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Back Taxes - Incorrect Income

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    Back Taxes - Incorrect Income

    A taxpayer has not filed his tax return, and it was due more than three years ago. A substitute for return (SFR) was prepared by the IRS. He had a K-1 in the year in question showing a taxable distribution, but it should have been a nontaxable distribution. I could be wrong, but my understanding is the K-1 cannot be corrected now because of the statute of limitations. What is the best way then of resolving this type of situation with the IRS?

    #2
    The partnership has to correct the K-1. That is the only way you can resolve the issue.
    Jiggers, EA

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      #3
      Back Taxes - Incorrect Income - continued

      In this case, the taxpayer was a partial shareholder of an S Corporation. The S Corporation is no longer in existence. Is it too late to correct the K-1 itself? Can the taxpayer negotiate with the IRS regarding his individual taxes if he can present evidence that the K-1 was incorrect?

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        #4
        Originally posted by Tax Sleuth View Post
        In this case, the taxpayer was a partial shareholder of an S Corporation. The S Corporation is no longer in existence. Is it too late to correct the K-1 itself? Can the taxpayer negotiate with the IRS regarding his individual taxes if he can present evidence that the K-1 was incorrect?
        Why don't you file a return and use a form 8082 for inconsistent treatment of the k-1? I would probably also use a form 8275 to disclose the situation and protect you and the taxpayer from 6694 and 6662 penalties.

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          #5
          the 3 year statute dictates whether or not a refund will be isssued. An incorrect return based on an incorrect K-1 can be amended when the correct K-1 is received.
          Believe nothing you have not personally researched and verified.

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