I have a client that whose income of $490 was reported incorrectly as Partnership income when in fact it was S-Corp income. The Schedule K-1 provided to the shareholder-employee had it correctly stated as Schedule K-1 for an S-Corp. Just be clear, the error was made when this income was reported on the individual's own tax return.
When it is correctly reported it doesn't change the refund amount nor the taxable income on the Federal return and has a very minimal impact on state tax return (increase in taxable income of less than $150 and decreases refund/increases tax by $10).
None on the federal. But since there is a small difference on the state, you need to ask the client what they want done. Most clients are going to say don't bother because it is such a small amount. But there are some out there that won't sleep at night for the next few years, afraid the State is going to get a SWAT team together to bring them in one night while they are sleeping.
What would be the repercussions, if any, if we didn't amend? Just want to fully understand what the major differences between the way it was reported and the way it should have been reported when the tax outcome is the same.
None on the federal. But since there is a small difference on the state, you need to ask the client what they want done. Most clients are going to say don't bother because it is such a small amount. But there are some out there that won't sleep at night for the next few years, afraid the State is going to get a SWAT team together to bring them in one night while they are sleeping.
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