Allowing distributions to reduce Accumulated Adjustment Account below zero (1120)

Alerts and notices

This article explains how to allow the Accumulated Adjustment Account on Form 1120S, Schedule M-2 to be reduced below zero.

For an existing client

  1. Open the client.
  2. In the folders block, click the Balance Sheet folder, and click the Ms tab. Page down to the Schedule M-2 - Analysis of Accumulated and Other Adjustments section on Screen Ms.
  3. Enter 1 in the Allow distributions to reduce AAA below zero field.

For all new clients

You can enable a setting to automatically allow the Accumulated Adjustment Account on Form 1120S, Schedule M-2 to be reduced below zero for any new client you create.

Note: This option will only apply to new clients. You must follow the procedure above to modify any existing clients.

  1. Choose Setup > 1120 Corporation.
  2. In the Federal tab, click the New Client Options button.
  3. In the Return Presentation tab, enter 1 in the Allow distributions to reduce AAA below zero field.