Allocating the ERC to a single Partner in an S-corp

[KN_]

I am preparing an amended 2020 return for an S-corp client who just received their ERC in Jan 2023. The credit is assigned to Q4 of 2020, and my issue is the following: There were 2 partners in this S-corp, but one unfortunately passed away in early 2020. After inputting the ERC, the credit was applied to the K-1s of both the deceased and active partner. My understanding is that because the ERC is in relation to Q4, I need to allocate the entire credit to the active partner since the deceased was not present in Q4, and ensure that the deceased's K-1 is identical to what was filed for 2020.

Is there a way to set Lacerte to apply the credit to just one partner if the above assumption is correct? 

[sjrcpa]

Enter the change in ownership dates and percents.

On  the original return, was income/loss allocated on a per share per day basis? Or were the books cut off as of the date of death?

I don't know if you can change the allocation method on an amended return.

[rbynaker]

I'm curious what path you took to get from "one shareholder died" to "now there's only one shareholder."

Often one shareholder dies, and their estate becomes the new shareholder (so there's still two).  Maybe something else happened in your case but that's likely the default without some sort of careful planning involved.

[sjrcpa]

I was curious about that, too.

[PhoebeRoberts]

Me, three.

[KN_]

Pardon the lack of detail in my initial post- still a fairly green staff accountant. Much to learn 🙂

The other partner in this S-corp is the deceased's trust.

The S-corp now has a single shareholder, different than the deceased and their trust listed for 2020. This new shareholder, who has 100% now (obviously), was the Managing Director without any stock prior to 2021. 

That also being said, I'm not entirely sure how to determine if the books were cut off as of the date of death, or if the income/loss was allocated on a per share per day basis. What I do see is that at the beginning of the year in 2020, 100% of the shares were in the deceased's name, and by the end of the year, 100% of the shares are allocated to the trust. 

The 2020 return that I am assisting to amend was prepared by another CPA firm and I have very little information on this return.  

[rbynaker]

Can you get a copy of the original return?  An election should have been attached if made.  You can "do the math" and see if the allocation was pro rata or not.

Beyond that I don't know that you can make the change retroactively.  The IRS may want an amended 1120S, amended 1040 and amended 1041.  Which one of those entities is your client?

[KN_]

I can get a copy of the originally filed return- it is an 1120S. I do not, however have a copy of the deceased's 1040 or 1041 that was originally filed. My manager indicated we might need to file an amended 1

[KN_]

*amended 1040 or 1041