Common questions about balance sheets in Lacerte

Table of contents:

Depreciable assets not included on beginning balance sheet

For newly acquired clients (not initial tax returns) the balance sheet beginning amounts will not generate automatically from the Depreciation screen. Instead the beginning amounts for the balance sheet will need to be entered manually on the Balance Sheet screen.

Ending balance sheet amounts are calculated from beginning balance sheet amounts, taking into account all current year activity calculated from Depreciation screen.

• Current year activity includes
  • Current year depreciation/amortization, special depreciation allowance, and elected Section 179 expenses (added to balance sheet ending depreciation).
  • Assets placed in service in the current year (basis added to balance sheet ending basis).
  • Assets disposed of during the current year (basis and accumulated depreciation subtracted from ending balance sheet).
• Current year activity does NOT include
  • Basis of assets added to the Depreciation screen--but with "date placed in service" not in the current year.
  • Basis or depreciation of assets simply deleted from the Depreciation screen.
  • Basis or depreciation of assets with entries, 1=Delete this year, 2=delete next year.

In the first year a business return is prepared using Lacerte:

• Enter all assets on the Depreciation screen. Lacerte will automatically calculate the end of year amounts on the balance sheet based on current accumulated depreciation/amortization/depletion.
• Ensure that for all assets, Date Placed in Service is the date depreciation actually began (whether in current or prior year).
• Enter Prior Depreciation/Amortization, Prior Section 179, and Prior Special Depreciation Allowance for all assets.
• Ensure that all assets have a Type (1=automobiles, .... 8=amortization, etc.).
• Ensure that all amortization assets use a "nonrecovery" Depreciation Method (91-98).
• Ensure that assets of all other types use MACRS (ACRS for older assets) Depreciation Method (30-88).

State balance calculation follows the same approach, although there are variations in the input screens caused by differences in the way different state forms categorize assets on their balance sheets.

Only use the Ending column on the Balance Sheet screen if you plan on overriding your end of year balance sheet amounts. The asterisk * on the input fields indicates that the Ending column will override Lacerte's automatic calculation.

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Balance sheet out of balance by Section 179 carryover from prior year

When there is a prior year section 179 carryover, there needs to be an M-1 adjustment entered to make the balance sheet balance.

Partnership:

The section 179 carryover will proforma into Screen 22, Other Schedule K Items, in the field Section 179 carryover (not oil & gas activities) found in the section titled Section 179 Deduction (4562). To make the M-1 adjustment for a Partnership:

1. Go to Screen 27.1, Schedule M-1.
2. Enter the amount of section 179 carryover, and a description, in the field Other (Ctrl+E) under the section Deductions on Schedule K Not Charged Against Book Income (-).

S-Corporation:

The Section 179 carryover from the prior year will proforma into Screen 20, Income and Deductions, in the field Section 179 carryover (not oil and gas activities) found in the section titled Section 179 Deductions (4562). To make the M-1 adjustment for an S corporation:

1. Go to Screen 31.1, Schedule M-1.
2. Enter the amount of section 179 carryover, along with a description, in the Other (Ctrl+E) field under the section Deductions on Schedule K Not Charged Against Book Income (-).

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Section 754 and 743(b) Depreciation Affecting Balance Sheet

If the Section 754, 743(b) depreciation entered in Screen 14, Depreciation has a date placed in service for the current year, the cost basis of the asset will flow to the balance sheet automatically.  Current year depreciation may also flow to the balance sheet depending on the Special Allocation method used in Screen 14, Depreciation.

It may be necessary to override the ending balance of the balance sheet for the applicable assets if you wish the Balance Sheet to be unaffected by Section 754, 743(b) depreciation.

To override the balance sheet:

1. Go to Screen 24, Balance Sheet.
2. Enter the desired balance for Buildings and other depreciable assets in the Ending column.
3. Enter the desired amount of accumulated depreciation in Less accumulated depreciation in the Ending column.

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Force CA Balance Sheet to Match Federal in S Corporate Module

Unlike the Partnership module, there is no option to automatically force the California Balance Sheet and Schedule M-2 to match the Federal. Instead:

• Compare the Federal and CA Balance Sheet and Schedule M-2 to locate discrepancies.
• Once discrepancies have been found, manual entries will need to be made on Screen 32, Schedule M-2 in the State if Different column to override the California Schedule M-2 to match Federal and/or Screen 29.011, California Balance Sheet to override the California Balance Sheet.

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Balance Sheet Rounding Adjustment

If the Balance Sheet (Schedule L) calculations create a rounding amount Lacerte has an option to enter an amount that forces the Schedule L to balance, by default that amount is $5 dollars.

To adjust the balance sheet rounding amount for all clients:

1. Select Settings
2. Select Options
3. Select the Tax Return tab
4. Scroll down to the Federal Tax Options section
5. Enter an amount in, Balance Sheet Rounding Amount

   Note: You can enter up to 4 digits, (e.g.: 1-9999) in the Balance Sheet Rounding Amount. Example: When 5 is entered, Lacerte will round the balance sheet amounts to the nearest five dollars. When 0 is entered, Lacerte will suppress the adjustments to the balance sheet.

To adjust the balance sheet rounding amount for a specific client:

1. Go to Balance Sheet Miscellaneous Screen
   • Screen 25, Balance Sheet Miscellaneous (Partnership)
   • Screen 38, Balance Sheet Miscellaneous (Corporate)
   • Screen 30, Balance Sheet Miscellaneous (S Corporate)
2. Enter an amount in, Balance sheet rounding amount (-1= none) [O]

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End of Year Balance Sheet does not Complete for Depreciable Assets

If the corporation is marked as a Final year return (Screen 4, code 5), the program will not calculate or print the ending balance for the following lines of the balance sheet:

• Buildings and other depreciable assets
• Accumulated depreciation
• Depletable assets
• Accumulated depletion
• Intangible assets
• Accumulated amortization

Perform the following steps if you wish to calculate and print the ending balances in the Corporate module for a final return:

1. Go to Screen 4.1, Miscellaneous Information (Corporate module).
2. Check the box next to Do not clear balance sheet ending cost and accumulated accounts on final return (code 38).

You may also clear the ending balances by going to Screen 37, Balance Sheet and entering -1 in the Ending column on the applicable lines.

The ending accumulated depreciation on Schedule L can be overridden using the ending column of the input field Less Accumulated Depreciation (Screen 34, code 217). Lacerte automatically calculates the ending accumulated depreciation when an entry is present in the beginning column for Less Accumulated Depreciation (Screen 34, code 117). The program adds the current depreciation to the beginning accumulated depreciation to arrive at the ending figure.

If no entry is made in Current Year Book Depreciation (Screen 35, code 1) and the ending column of Less accumulated depreciation (Screen 34, code 217) is left blank, the program automatically defaults to using tax depreciation to compute the ending balance of accumulated depreciation. You can override this by going to Screen 35. Enter an amount in Current year book depreciation (code 1). This field determines whether the software takes federal tax depreciation, state depreciation, or book depreciation to the ending balance sheet.

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Beginning Balance Sheet Amounts Out of Balance

Tips to resolve:

• Beginning balances proforma from the prior year program.  Check the ending balances in the previous year program and make modifications in the current year program if necessary.
• If this is a new client file in the Lacerte program, the beginning balances are direct input / output - check the Balance Sheet screen entries and verify they are correct.
• If the beginning balances are not printing on the form, check the input. If the return is not complete or has little income, the return may not be required to file a balance sheet.

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