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I think I know the answer but wanted to see if I am wrong here. First, I have a partnership and we record tax payments estimates as a debit to Equity (Tax Estimates) / Credit Cash. Is this actually considered an Owner Distribution? I was reading and it said that Tax Payments aren’t included in the calculation for Partner Capital M2 but then my balance sheet doesn’t balance in Schedule L.
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Are these state PTET payments?
State nonresident withholding payments?
Federal estimated tax payments for the Partners?
The more I know the more I don’t know.
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I suppose that would help! They are Federal Estimated Payments for the Partners
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What is also causing an issue is that my Schedule L capital is different than the M2 because of book to tax differences in depreciation (because Net Income is tax basis) and those payments.
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Those estimated tax payments are distributions/draws.
The more I know the more I don’t know.
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Do you also know if I should add the difference between the depreciation book to tax as part of an adjustment on the M2? Or just leave M2 and Schedule L capital balance different?
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Nowadays we have different capital accounts on the 1065 balance sheet than on the K-1s. Book basis vs Tax basis.
The more I know the more I don’t know.
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Ok it’s just weird that the tax system ProConnet doesn’t automatically add that to the adjustment. But I get it. At least I got from your answer is the tax payments are indeed distributions.
