Form 1065 - U.S. Return of Partnership Income, Form 1120 - U.S. Corporate Income Tax Return and Form 1120S - U.S. Income Tax Return for S Corporations require the completion of a balance sheet (or Schedule L) when the entity has receipts and/or assets in excess of specified amounts for that specific business entity. In such cases, the entity may need to include the Schedule L - Balance Sheet as part of the tax return.
Before a tax returns with a Schedule L required can be marked complete in the tax program, the balance sheet should be reconciled. If you receive a message stating "Total assets do not equal total liabilities and equity", it is indicating that there is an error either in the input of the data onto the balance sheet, or the information that has been entered on the tax return does not reconcile with the accounting records of the entity.
To correct this error, verify that the information in the entity's accounting software matches the information entered in the tax program for both the beginning balances and ending balances. If the information was entered correctly, double check both the books for accuracy in calculation and the entries for the calculation of income on the tax return. Only when the error has been corrected, and the balance sheet's assets equal the total liabilities plus equity, will this message stop being displayed.
The tax program will automatically pull certain items to the Schedule L - Balance Sheet. If the previous year tax return was done in the tax program and that return included a Schedule L, all of the beginning account balance amounts will pull from last year's ending account balances. Otherwise, the beginning amounts for each asset, liability and owner's equity will need to be entered.
The items that automatically pull to the balance sheet from the entries made reporting the income on the tax return are the following:
Inventories - The beginning and ending amounts entered on Form 1125-A Cost of Goods Sold are pulled to the Balance Sheet. Any adjustments to inventory amounts should be made on Form 1125-A because any change in inventory values will impact the Cost of Goods Sold by the entity and ultimately affect the income being reported.
Buildings & Other Depreciable Assets - If the assets have been entered in the tax program's depreciation module, the original cost or basis in any assets subject to depreciation will automatically pull to the balance sheet.
Accumulated Depreciation - The amount that pulls to the ending Accumulated Depreciation balance consists of the total accumulated depreciation on ALL depreciable assets that have been entered in the depreciation module.
TaxSlayer Pro does not track the accumulated impact of any adjusting entries to the ending accumulated depreciation amount, and it is the responsibility of the preparer/accountant to track any adjustments that are made to the accumulated depreciation balance from year to year. Although adjustments to the ending accumulated depreciation balance can be made on the Balance Sheet; any adjustment made in this section will not carry to the tax return where the underlying depreciable asset was entered.
Land - If land is entered in the depreciation module as a non-depreciable asset, those amounts will automatically pull to the ending balance amount.
Intangible Assets - If an Intangible Asset was entered in the depreciation module as an asset subject to amortization, those asset amounts will automatically pull to the ending balance amount.
Accumulated Amortization - The amount that pulls to the ending Accumulated Amortization balance consists of the total accumulated amortization on ALL intangible assets that have been entered in the tax return that are subject to amortization.
NOTE: This is a guide on addressing the warning that is given when the Schedule L - Balance Sheet per Books does not balance when entering it into TaxSlayer Pro. This is not intended as tax advice.