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I would be interested to hear if the K-1 shows up on the transcript. My experience with hand-written information returns (i.e. 1099's) is that they can take more than a year to show up in IRS records (if at all). So you may not be able to know if it was filed--the questions about the origin of the K-1 seem key to deciding on how to proceed. As well as knowing why they are not willing to go back to the original preparer to amend.

I think part of the issue is the confusion with the two types of ERC. They are similar in some ways and quite different in other ways; particularly in the manner the credits are claimed. The ERC for an inoperable business due to a designated disaster falls under sect. 38 as a general business credit and used as an offset to income tax via form 5884-A. They should have been given different names to avoid the confusion!

Thanks Lion and I do agree with you, but again, I don't have all of the details to make the decision as to whether they qualified or not. The client says they did and worked with Paychex. This client for years has been straight up with everything. Matter of fact, they are no leaving Paychex because of the cost and the fact Paychex did not tell them they had to adjust the 941 (Paychex did this without informing them they learned this from me after the fact), they are part of the Paychex PEO program which costs considerably more, and they never received any information telling them they would have to amend their 1120S. I have told the client that they MUST amend the 1120S for 2020, 2021 & individual 2022. The reduction in the wages obviously affects everything. For 2021 there was a loss carryforward that will be eliminated by the adjustments. I goes without saying, the shareholder basis will be adjusted as well. The client is not happy about the fact they have to pay some significant tax after amending. But, they are still money ahead that they never had when it is all said and done. This is the irritating thing about all of the scam adds and those that were legitimate but failed to properly inform the client of everything that would take place when claiming this credit. Like us, with the EIC, I think the preparation of these credits should require documented due diligence or suffer the same disciplinary action.

Can you pull the transcript? I get hand written 1099-nec's all the time from clients. Never had a hand written K-1 but it isn't prohibited. My guess is she produced the tax return themselves?

@ETax847 Does that handwritten K1 make you queasy? Does it substantially change the return, as in it is going to generate a great big refund? Was the original K1 (if there was one) also handwritten or was it computer generated? Is the original return also handwritten? Who prepared the original return and why aren't they amending (always a big flag for me if there is not a good answer to that question)? Who prepared the entity return that spun the K1 to your prospective client? How much of that entity does your prospective client own? Lots of questions, very little info in the OP. Trust your gut. You should be able to distinguish the BS from a legit taxpayer just trying to do the right thing. Tom Longview, TX