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Schedules M-1 and M-3 reconcile book income to taxable income reported on the return.  Only corporations with $50 million or more of assets are required to file Schedule M-3.  Thus, the majority of the approximate two million corporate tax returns filed annually complete the Schedule M-1 rather than the Schedule M-3.  It is important to first understand the Schedule M-1 reporting process before tackling the more complex reporting requirements of the Schedule M-3.

This course covers the Schedule M-1 filing and reporting requirements, including:

  • Which corporations are required to complete Schedule M-1
    • which corporations are exempt from the reporting requirement
    • which corporations must file Schedule M-3 instead.
  • How to report book/tax differences on Schedule M-1
    • How to identify and disclose
      •  Temporary differences
      • Permanent differences
  • How financial income reported on Schedule M-1 is used to reconcile ending retained earnings reported on Schedule M-2.

Note:  accounting for temporary and permanent differences is covered in other courses I deliver on Illumeo.

Intro Video Transcript

Hello and welcome to this Illumeo webinar on Schedule M-1 Disclosure of Book Tax Differences. In prior webinars, we have talked about these book tax differences. Specifically in our first webinar, we talked about temporary differences and the second webinar we talked about permanent differences. And so in this third webinar, we're going to put those together and show how they're disclosed on the corporate tax return. Before you begin with the rest of this webinar, you may want to pause and go t the IRS website at www.irs.gov. Click on the forms of publications link and download the corporate Form 1120. When you print this out, you will notice that the Schedule M1 that we're going to talk about today is found on page five. So once you've downloaded the form, let's begin. This course is going to walk you through all of the requirements needed to complete Schedule M1. We'll talk about exempt entities, in which corporations must follow the more complicated Schedule M3 instead.

We're going to show how to report book tax differences on Schedule M1. We'll talk about temporary and permanent differences. However, when we do report these on Schedule 1, there's no need to separate the temporary from the permanent differences. Then lastly we're going to show how schedule M1 is used to reconcile the balance sheets, specifically the retained earnings amount shown on the balance sheet. So this schedule M2 reconciliation is the last step then once we have completed schedule M1.

At the end of today's webinar, you should be able to understand which different entities are required to report either Schedule M1 or M3. We're going to take the book tax differences and we're going to divide them in to two parts. On lines 1 through 5 on Schedule M1, we'll talk about those book tax differences that will increase book income to get to taxable income.

And then on line 6 through 10, we'll identify certain items that we can deduct from book income in order to arrive at taxable income. So if you think of the form as in being two parts, the first part is which of those items increase book income to get to taxable income? And then the second part is which items reduce book income to get to taxable income? We'll have a comprehensive example into case study that we will use to reinforce your knowledge of both tax differences.

Course Series

This course is included in the following series:

7 CoursesReporting and Compliance for Book-Tax Differences

  1. Corporate Tax Filing: Schedule M-1 Disclosure of Book-Tax Differences on the Corporate Tax Return
  2. Corporate Tax Filing: Schedule M-3: Part I: Compliance and Reporting Issues
  3. Corporate Tax Filing: Schedule M-3: Part II: Compliance and Reporting Issues
  4. Corporate Tax Filing: Schedule M-3: Part III: Compliance and Reporting Issues
  5. Corporate Tax Filing: Schedule M-3: Additional Reporting in Parts II and III
  6. Corporate Tax Filing: Schedule M-3: Reporting Requirements for a Consolidated Group
  7. Corporate Tax Filing: Uncertain Tax Positions: Financial Accounting and Tax Reporting Requirements

Learning Objectives

  • Recognize which entities are required to file Schedule M-1.
  • Identify book-tax differences that increase taxable income.
  • Identify book-tax differences that reduce taxable income.
  • Discover how to reconcile retained earnings on Schedule M-2.

10 Reviews (50 ratings)Reviews

4
Member's Profile
Excellent presentation of information; particularly for accounting professionals who have no background on this topic. Again, I would have liked to review the graded final exam to determine which question was answered incorrectly.
4
Anonymous Author
I'm not involved with any tax work at my company but found this to be an informative course that brought me back to my public accounting days in tax.
5
Member's Profile
This course provided a good overview of how to account for book-tax differences, as well as how to effectively navigate the Schedule M-1
4
Anonymous Author
A lot of good information and detail in the course and in the slides. The slides and examples reinforce understanding of concepts.
4
Member's Profile
The use of multiple examples was helpful in understanding the differences.
5
Member's Profile
I have always wanted to understand the M1- this was an excellent class.
3
Member's Profile
The schedule m-2 section had a blank slide for the whole 14 minutes.
5
Member's Profile
Great instructor and lesson plan and review questions.
5
Anonymous Author
really good
3
Member's Profile
2

Prerequisites

Course Complexity: Intermediate

No Advanced Preparation or Prerequisites are needed for this course.

Education Provider Information

Company:
Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact:
For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Course Syllabus
INTRODUCTION AND OVERVIEW
Schedule M-1 and M-2
  17:13Historical Overview and Major Components of Schedule M1
  26:09Schedule M-1 Lines 1 - 10
  13:57Schedule M-2 Lines 1 - 6 and Case Study
Conclusion
  2:22Course Conclusion
Continuous Play
  1:02:551 Corporate Tax Filing Schedule M-1: Disclosure of Book-Tax Differences on the Corporate Tax Return
SUPPORTING MATERIALS
  PDFSlides: Schedule M-1 Disclosure of Book-Tax Differences
  PDFSchedule M-1 Disclosure of Book-Tax Differences Glossary/Index
REVIEW & TEST
  quizREVIEW QUESTIONS
 examFINAL EXAM