Lacerte Diagnostics 25312 and 25319: Distributions and Schedule M-2
Diagnostic 25319 means the distributions on Schedule K do not agree with Schedule M-2, and the usual cause is a leftover distributions override on screen 32: clear it. Diagnostic 25312 is a critical diagnostic meaning the line 16d distributions exceed the net balance available in the Schedule M-2 accounts, so the excess reduces retained earnings on Schedule L. If the amounts are right, 25312 can be left alone.
- Read which diagnostic it is
- For 25319, check screen 32
- Confirm the real input is on screen 8
- For 25312, verify the amounts
- Then ask the basis question
- Diagnostics
- Screen 32, Schedule M-2
- Clear the distributions override
| Trial balance account | Lacerte screen and field | Lands on |
|---|---|---|
| Diagnostic 25319 | Clear the screen 32 distributions override | Schedule K versus Schedule M-2 |
| Diagnostic 25312 | Verify screen 8 distributions and the M-2 balances | Schedule K line 16d versus M-2 accounts |
| Correct distributions input | Screen 8, Distributions other than dividends | Schedule K line 16d |
| Second distributions input | Screen 27, Other Schedule K Items. Using both double counts | Schedule K line 16d |
| Effect when distributions exceed AAA | Excess reduces retained earnings | Schedule L line 24 |
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Try it freeLacerte Diagnostics 25312 and 25319: Distributions and Schedule M-2 on a trial balance
| Acct # | Account | Debit | Credit |
|---|---|---|---|
| 1000 | Cash | 42,800.00 | |
| 1200 | Accounts receivable | 68,500.00 | |
| 1300 | Inventory | 55,000.00 | |
| 1500 | Equipment | 145,000.00 | |
| 1510 | Accumulated depreciation | 47,500.00 | |
| 2000 | Accounts payable | 28,400.00 | |
| 2100 | Accrued expenses | 9,200.00 | |
| 2400 | Notes payable | 92,000.00 | |
| 2450 | Due to shareholder | 15,000.00 | |
| 3000 | Common stock | 10,000.00 | |
| 3900 | Retained earnings | 86,300.00 | |
| 3950 | Shareholder distributions (the account this page is about) | 52,000.00 | |
| 4000 | Gross receipts | 612,000.00 | |
| 5000 | Cost of goods sold | 318,000.00 | |
| 6000 | Salaries and wages | 88,000.00 | |
| 6050 | Officer compensation | 72,000.00 | |
| 6300 | Depreciation expense | 21,500.00 | |
| 6900 | Other operating expenses | 37,600.00 | |
| Total | 900,400.00 | 900,400.00 |
Example journal entries
| Account | Debit | Credit |
|---|---|---|
| Shareholder distributions | 52,000.00 | |
| Cash | 52,000.00 |
25319: two schedules disagreeing
The distributions on Schedule K and the distributions on Schedule M-2 are supposed to be the same money. When they are not, Lacerte raises 25319.
The cause is nearly always an override. Screen 32 is the Schedule M-2, and it has a Distributions other than dividends field that overrides what the return computed. Someone used it once, possibly in a prior year, and the figure stayed behind while the real input on screen 8 changed.
Clear the override. The distributions should come from screen 8, Distributions and Loan Repayments, where a total is split between shareholders using the ownership percentages on screen 6.
The other way to produce this is to enter distributions in two places: screen 8 and the Other Schedule K Items screen both have an input, and using both double counts.
25312: distributions exceeding the accounts
This one is critical rather than informational, and it means something different. The line 16d distributions are larger than the net balance available in the Schedule M-2 accounts, so the excess reduces retained earnings on Schedule L.
Intuit's own guidance is that if the amounts are accurate, the diagnostic may be ignored. That is true as far as the return goes, and it is not the end of the analysis.
What 25312 is really telling you
A distribution larger than the accumulated adjustments account usually means one of three things, and all three are worth a look before filing:
The distributions are right and the company has distributed more than its accumulated taxable income. Normal for a business funded by debt or by earlier contributions, and it raises the shareholder basis question: beyond stock basis, a distribution is generally capital gain on the shareholder's return.
Something in the equity section is miscoded. A capital contribution recorded as income, a loan recorded as a distribution, or personal expenses reclassified to distributions can all inflate the figure.
The accumulated adjustments account is understated. Nondeductible expenses netted into expense accounts, or a prior year that was never reconciled, leave AAA lower than it should be.
The first is a conversation with the client about their own return. The second and third are corrections to make before filing.
Tax return treatment
| Form | Line |
|---|---|
| Form 1120S | Schedule K line 16d, Schedule M-2, Schedule L line 24, and K-1 box 16 code D |
| Form 7203 | Where the shareholder tests the distribution against basis |
Common questions
How do I clear Lacerte diagnostic 25319?
Clear the Distributions other than dividends override on screen 32, the Schedule M-2 screen, so the figure comes from screen 8 instead. The diagnostic means Schedule K distributions and Schedule M-2 distributions disagree, and a leftover override is the usual cause.
What does diagnostic 25312 mean?
That the distributions on Schedule K line 16d exceed the net balance available in the Schedule M-2 accounts, so the excess reduces retained earnings on Schedule L. Intuit says that if the amounts are accurate, the diagnostic can be ignored.
Can I just ignore 25312?
For the entity return, often yes. But a distribution larger than the accumulated adjustments account raises a shareholder basis question: beyond stock basis a distribution is generally capital gain on the shareholder individual return. It is worth checking before filing rather than after.
Why are my distributions doubled on Schedule K?
Because they were entered in two places. Screen 8 and the Other Schedule K Items screen both accept distributions, and using both reports them twice. Enter them on screen 8 and leave the other input empty.
Related answers
Go deeper
This page is the short answer. These articles work through the same ground in detail.
Last reviewed October 18, 2026.