1125-E & Balance sheet issues Do you amend?

[michele]

Had some one come in the office that already had their 1120-s and personal prepared  somewhere but did not feel like it was right. OH boy they had been a schedule c filer and were filing as a scorp for 2021 for the first time

I saw they had 1 million in receipts and no 1125-E filed. it did show compensation to officer on front page of return. Then I looked at the balance sheet and they were showing beginning retained earnings. Big flag there probably should have been loan from shareholder or paid in capital  if they were going to complete a beginning and not just the ending balance sheet The assets and liabilities were being transferred from schedule c to the 1120-s  I did not see a statement stating 351 for personal return or 1120 stating they were making a transfer of assets

The depreciation schedule  for the 1120-s show all the assets with the original placed in service date of when they were bought under the schedule c disregarded entity. I believe they just suppressed the asset depreciation on the personal side.

Under the liabilities there was a grant. That was a grant not a loan.

Income and expenses look ok.  Would you amend this to straighten out this mess of a balance sheet. and not completing a 1125. I hate to see a first year Scorp filing with a mess and inaccurate basis for their 7203. 

thx

Michele

[Strongsilence-CPA]

Amend definitely. 

1. It gives you a chance to show why you are better than the other preparer. (And I hope, client loyalty is established.)

2. It may suggest to a tax agency that the client is intending to learn and to follow the tax laws.

3. Tax basis capital account reporting requirement.  Get capital on the tax basis.

Good luck!

[sjrcpa]

3. S Corps don't have capital accounts, tax basis or otherwise.