Must an S Corp Loss be Claimed?

[erchess]

Taxpayer is Single, No Dependents, and lived with parents the whole year. He had $9,573 in wages and $12 in bank interest and nothing else except a $7,416 loss on the family S Corp, in which he actively and materially participated in addition to paying $10K for his shares. The capital came from savings accumulated during years in which he worked more at his regular job in a warehouse and from money he inherited.

Now he gets only about $96 more in refund with the S Corp Loss than without it. In particular EIC does not change. On the other hand with it, he gets no stimulus money if I filled out the worksheet correctly. Am I right in my belief that without it he would get at least $300 and if so, would it be fraudulent to leave off the S Corp?

[ChEAr$]

S corp loss

Taxpayer is Single, No Dependents, and lived with parents the whole year. He had $9,573 in wages and $12 in bank interest and nothing else except a $7,416 loss on the family S Corp, in which he actively and materially participated in addition to paying $10K for his shares. The capital came from savings accumulated during years in which he worked more at his regular job in a warehouse and from money he inherited.

Now he gets only about $96 more in refund with the S Corp Loss than without it. In particular EIC does not change. On the other hand with it, he gets no stimulus money if I filled out the worksheet correctly. Am I right in my belief that without it he would get at least $300 and if so, would it be fraudulent to leave off the S Corp?

In this case I would not omit the schedule e showing the loss, since basis is provable.
Of course the real reason is that it would be fraudulent.

However, I must admit that I have with client's consent omitted a horrendous loss
in similar circumstances when client could not prove her basis.

[BOB W]

Failing to include the loss will increase the earned income credit. Sounds like a tax problem in the making...................

[devin]

I'm not a CPA, and certainly don't have as much experience as everyone who has posted in this thread so far.

However, I wanted to post a link to an IRS website that gave me some hope for my situation of not qualifying for a stimulus payment on my 2007 taxes.

http://www.irs.gov/newsroom/article/0,,id=179211,00.html

States: "Not eligible at the current time? If your circumstances change and you become eligible after you file your 2007 federal tax return, you can always file an amended reutrn using Form 1040X. If you're not eligible this year but you become eligible next year, you can claim the economic stimulus payment next year on your 2008 tax return."

I read that to mean that if a taxpayer is not eligible on their 2007 tax return, and cannot become eligible by later amending their 2007 tax return, that they can receive the stimulus payment on their 2008 tax return.

Perhaps this is common knowledge to most tax preparers, however I don't remember having read in news articles that the stimulus payment was available in 2008 for taxpayers that didn't receive it through their 2007 return. If I'm reading this correctly, it of course assumes Congress doesn't change their minds before 2008 returns are filed.

This might make sense of another issue. A taxpayer can waive receiving the stimulus payment. I previously thought this was just a way for a taxpayer who wanted to "feel good" about helping the government out, but I am now thinking this might be a way for a taxpayer who believes they will qualify for a larger stimulus payment on their 2008 return than their 2007 return. Although I am thinking this might work, since no matter what I don't qualify for a stimulus payment on my 2007 taxes, I haven't bothered reading the law Congress passed to see if this would be justifiable under the law.