Form 1120-F Schedules M-1 and M-2 at a glance
What it is: Schedules M-1 and M-2 (Form 1120-F) are the Reconciliation of Income (Loss) and Analysis of Unappropriated Retained Earnings per Books.
Where and when to file: Attach to Form 1120-F.
Generally, any foreign corporation that is required to complete Form 1120-F, Section II, must complete Schedules M-1 and M-2 (Form 1120-F).
A filled-in Form 1120-F Schedules M-1 and M-2 example: a foreign corporation reconciles income and retained earnings
How to fill out Form 1120-F Schedules M-1 and M-2, box by box
Name of corporation and Employer identification number
Enter the Name of corporation and the Employer identification number.
Schedule M-1 lines 1 to 6
In Schedule M-1, enter the Net income (loss) per books on line 1, the Federal income tax per books on line 2, the Excess of capital losses over capital gains on line 3, and the Income subject to tax not recorded on books this year (itemize) on line 4. The corporation may be required to file Schedule M-3 (see instructions).
Enter the expenses recorded on books this year not deducted on this return (itemize) on line 5 of Schedule M-1: a Depreciation, b Charitable contributions, c Travel and entertainment, d Other (itemize).
Add lines 1 through 5 on line 6 of Schedule M-1.
Schedule M-1 lines 7 to 10
Enter the income recorded on books this year not included on this return (itemize) on line 7 of Schedule M-1: a Tax-exempt interest, b Other (itemize).
Deductions on this return not charged against book income this year (itemize) go on line 8 of Schedule M-1: a Depreciation, b Charitable contributions, c Other (itemize).
Add lines 7 and 8 on line 9 of Schedule M-1. Enter Income-line 6 less line 9 on line 10.
Schedule M-2 Analysis of Unappropriated Retained Earnings per Books
In Schedule M-2, enter the Balance at beginning of year on line 1, the Net income (loss) per books on line 2, and the Other increases (itemize) on line 3.
Add lines 1, 2, and 3 on line 4 of Schedule M-2.
On line 5 of Schedule M-2, enter the Distributions: a Cash, b Stock, c Property. On line 6, enter the Other decreases (itemize).
Add lines 5 and 6 on line 7 of Schedule M-2. Enter the Balance at end of year (line 4 less line 7) on line 8.
If your situation is different
Schedule M-3 in lieu of Schedule M-1
Complete Schedule M-3 in lieu of Schedule M-1 if total assets at the end of the tax year that are reportable on Schedule L are $10 million or more. (checked October 22, 2026)
A corporation filing Form 1120-F that is not required to file Schedule M-3 may voluntarily file Schedule M-3 instead of Schedule M-1.
Common questions about Form 1120-F Schedules M-1 and M-2
When is this form not the right one?
Do not complete Schedules M-1, M-2, and M-3 if total assets at the end of the tax year (Schedule L, line 17, column (d)) are less than $25,000. (checked October 22, 2026)
Sources
[1] Schedules M-1 and M-2 (Form 1120-F) (Rev. December 2025), Department of the Treasury Internal Revenue Service (the Official source link on this page).