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Necessity to Amend Previous 1120S/1040

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If you have a new client and you can clearly see the errors in the previous years 1120S (K1 is blank there was no income/expenses accounted for) but I took over their books in Jan of 2019 and I have advised the client that not only was there revenue for the s-corp for 2018 but on their individual return (1040) for 2018 it reflects losses that should have come from the K1 that was clearly blank that an amendment would be necessary.

The client cannot afford to amend the previous year and just want 2019 completed but their beginning balances from 2019 that are accurate in the books that I kept for them will be inaccurate on their return if I match it to the previous year

Does that make sense?

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1 Solution

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Level 15

Are you sure the return wasn't prepared correctly?  If they had losses and no basis, the return would show a zero for the business.

ex-AllStar, ex-Lutefisk taste taster, ex-ACME product tester
and ex marks the spot where those rocks and anvils hit me.

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Level 15

Are you sure the return wasn't prepared correctly?  If they had losses and no basis, the return would show a zero for the business.

ex-AllStar, ex-Lutefisk taste taster, ex-ACME product tester
and ex marks the spot where those rocks and anvils hit me.

View solution in original post

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Thank you for your response.

In 2016 their Basis was calculated at 25K by end of year. New preparer in 2017 did not incorporate 2016 end of year Basis into 2017 but applied income/expenses and the same preparer for 2018 only applied the losses from 2017 under M-2 (accumulated Adjustments) but no revenue/expenses, nothing on K1. BUT same preparer on 2018 1040 applied under Sch E non-passive loss from schedule K1 of a considerable amount

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