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This article applies to:

  • Product: ONESOURCE Income Tax Express RS
  • Return type: 1120 Corporation
  • Subject: Print requirements

Schedule M-3 print requirements

Schedule M-3 is required for corporations with year-end assets over $10 million. Verify entity type and ensure correct compute options in the Organizer settings.
The application calculates and prints Schedule M-3 for the following corporations when total assets at year-end exceed $10 million:
  • 1120
  • 1120-S
  • 1120-F
  • 1120-PC or Failed Life
  • 1120-C
Go to
Organizer
General Information
Basic Return Information
Entity Information
 to confirm the entity type.
Also confirm that you have set the Schedule M-3 compute options correctly:
  1. In
    Organizer
    , go to the
    Balance Sheet/M1-M2 -M3
     folder and select
    Schedule M-3
    .
  2. Select the
    Schedule M-3
     screen.
  3. On the
    Sch M-3 Options
     tab:
    1. Confirm that you haven't selected
      Dormant
       or
      Inactive Corporation
       in the General Options section.
    2. In the Option to Compute Schedule M-1 and/or Schedule M-3 section, select an option other than
      Compute Sch M-1 only
      .
note
The application prints Schedule M-3, Page 1 only for single company returns or top consolidation returns, since these are the filing entities.

Suppress Part II, Line 28 detail

To suppress detail for Schedule M-3, Part II, Line 28, Other items with no differences:
  1. In the Organizer, go to the
    Balance Sheet/M1-M2-M3
     folder and select
    Schedule M-3
    .
  2. Select the
    Schedule M-3
     screen.
  3. On the
    Sch M-3 Options
     tab, go to
    Print Suppression Options
    .
  4. For Part II Detail, mark the checkbox for
    Other income (loss) and expense/deduction items with no differences
    .
If you are filing a consolidated return, make sure to use this option consistently across your returns.

Move the Line 23d amount from permanent to temporary

To move the Schedule M-3, Page 2, Line 23d amount from permanent to temporary difference:
  1. If you use the automatic option to calculate Line 23d, go to
    Organizer
    Balance Sheet/M1-M2-M3
    Schedule M-3
    Schedule M-3
    .
  2. On the
    Sch M-3 Options
     tab, select
    Temporary
     or
    Permanent
     in the
    Option to Calculate Book/Tax Difference for Gain/Loss from Form 4797
     field.
  3. If you don't use any automatic options but an amount still appears, go to
    Organizer
    Balance Sheet/M1-M2-M3
    Schedule M-3
    Schedule M-3
    . On the
    Sch M-3 Options
     tab, mark the
    Global M-3 Automatic Calculation Suppress
     checkbox.

Schedule M-3 automatic computations

You must manually enter most Schedule M-3 data in
Organizer
Balance Sheet/M1-M2-M3
Schedule M-3
Schedule M-3
. However, the application automatically computes some items based on data you enter elsewhere in the return. The application automatically transfers the following items, as necessary:
  • Gross capital gains from Schedule D, excluding amounts from flow-through entities
  • Gross capital losses from Schedule D, excluding amounts from flow-through entities, abandonment losses, and worthless stock losses
  • Net gain/loss reported on Form 4797, excluding amounts from flow-through entities, abandonment losses, and worthless stock losses
  • Abandonment losses
  • Worthless stock losses
  • Addback of credit for alcohol used as fuel
  • Addback of biodiesel and renewable diesel fuels credit
  • Recapture under Section 179 and 280F
  • Meals and entertainment
  • Domestic production activities deduction
  • Depreciation
  • Employment credits wage reduction
  • Reduction is research and development expense by credit
  • Extraterritorial income exclusion
  • Passive loss adjustment
To suppress all items from flowing automatically to Schedule M-3, mark the
Global M-3 Automatic Calculation Suppress
 checkbox on the
Sch M-3 Options
 tab.
You can also use the Sch M-3 Options tab to suppress individual items from flowing automatically.

Schedule M-3, Part III, Line 3 state tax

Schedule M-3, Page 3, Part III, Line 3, State and Local Tax, may include any state and city taxes that are accrued to the federal return. Go to
Organizer
States
Common State
Tax Accrual
 to determine if you have enabled accrual. If you select
Accrue to the M-1
 on the
Accrual Options
 tab, the application also accrues the tax to Schedule M-3.
When you enable accrual, the application automatically populates Schedule M-3, Part III, Line 3, and it ignores any amounts you enter in the Schedule M-3 Organizer for column (b).

Exclude items with no differences on Schedule M-3/Form 8916-A

To move items without differences on Schedule M-3:
  • For 1120 returns: Go to
    Organizer
    Balance Sheet/M1-M2-M3
    Schedule M-3
    Schedule M-3
    . On the
    Sch M-3 Options
     tab, under
    General Options
    , mark the checkbox for
    Exclude items with no differences from Part II, line 25 and Part III, line 37 and report those on Part II, line 28
    .
  • For 1120S returns: Go to
    Organizer
    Balance Sheet/M1-M2-M3
    Schedule M-3
    Schedule M-3
    . On the
    Sch M-3 Options
     tab, under
    General Options
    , mark the checkbox for
    Exclude items with no differences from Part II, line 22 and Part III, line 29 and report those on Part II, line 29
    .
To move items without differences on Form 8916-A:
  • For 1120/1120S returns: Go to
    Balance Sheet/M1-M2-M3
    Supplemental Attachment to M-3
    Form 8916-A
    . Under
    General Options
    , mark the checkbox for
    Check to exclude Part I, items with no differences from Line 6 and report those on Line 7
    .
For consolidated returns, you can find transfer options for these settings on the
Organizer
Consolidated Returns
Step 3 - Select Print and Calculation
Form Print Options
 tab. From the TopCon return, select or deselect your preference, then select
Transfer to ALL
 to send to the members of this consolidation. Because transfer options move down only 1 level of consolidation, repeat this step in any subconsolidations or divisional consolidations after you complete the transfer from the TopCon return.

Consolidated Schedule M-3 data entry

Complete Schedule M-3, Part I once to report the consolidated information for the entire U.S. consolidated tax group, and enter this information only on the top consolidator. Complete Schedule M-3, Part II, and Part III separately for each member of the consolidated group; enter this data on each subsidiary return and the parent return, not on the top consolidator.
When you print the top consolidation, the application generates a consolidated Schedule M-3 with Parts I, II, and III, along with a separate Part II and III for each parent and subsidiary. If the return includes a divisional consolidation, the application prints Schedule M-3 Part II and III for the subconsolidation but not for the divisions, because divisions are not legal entities. The application prints Schedule M-3, Part I only in the top consolidation, not in the member returns.
To keep data entry consistent among the consolidated members and avoid adjustments, go to
Organizer
Balance Sheet/M1-M2-M3
Schedule M-3
Schedule M-3
Sch M-3 Options
 tab. You can transfer several compute options from the Top Consolidator to the parent and subsidiary returns by selecting
Transfer Option for Consolidated Returns
. Make sure the Option to Compute Schedule M-1 and/or Schedule M-3 matches at every level.

Resolve a Page 2, Line 23d adjustment in consolidated returns

If Schedule M-3, Page 2, Line 23d shows an adjustment in subview, go to
Tax Forms
Federal 1120 - U.S Corporation
1120 Consolidated Review
 and look for equal adjustments on 1120, Page 1, Lines 8 and 9. Because the application reclasses certain gains from Form 4797 to Schedule D, differences in overall gain or loss between members and the consolidation appear as equal adjustments on these lines. If this adjustment matches the amount on Schedule M-3, Line 23d and the return is in balance, you can safely ignore the adjustment. If a difference exists, review how each member calculates Sch M-3 Line 23d (automatically or manually) and make sure all returns use a consistent method before you consolidate.
To suppress the adjustment, go to
Organizer
Balance Sheet/M1-M2-M3
Schedule M-3
Schedule M-3
 and mark the
Global M-3 Automatic Suppress
 checkbox.

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