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Screen CAMc - California Income Reconciliation (1120)
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Schedule M-1 - Reconciliation of Income (Loss)
note
Normally, the application does
not
complete Form 100 or 100W, Schedule M-1 if the year-end assets and
total receipts are less than $250,000. To complete the schedule for all returns regardless of the asset value and total receipts, enter X
for Complete Schedules M-1 and M-2 when receipts and assets are less than $250,000
in the Setup, 1120 Corporation, Federal tab, then Other Return Options. To complete the schedule for only the current return regardless of the asset value and total receipts, enter X
for Complete Schedules M-1 and M-2 when receipts and assets are less than $250,000
in the federal Mc screen. If using UltraTax/1120 Consolidated to file the California combined group return, Schedules M-1 and M-2 of Form 100 or 100W must be completed for each member using one of these methods.The application uses the information in this section to complete Schedule M-1 on Form 100 or 100W. The application transfers amounts from federal Form 1120, and Sides 1 and 2 of California Form 100 or 100W to complete Schedule M-1. This provides an automatic reconciliation of book income to California net income (loss) after state adjustments. From the federal return, the application transfers the following:
- The 50 percent reduction in applicable meals and entertainment expenses
- Income from alcohol fuel credit
- Income from biodiesel and renewable diesel fuels credit
- Credit to holders of tax credit bonds
- The difference between book and tax depletion
- Conservation expenses
- Federal income tax
- Expenses attributable to tax-exempt income
- Officers’ life insurance premiums
- Cash surrender value of officers’ life insurance
If federal Form 1120H is filed and federal Form 1120 is completed, the following information transfers from the federal.
- Excess contributions
- Employment credit wages
- Employer tip credit reduction
- Research credit
- Disabled access credit
note
Use the CAStmtM1 screens to make any adjustments to the transferred federal values.
In addition, the application makes adjustments for the following:
- The difference between book and California tax depreciation
- California dividends-received deduction
- The difference between federal and California Form 4684, short- and long-term income-producing losses
- The difference between California contributions paid and California contributions deducted
- Schedule D-1 book / state difference
- Amortization book / state difference
- Organization or startup expense book / state difference
- Research credit
- Rounding, if this had been indicated in the Maximum amount for Schedule M-1 rounding field
- California net capital loss carryover utilized this year
- Schedule D federal / state difference
- Passive activity and at-risk adjustments
- Additional losses allowed or disallowed due to passive and at-risk activities
If filing California Form 199, adjustments are calculated for exempt function income, exempt function deductions, and the specific deduction for Section 23701t.
- Exempt function deductions are calculated by taking the difference between federal Form 1120H, Association’s total expenditures for the taxpayer and Total deductions (excluding exempt function income).
- Exempt function income is calculated by taking the Total exempt function income amount from federal Form 1120H.
- A $100 specific deduction for Section 23701t is calculated.
Taxable income not on books /… / Return deductions not on books
The application uses the information entered here to complete Schedule M-1 on Form 100 / 100W. Amounts are transferred from the federal Mc screen to the statements attached here. Use these statements to make any necessary modifications.
To exclude an item from the state return, delete the amount or the entire line item from the statement. The application shows the modified column in black and won't replace this new data with subsequent federal-to-state data transfers. For more information, (including details on setting a customer preference to mark fields for which you overruled the transferred amount), see the Statements overview.
note
If electronic filing, you you'll need to delete the entire line rather than deleting only the amount.
Tax-exempt interest
Enter an amount to override the calculated amount. The application transfers tax-exempt interest from the federal return and U.S. interest from the federal Inc screen to the line for tax-exempt interest, Items recorded on books this year not included in this return of Schedule M-1 for income tax filers only. Franchise tax filers are subject to tax on all interest income received; therefore, no Schedule M-1 entry is required. Use the
Type of tax return
in the CAGen screen to indicate the type of tax return being filed.All U.S. interest and tax-exempt interest is reported on Form 100 or 100W, Side 1, Interest on government obligations. For corporations subject to income tax (instead of the franchise tax), interest received on obligations of the federal government and on obligations of the state of California and its political subdivisions is exempt from income tax. Use the Type Code column to indicate the source of tax-exempt interest. In-state interest, along with U.S. interest, is deducted on Form 100 or 100W, Side 2, Other deductions. Enter a code directly or select one from the dropdown.
Book information: Depreciation - other than cost of goods sold / cost of goods sold
These contain the book depreciation amounts. The application uses these to generate a Schedule M-1 reconciling item, which is the difference between the book depreciation amount and the amount of total state tax depreciation.
The first book depreciation boxes show the amount of book depreciation entered in the asset module. If you want the application to use an amount for book depreciation that is different than the displayed amount, enter an amount (or zero) in the second book depreciation box. If both book boxes are blank on either line or if book equals state tax, the application doesn’t generate a Schedule M-1 depreciation adjustment.
note
If a force amount is entered on the corresponding box in the federal Mc screen, then a force amount should also be entered here.
Book information: Amortization
These contain the book amortization amounts. The application uses these boxes to generate a Schedule M-1 reconciling item, which is the difference between the book amortization amount and the amount of total state tax amortization.
The first book amortization box shows the amount of book amortization entered in the asset module. If you want the application to use an amount for book amortization that is different than the displayed amount, enter an amount (or zero) in the second book amortization box. If both book boxes are blank or if book equals state tax, the application doesn’t generate a Schedule M-1 amortization adjustment.
note
If a force amount is entered on the corresponding field in the federal Mc screen, then a force amount should also be entered here.
Book information: Organization or startup expense deduction
These contain the book organization or startup expense deduction amounts. The application uses these to generate a Schedule M-1 reconciling item, which is the difference between the book organization or startup expense amount and the amount of total state tax organization or startup expense.
The first book organization or startup expense box shows the amount of book organization or startup expense entered in the asset module. If you want the application to use an amount for book organization or startup expense that is different than the displayed amount, enter an amount (or zero) in the second book organization or startup expense box. If both book boxes are blank or if book equals state tax, the application doesn’t generate a Schedule M-1 organization or startup expense adjustment.
note
If a force amount is entered on the corresponding field in the federal Mc screen, then a force amount should also be entered here.
Book information: Schedule D-1 gain (loss)
These represent book Schedule D-1 gain or loss amounts. The application uses these to generate a Schedule M-1 reconciling item, which is the difference between the amount of the book Schedule D-1 gain or loss and the state tax Schedule D-1 gain or loss calculated by the application.
The first
Schedule D-1 gain or loss -book
box shows the amount of book Schedule D-1 gain or loss entered in the asset module. If you want the application to use an amount for book Schedule D-1 gain or loss that is different than the displayed amount, enter an amount (or zero) in the second Schedule D-1 gain or loss
- book
box. If both Schedule D-1 gain or loss
- book
boxes are blank or if book Schedule D-1 gain or loss equals state tax Schedule D-1 gain or loss, the application doesn’t generate a Schedule M-1 gain or loss adjustment. If a book Schedule D-1 gain / loss amount is not entered, the application assumes that the book and state tax amounts are the same and doesn’t make a reconciling adjustment. The application makes automatic adjustments only when values entered for the book and the tax Schedule D-1 gain or loss are different.
note
If a force amount is entered on the corresponding field in the federal Mc screen, then a force amount should also be entered here.
Maximum amount for Schedule M-1 rounding
Enter an out-of-balance threshold. The application performs an out-of-balance adjustment up to the amount specified. The application doesn’t perform an adjustment if the difference between the net income for state purposes on Side 2 and Schedule M-1 is out of balance by more than the amount here. If you don’t want the application to make an automatic adjustment, enter
0
(zero) or leave this blank.