1065 error

[thegoodbrotherbrokers]

I have a client who came to my office to amend form 1065. After checking and doing my "Due diligence" I found out that his partnership taxes for 2018 and 2019 were filed wrong as he ended his partnership on 2017. Now here my question.

If he already filed his tax return and made the mistake of filing it as 2 member LLC. when I know he should have filed as a sole proprietorship. How can I fix this. Just to mention that it was filed wrong for two years 2018 and 2019.

Thanks

[Just-Lisa-Now-]

How'd he file a 1065 if there was only 1 person?

[thegoodbrotherbrokers]

He  kept the second partner one year with 0 % and the best year he used himself one with social and the second as a foreigner because he was told he have to file as partnership 1065

[sjrcpa]

???

[George4Tacks]

Greetings New User - ,

You’ve come to an Intuit site supporting tax professionals, and you may be looking for support as an individual taxpayer. Please visit the TurboTax Help site for support of the not so professional . If you are using a different product, include it in your post here. 

Have a wonderful day!

[thegoodbrotherbrokers]

Ok. let me explain the following:

He ended his partnership 2017

Year 2018 he filed 1065 but the partner that was finished 2017 he used the info but input 0% share and 100% for himself

year 2019 he deleted the partner but instead he used his own info to create two partners one with social security and the second "Foreigner".

Now I know that I Have to amend 1065 for 2017 to make sure schedule k is final for both partners and I know I have to amend his personal taxes to create schedule c for 2018 and 2019 but what do I do with the 1065 for 2018 and 2019. I just send a letter to IRS explaining so they can delete those forms partnership taxes .?

[thegoodbrotherbrokers]

I am using Proseries 

[thegoodbrotherbrokers]

Proseries Pro

[Just-Lisa-Now-]

Did he report the income from the K-1s on his personal returns each of those prior years?

If he reported the income, amending from the K-1 to Sch C wont make any dollar difference....I know its not "right" but if the tax liability is the same either way, is it worth all the extra work to amend from one to the other?  

[thegoodbrotherbrokers]

Agreed. But, the idea is to remove the late filing penalty for the partnership 

[sjrcpa]

I thought you said 2018 and 2019 partnerships returns were filed, although they shouldn't have been. Now you are saying they were filed late?

[thegoodbrotherbrokers]

Yes they were file late 

[thegoodbrotherbrokers]

 But still. The solution is going to be the same. Should I file and amended 1040 and call them to see if they remove the 1165 or what should I do. 

[George4Tacks]

Based on the confusing statements you made, including something about a second "foreigner", I would suggest this person go elsewhere.
Your due diligence says you have several incorrect filings that really should be amended. How much money is this new client willing to pay you to correct all of them?

[thegoodbrotherbrokers]

Thank you for your reply but that is not the solution.

You are focusing in something not important because at the end I will be doing what I think will be the best for the client. It is not related to how much money is going to pay me. It is relate to how much I will be able to save him from penalty. One more time the question

Should I write to irs about the wrong filing or should I amend first the 1040 and if I do Amend what do o do with the 1065 so they know it was not properly filed and needs to be delete or amend.l and please , do not tell me to tell the client to go somewhere else. That is not professional

[George4Tacks]

Sorry for the impression of not being professional, but your communications seem to be incomplete. Please explain the "foreigner" and I might have a more professional response. My guess is that there is a second person involved that might be a foreign investor. 

[sjrcpa]

And when did it stop being a partnership?

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/re-partnership-taxes/01...

Your facts keep changing, too.

[thegoodbrotherbrokers]

Thank for your reply. I explained earlier. He thought he was suppose to file 1065 regarding but in order to file 1065 as a partnership he create a second partner using his own information and because he cannot use his social security number twice instead he wrote foreigner. One more time. What should I do because I cannot amend the 1065 and change it to one member because if I do it it is not a partnership anymore so the system won’t allow filing with only one member. 

[Terry53029 · Accepted solution]

Sounds like your client prepared his own taxes, not that it changes anything. As I'm sure you are aware that you only have to file this years taxes correctly, and point out the error to client. He will decide if he is going to correct the errors. Don't know if this is correct, but if it were me I would amend the 1065 that ended the partnership, and mark it as final. I would then amend the 1040 for the incorrect years, by adding a schedule C and removing the K1 on 1040X, and explain the change. Just my 2 cents. 😁

[sjrcpa]

So far so good. What would you do about the 2 bogus 1065s that were filed? And did this made up foreign partner get a K-1?

[Terry53029]

With the new auditing rules that took effect 01/01/2018 affecting partnerships under 100 partners, I doubt the Irs would try to assess any penalties as long as all profits and income was reported on schedule C. I would count on the amended 1040 would be sufficient. In fact prior to 2018 a small partnership (under 10 partners) did not even have to file a 1065 see    Rev. Proc. 84-35. Almost forgot the "foreign partner" would have to see what he put down, as that could open a can of worms. That is the trouble with answering questions here, as all of the facts are never known, and knowing the exact and complete picture can change your answer

[thegoodbrotherbrokers]

Thank you very much. Exactly the answer I was looking for. You made my day!

[thegoodbrotherbrokers]

Perfect. I will do that. You earned.!