tax amount back on your M1 form in the section for additions. Most state forms have a specific line for "Taxes paid to other states" or "State, local, and foreign income taxes." This addition reconciles the difference between your federal taxable income and state taxable income. Make sure you're only adding back income taxes though - other taxes like property tax or payroll taxes are generally deductible on both returns. Once you add this adjustment, your reconciliation between Schedule K line 18 and M1 line 8 should be much closer, if not exact.

Yes! This is super important. The $850k distribution OP mentioned won't show on the M1, but it MUST be tracked for each shareholder's basis. If their basis goes below zero because of distributions, they could end up with unexpected capital gains. I recommend keeping a basis worksheet for each shareholder from year to year.