Do I need to amend this?

[Peggy Cobb]

I just had a new client walk in. Their previous preparer did an S-Corp return and their personal. The S-corp had pass through income of $28,000, but the tax preparer shows an additional K-1 on the Schedule E for unreimbursed partner expenses of ($27,000). The T/P is a 50% owner and the S-Corp has closed down business effective 2/1/08.

Do I need to amend the 1120-S and the 1040, or is this acceptable? The T/P is questioning the return and is asking for a second opinion.

Thanks,

[ajuroff]

Did the client actually have unreimbursed partner expenses of $27,000?

There is a thread on this a few pages back. There was a "work-a-round" for the unreimbursed partner expenses because it wasn't flowing to the Sch E correctly. That work-a-round was to set up a second Corp (on the K-1 input worksheet) with the same Fed ID number and showing the unreimbursed partner expenses. (as a negative)

I did this for two individuals (partnership) and it worked great. Everything flowed correctly to the Sch E and SE.

[Peggy Cobb]

I have used the work around before for partnerhsips, but my concern is that it is an S-Corp.

Thanks,

Did the client actually have unreimbursed partner expenses of $27,000?

There is a thread on this a few pages back. There was a "work-a-round" for the unreimbursed partner expenses because it wasn't flowing to the Sch E correctly. That work-a-round was to set up a second Corp (on the K-1 input worksheet) with the same Fed ID number and showing the unreimbursed partner expenses. (as a negative)

I did this for two individuals (partnership) and it worked great. Everything flowed correctly to the Sch E and SE.

[grandmabee]

I have used the work around before for partnerhsips, but my concern is that it is an S-Corp.

Thanks,

this could be a problem as you know there is no unreimbused shareholder expense. How could you have unreimbursed partner expense with no k-1 for a partnership return. It looks fishy to me

[OldJack]

The problem here is that we don't know what those $27,000 are all about. You can't give a second opinion without knowing what the details are. This could be the shareholders stock basis being reported in the wrong place or it could be a payment made under a loan guarantee that would be reported on Sch-E. You have to find out the details.