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@BeccaGolden wrote:

 - can I just create a correct Shareholder basis schedule for 2021 tax year or do I need to correct the prior year return as well? 

- The S Corp tax return Shareholder Basis Schedule stated the loss was disallowed for the shareholder but the shareholder's personal tax return claimed the entire loss - shouldn't that have been carried forward rather than claimed in full? 

- The Shareholder had distributions in excess of stock basis but somehow this did not trigger capital gains tax on the Shareholder's personal tax return - is there some trick I'm missing that would prevent the shareholder from having to pay or was it because the debt basis was incorrectly overstated?

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Do a correct Basis schedule for whichever tax return you are preparing.  If you are not preparing a previous return, I don't see any reason to mess with it.

Yes, if the there was not enough Basis, the loss should not have been allowed and it would be carried forward.  Advise the client to amend.

I'm not sure how ProConnect Online works (I use ProSeries).  *IF* the Basis worksheet controls such things as creating a capital gain due to excess Basis, yes, incorrect Basis on the worksheet would not create the capital gain because the program thinks there is enough Basis.   But after you correct the Basis worksheet, check how the program treats the excess Basis.  In my software (ProSeries), you need to manually enter the excess distributions on 8949/Schedule D (but my software also does not have a Basis worksheet for 1040s).