Yet Another Turbotax

[Golden Rocket]

Yet another Turbotax horror story.

Engineer friend of mine started a partnership. CPA prepares partnership return, and a K-1 showing appx $35,000 loss.

Engineer friend put $20,000 of his own money into the partnership, and is NOT responsible for the debt which covered massive operating losses. (Don't ask why, it's a long story). So he puts the $35,000 loss into Turbotax, gets a fat refund of several thousand dollars, and no one is the wiser, right?

In casual conversation, he told me about this, and I told him he could only deduct $20,000 of the loss, and the K-1 does not compensate its reporting for his lack of basis. His response was, "Intuit backs their product, and when I buy Turbotax, they guarantee they will go through an audit with me and indemnify any audit adjustments."

Look again, my friend. The guarantee only applies to mathematical calculations. He asked me what should he do? Of course, my answer was to file an amended return and send them back their money. I seriously doubt that he ever did this. I also seriously doubt anything will ever come of it.

[Uncle Sam]

TurboTax

Before you condemn Turbotax - how about the CPA who prepared the return who let it go - WHO SHOULD HAVE KNOWN better? I suggest your friend go back to the CPA and get an amended K-1.

[sea-tax]

Before you condemn Turbotax - how about the CPA who prepared the return who let it go - WHO SHOULD HAVE KNOWN better? I suggest your friend go back to the CPA and get an amended K-1.

US can you elaborate? I am a little confused why the CPA is at fault. It sounded to me like he only prepared the Partnership Return not the personal.

[Uncle Sam]

TurboTax

Wouldn't the partnership return K-1 reflect the partner's basis on the bottom left, show non-recourse debt in upper portion of K-1 so the 1040 preparer could use that data?

[sea-tax]

Wouldn't the partnership return K-1 reflect the partner's basis on the bottom left, show non-recourse debt in upper portion of K-1 so the 1040 preparer could use that data?

It might show inside basis but not outside basis , would it not be the responsibilty of the 1040 preparer to track the outside basis and therefore the deductibility of the 1065 loss per partner.

[Golden Rocket]

Basis

Maintaining the partner's basis is the responsibility of the partner. The K-1 shows the amount of allocated income (loss), and does not show separately how much of this loss is deductible.

Somewhere in the maze of Turbotax questionnaires, etc. is probably a blurb to warn taxpayers about deducting more than their basis, but it is not prolific enough to get through to the layman.

[dsi]

I tack basis for my P/S and S-corp clients. Of course, they pay me for this service but I don't think they truly realize what it means to them. I have lost a couple of clients over the years because my fees are a little higher than my competitors, but again, I kept track of basis.

I know for a fact the new accountants my clients are seeing are not, NOT tracking basis and neither are my old clients.

Whenever I get a new client and basis has not been tracked, I require they sign a statement that they are the responsible party for providing the basis calculations, and not me.

[JG EA]

Whenever I get a new client and basis has not been tracked, I require they sign a statement that they are the responsible party for providing the basis calculations, and not me.

For these new clients do you then track starting from zero?

[joanmcq]

TT has spots to put in the inside basis from the K-1, as well as recourse & nonrecourse debt, but specifically states, 'this information is not used in calculations'.