Where to Enter Schedule M-1 Adjustments in Lacerte
Lacerte generates most of Schedule M-1 automatically from the book to tax differences already in the return, and works backwards to net income per books rather than forwards from it. To change a specific line, use the Schedule M-1 screen: 31.1 on an 1120S, 27.1 on a 1065 and 39.1 on an 1120. Several lines offer Jump to Input, which takes you to the entry that produced the figure.
- Detail
- Screen 31.1 (1120S) / 27.1 (1065) / 39.1 (1120)
- Schedule M-1
| Trial balance account | Lacerte screen and field | Lands on |
|---|---|---|
| Book to tax depreciation difference | Computed from screen 16. Override on the M-1 screen | Schedule M-1 depreciation line |
| Meals disallowance | Entered with the expense, flows automatically | Schedule M-1 expenses on books not deducted |
| Federal income tax (1120) | Tax provision accounts | Schedule M-1 line 2 |
| Tax exempt interest | Schedule K screen | Schedule M-1 income on books not on return |
| Officer life insurance premiums | With the expense, as nondeductible | Schedule M-1 addback |
| Net income per books | Computed in reverse, not entered | Schedule M-1 line 1 |
Skip manual grouping codes. Get a Lacerte ready import file in minutes.
Try it freeWhere to Enter Schedule M-1 Adjustments in Lacerte 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 | 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 (the account this page is about) | 21,500.00 | |
| 6900 | Other operating expenses | 37,600.00 | |
| Total | 900,400.00 | 900,400.00 |
Example journal entries
| Account | Debit | Credit |
|---|---|---|
| Depreciation expense | 21,500.00 | |
| Accumulated depreciation | 21,500.00 |
The calculation runs backwards
This is the part that confuses people looking for a field to type book income into. Lacerte does not start from net income per books and work towards taxable income. It starts from the taxable income the return computed and works back up the schedule, so line 1, net income per books, is the output rather than an input.
On an 1120 it starts from page 1 line 28. On an 1120S it starts from Schedule K line 18. On a 1065 it starts from the Analysis of Net Income per return.
The practical test: when the schedule is complete, line 1 should equal the book income on the client's financial statements. If it does not, something in the return disagrees with the books, and that difference is information rather than a formatting problem.
Most of it is automatic
Lacerte generates most of the increases and decreases from entries elsewhere in the return that already indicate a book to tax difference. The depreciation difference comes from the asset module. The meals disallowance comes from how the expense was entered. Tax exempt interest comes from the Schedule K screen.
That means the first move when an M-1 line looks wrong is not to override it. Several lines offer a Jump to Input feature that takes you to the entry that produced the number, which is almost always where the actual problem is.
When to override
Use the M-1 screen when the underlying entry cannot produce the right answer, which in practice means a book figure the return has no other way of knowing. An override there replaces the computed figure and stops Lacerte from recomputing it, so it needs a note in the file explaining why.
The differences worth hunting on a small business return
- Depreciation, almost always, because book lives and MACRS rarely agree
- Meals, where only part is deductible and clients often net the disallowance into the expense
- Officer life insurance where the company is the beneficiary, which is permanently nondeductible
- Penalties, which are never deductible and usually sit inside a tax expense account
- Federal income tax on an 1120, which is an addback and is the one the IRS can see from the face of the return
- Accrued compensation to an owner, which is often not deductible until paid
Tax return treatment
| Form | Line |
|---|---|
| Form 1120 | Schedule M-1, from screen 39.1, starting from page 1 line 28 |
| Form 1120S | Schedule M-1, from screen 31.1, starting from Schedule K line 18 |
| Form 1065 | Schedule M-1, from screen 27.1, starting from the Analysis of Net Income |
Common questions
What screen is Schedule M-1 in Lacerte?
Screen 31.1 on an 1120S, screen 27.1 on a 1065 and screen 39.1 on an 1120. Intuit articles have used different numbers across versions for the S corporation screen, so confirm in your copy.
Why can I not enter net income per books?
Because Lacerte computes it. The calculation runs backwards from the taxable income the return produced, so line 1 is the result. When the schedule is finished, line 1 should match the book income on the financial statements.
Should I override an M-1 line that looks wrong?
Not first. Most lines are generated from entries elsewhere in the return, and several offer a Jump to Input that takes you to the source. Override only when the underlying entry cannot produce the right figure, and note why in the file.
Which book to tax differences come up most?
Depreciation, the meals disallowance, officer life insurance where the company is the beneficiary, penalties, federal income tax on an 1120, and accrued compensation to an owner that is not deductible until paid.
Related answers
Go deeper
This page is the short answer. These articles work through the same ground in detail.
Last reviewed October 18, 2026.