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A client is amending their 2014 S Corporation tax return to take advantage of $25,000 in research and development credits on Form 6765. The Alternative Simplified Credit (ASC) was not allowed because the time to take the ASC had expired.
The credit was comprised of only labor items, both in cost of goods sold and administrative expenses. No capital items were used in the calculation.
We began the process of reducing the labor items in preparing the amended tax return, and to balance the tax return balance sheet, we provisionally applied the reduction in expenses as an M-1 adjustment.
Please comment as to whether the M-1 adjustment is the correct way to complete the amended return.