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If a prior year schedule k-1 shows a loss could amending that k-1 to the return yield more of a refund?

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If a prior year schedule k-1 shows a loss could amending that k-1 to the return yield more of a refund?

Postby jarin » Thu Nov 01, 2012 7:20 am

I have a schedule k-1 showing a fairly significant business loss from a year ago (20k) it was not added on that tax return when filed as it always arrives later in the year. By going back and amending that year's return and adding the k-1 could that increase my deductions and could that potentially yield a higher refund for that year? AGI is around 50k, married filed jointly, no home, no other significant factors to consider. Thank you.
jarin
 
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If a prior year schedule k-1 shows a loss could amending that k-1 to the return yield more of a refund?

Postby ainsworth » Thu Nov 01, 2012 7:26 am

First, basis is basically the money that you have already paid taxes on that you invested in the partnership. At risk is the money that you are "at risk" to lose if the partnership goes belly-up. Basis and at-risk amounts are often the same and the terms are often used interchangably.

To get an idea of your basis, use the following formula:

Initial investment in the partnership
+ Gains from the partnership over all of the years that you have been a partner
- Losses claimed on your tax returns from the partnership over all of the years that you have been a partner
+ Any additional money you invested into the partnership over all the years that you have been a partner
- Any money you took out of the partnership over all the years that you have been a partner
= Basis (The computation is more complicated than this, but it will give you ballpark figure to work with.)

The basis needs to be computed every year and can never be negative. If you are computing basis for 2011, do not include any transactions that occurred in 2012. When you compute your 2012 basis, you will include all transactions for 2012 and all prior years, or just start with your 2011 basis and adjust for 2012 transactions.

You can only claim losses to the extent of your basis. If your basis is $10,000 and your loss is $20,000, you could only claim a loss up to $10,000. That would zero out your basis and you could not claim any more losses until your basis increases again.

Now, assuming that you have sufficient basis, you need to determine if the loss can be claimed under the passive activity rules. You can only deduct passive activity losses to the extent of passive activity income. Let's say you have a $10,000 loss that would be allowable under the basis (at-risk) rules. If the activity is passive, you would have to have passive income in order to claim any of the loss. If you only had $5,000 of passive income, then you could only claim $5,000 of the loss. The remaining $5,000 would be carried over until you did have passive activity income, at which time you could claim the passive losses up to the passive income you received that year.

If you had sufficient basis and passive income on the return, you very well may be entitled to a refund of some of the taxes you paid. However, it's not as easy as just showing a $20,000 loss on Schedule E. There is quite a bit of work that needs to be done before you do that, and you may not be entitled to deduct the entire $20,000...or any of it.
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If a prior year schedule k-1 shows a loss could amending that k-1 to the return yield more of a refund?

Postby azzai » Thu Nov 01, 2012 7:44 am

When you have a loss on either a 1065 schedule K-1 or an 1120S schedule K-1, you MUST know your basis, whether the money is at risk and whether or not it's a passive loss.

The IRS doesn't like you to claim a loss and reduce your other taxable income.

Edit. How did you invest? How much? How did it lose $20K?

See form 6198.
If this is a passive loss, you have to use form 8582 to postpone the loss to a future year.

If you don't know what basis is, you shouldn't be in a partnership. (Let me guess, this is a PTP and you thought you were buying stock?)
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If a prior year schedule k-1 shows a loss could amending that k-1 to the return yield more of a refund?

Postby finian » Thu Nov 01, 2012 7:49 am

many K(1)''s arrive after the filing deadline and if the taxpayer does not file an extension he will now file a 1040X and report the loss on the K(1)
it could very well result in a larger refund
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If a prior year schedule k-1 shows a loss could amending that k-1 to the return yield more of a refund?

Postby grayson85 » Thu Nov 01, 2012 7:53 am

So you are now saying that the past years income tax return has been filled out and filed incorrectly during the past year tax filing season for this purpose RIGHT.
AND now you really should and need to CORRECT this error on that tax year income tax return and get it done CORRECTLY RIGHT.
Use the search box at the www.irs.gov website for the Instructions for Form 1040X (12/2011)

http://www.irs.gov/instructions/i1040x/index.html

Lines 1 - Through 31—Which Lines To Complete

http://www.irs.gov/instructions/i1040x/ch02.html#d0e645

Before looking at the instructions for specific lines, the following information may point you in the right direction for completing Form 1040X.
Payments and refundable credits Lines 10–22
You are changing amounts on your original return or as previously adjusted by the IRS. Because Form 1040X can be used for so many purposes, it is sometimes difficult to know which part(s) of the form to fill out. Unless instructions elsewhere in this booklet tell you otherwise, follow the rules below.
Always complete the top of page 1 through Amended return filing status.
Complete the lines shown in the following chart according to what you are changing.
Check a box in Part II, if applicable, for the Presidential Election Campaign Fund.
Complete Part III, Explanation of changes.
Sign and date the form.
Hope that you find the above enclosed information useful. 10/14/2012
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