State audit impact on Fed return

Forum|Forum|4 years ago
July 16, 2022
4 replies
13 views

State audit determined client business did not meet their criteria for a "for profit business". Disallowed losses for last 3 years and deemed it a hobby. Is the client required to amend the Fed returns based on the state determination?

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Just-Lisa-Now-

Intuit Community Champion

Interesting, which state was this?

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T

TomTax51Author

Level 3

Minnesota

ljr

Level 9

I'm really trying to remember if I ever had the situation where the change started at the state level and then went back to fed. Something is nagging at me but I'm just not sure. Usually the state changes are not something that "big" that affects both returns. Please let us all know if the client gets the letter from the IRS.

IRonMaN

Level 15

Is it a hobby or is it a business? Unless you had a MN auditor that completely missed the boat, I would have a tough time preparing a federal return taking a loss and then backing it off of a Minnesota return. If the auditor missed the boat, roll up your sleeves and fight. If not, I would amend the federal returns.

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