Why isn't Schedule M-2 line 3 and Schedule K-1 Section L calculating the same as in prior years in a 2020 1065?

  • Article Type:
  • QA
  • Last Modified:
  • 01/13/2021

Question

Why isn't Schedule M-2 line 3 and Schedule K-1 Section L calculating the same as in prior years in a 2020 1065?

Environment

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Answer

For tax year 2020, the IRS has made changes to the M-2 and Section L of the Schedule K-1. These items are now calculated using tax basis. The Schedule M-2, Line 3 is now derived from the total of all partner Schedule K-1's > Section L > Current Year Income (Loss) > Expand > Total to item L, Current year net income/loss.

Notes:

  • Only inputs on Interview Form K-3 - Other Schedule K Items and Schedule M-1 and M-2 Adjustments (Worksheet view: Income/Deductions > Schedule K Other Income / Deductions worksheet) or a government form overrides will affect Schedule M-2, Line 3.
  • Government form overrides on Schedule K-1 > Section L > Current year net income line, will not affect Schedule M-2 line 3.
  • Input overrides in Worksheet view on Partners > Schedule K-1 Overrides > Detail > Section 3 - Partner's Capital Account Analysis, Line 3 will not affect Schedule M-2 line 3. There is no Interview Form equivalent. 
  • With the coming 2020.02010 (2020-2.1) release, we will be implementing an override option. This input will be available on Interview Form ML-1, Box 30 (Worksheet view: M-1/M-2/L > Schedule M-2 Overrides > 8 Schedule M-2 Overrides).

Additional Information

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