Schedule M-1
Reconciliation of Income (Loss) per Books With Income (Loss) per Return
This section is used to reconcile the income reported by the S corporation on its tax return with the income recorded in its accounting records.
Again, referring back to line 11 on Schedule B, if your S Corporation's total receipts and total assets were less than $250K, then the Yes box should be selected. Your S Corporation is not required to complete Schedule M-1.
Schedule M-2
Analysis of Accumulated Adjustments Account, Shareholders’ Undistributed Taxable Income Previously Taxed, Accumulated Earnings and Profits, and Other Adjustments Account
This section is used to reconcile the factors that affect your shareholders’ basis in the S Corporation. Your basis is your S Corporation's earnings and deposit withdrawals.