ProConnect HelpIntuit HelpIntuit

Entering Nondeductible Expenses for an S-Corporation in Lacerte

by Intuit Updated 2 weeks ago

Nondeductible expenses for an S-Corporation:

Meals and Entertainment:

  1. Go to Screen 15, Deductions.
  2. Browse to the Meals and Entertainments section.
  3. Enter the meals in full under Meals in full (50% deductible).
  4. Enter the food and beverages from a restaurant under Food or beverages from a restaurant(100% deductible) (See Notice 2021-25).
  5. Enter the meals (DOT) in full under Meals (DOT) in full (80% deductible).
  6. Enter entertainment under Entertainment (nondeductible).

The program calculates the allowed 50% and 80% of meals expense based on entries in Meals (in full) and Meals (DOT) in Full. Food or beverages from a restaurant(100%) are fully deductible in 2021 and 2022 based on tax law changes related to notice 2021-25. Entertainment Expenses are nondeductible from 2019-2022. All nondeductible expenses flow to Schedule M-1, line 3b and Schedule M-2, line 5. The program carries the amount to Schedule K, line 16c and Schedule K-1, box 16c.

Enter an amount to override the program in Screen 31.1, Schedule M-1 under Disallowed travel and entertainment (code 102). The program carries the amount to Schedule K, line 16c and Schedule K-1, box 16.

Other nondeductible expenses can be entered in Screen 31.1, Schedule M-1, M-3, under the section Expenses Recorded on Books Not Included on Schedule K.

Federal underpayment penalty:

If you check the box to Accrue Federal Tax in Screen 3.1, Misc/Other Info, and the program calculates a penalty on Form 2220, the program carries the amount to the following forms:

  • Schedule K, line 16c
  • Schedule K-1, box 16c
  • Schedule M-1, line 3b
  • Schedule M-2, line 5, column (a) Other Reductions
    • To override the calculation of the Federal underpayment penalty included as a nondeductible expense, make an entry in Screen 31.1, Schedule M-1, M-3, under the section Expenses Recorded on Books Not Included on Schedule K in Federal underpayment penalty [O].

State Underpayment penalty:

If you enter 1 in 1 To Accrue Federal tax in Screen 3.1, Misc/Other Info, and the program calculates a penalty on Form 2220, the program carries the amount to the following forms:

  • Schedule K, line 16c
  • Schedule K-1, box 16c
  • Schedule M-1, line 3b
  • Schedule M-2, line 5, column (a) Other Reductions
    • To override the calculation of the state underpayment penalty included as a nondeductible expense, make an entry Screen 31.1, Schedule M-1, M-3, under the section Expenses Recorded on Books Not Included on Schedule K in State underpayment penalty [O].

Officer's life insurance premiums:

The program default for Officer's life insurance premiums is to carry the amount to the following forms:

  • Schedule K, line 16c
  • Schedule K-1, box 16c
  • Schedule M-1, line 3b
  • Schedule M-2 Line 5, column (a) (Accumulated Adjustments Account) when there are no Other Retained Earnings (prior C corporation E&P).
  • Schedule M-2, line 5, column (b) (Other Adjustments Account) when there are Other Retained Earnings (prior C corporation E & P), or if the If Accumulated Earnings and Profits at Year End (memo) is checked in Screen 3.1, Misc/Other Info.
    • Under the field 1=reduce AAA by officers insurance premiums, 2=reduce OAA by officers insurance premiums [O], enter a 1 to reduce AAA or 2 to reduce OAA by officers insurance premiums

If you do not want the nondeductible expenses to show as an adjustment on the M-1 but need to show on the M-2 and the Shareholder Basis Schedule, the amounts entered in Screen 31, Schedule M-1, M-3 will allow this to happen, as well as Screen 9, Shareholders Basis.

Lacerte Tax

Sign in now for personalized help

Ask questions, get answers, and join our large community of Intuit Accountants users.

Dynamic AdsDynamic Ads