What Is Schedule L and L1?
If you’re filing a business tax return and come across references to Schedule L and Schedule L1, you may wonder whether they’re the same form or serve different purposes. While they sound similar, they apply to different tax jurisdictions and requirements. Here’s what you need to know.
What Is Schedule L?
Schedule L is part of federal tax returns for certain business entities, specifically:
Schedule L is the balance sheet section of these returns. It reports your business’s financial position at the beginning and end of the tax year, including:
- Assets – cash, inventory, accounts receivable, equipment
- Liabilities – loans, accounts payable, accrued expenses
- Capital/Equity – partner capital accounts or retained earnings
Businesses with total receipts or assets of $250,000 or more are generally required to file Schedule L. It helps the IRS ensure that reported income and equity align with the business’s financial activity.
What Is Schedule L1?
Schedule L1 is not a federal form. It is specific to the California Franchise Tax Board (FTB) and is used as part of the California Form 100 (California Corporation Franchise or Income Tax Return).
Schedule L1 in California serves a similar purpose to federal Schedule L—it reports the corporation’s balance sheet information using the state’s tax accounting rules. However, it is tailored to California’s specific requirements, which may differ from the IRS in areas like depreciation, credits, or tax adjustments.
Key Differences Between Schedule L and L1
| Feature | Schedule L (Federal) | Schedule L1 (California) |
| Filed With | Form 1065 or Form 1120 | California Form 100 |
| Jurisdiction | IRS (Federal) | California Franchise Tax Board |
| Purpose | Federal balance sheet | California state balance sheet |
| Reporting Basis | Book or tax basis | California-specific tax basis |
Final Thoughts
In summary, Schedule L is a federal balance sheet form required on Forms 1065 and 1120, while Schedule L1 is a state-level form required by California for corporations filing Form 100. Both help tax authorities verify the accuracy of income, expenses, and equity, and must be completed accurately based on the respective jurisdiction’s rules. If your business operates in California or files both federal and state returns, be sure to understand and properly complete both schedules.
Dimov Tax proudly presents expert assistance. Contact us today for professional aid in Schedule L matters.