freshy70
Level 4
‎06-09-2022 02:01 PM
I am preparing a first year 1120S and the owner took distributions. I get this message "The amount of distributions entered on Schedule K, line 16d is greater than the total net balance available for distribution in all of the Schedule M-2 accounts by $71,594. This amount of excess distributions has reduced the ending balance of Retained Earnings on Schedule L, line 24." and it is a critical diagnostic. So what am I supposed to do? There does not seem to be any way to correct the diagnostic.
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PhoebeRoberts
Level 11
Level 11
‎06-09-2022 02:08 PM

Even though it's labeled critical, it's really an informational item. 

freshy70
Level 4
‎06-09-2022 02:12 PM

I see. Seems then I can just ignore the diagnostic and file without risk of the return being rejected.

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PhoebeRoberts
Level 11
Level 11
‎06-09-2022 03:02 PM

Yeah, most of the critical diagnostics won't cause an e-file to reject (or fail to be transmitted, which is worse). That one specifically is not a problem for e-file.