LLC with three members is taxed as a partnershp. After filing its tax
return, it was discovered that the 1065 was wrong, and that non-business expenses were incorrectly deducted. One members wants to amend the return
to show the actual deductible income, but the other two members won't
cooperate because they don't want to have to pay the additional tax that
would be assessed.

What to do? I couldn't find any guidance on the IRS site. The only two
things I can think of are 1, that the one members amend the return and send amended Schedules K even if the others don't cooperate, or 2, the one
member notify the IRS, and let the IRS assess the additional taxes on its
own.

Are these reasonable options? Is there a better option?

Thanks for any insight.


--
Stu
http://DownToEarthLawyer.com

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On Sat, 8 Jul 2023 17:16:13 EDT, Stuart O. Bronstein wrote:

LLC with three members is taxed as a partnershp. After filing its tax return, it was discovered that the 1065 was wrong, and that non-business expenses were incorrectly deducted. One members wants to amend the return
to show the actual deductible income, but the other two members won't cooperate because they don't want to have to pay the additional tax that would be assessed.

What to do? I couldn't find any guidance on the IRS site. The only two things I can think of are 1, that the one members amend the return and send amended Schedules K even if the others don't cooperate, or 2, the one
member notify the IRS, and let the IRS assess the additional taxes on its own.

Are these reasonable options? Is there a better option?

I'm amazed that the law-abiding partner has been unable to persuade
the two would-be tax cheats. Do they really want to risk paying
penalties and interest for underreporting their taxable income, not
to mention the hassles of dealing with the IRS as adversary? Is the
"extra" tax large enough that they can live with that possibility?

If they amend the return and make a plausible case for it being an
honest error, they'll probably escape the penalty and the hassles.

If they won't let the partnership correct its filing, I would think
that the honest partner, for his own protection, would have to amend
his 1040 and include partnership income based on his share of the
income that should have been reported.

Just an opinion, and from a layman, not a tax professional.

--
Stan Brown, Tehachapi, California, USA https://BrownMath.com/
Shikata ga nai...

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On Sat, 8 Jul 2023 17:16:13 EDT, "Stuart O. Bronstein"
<spamtrap@lexregia.com> wrote:

What to do?

Take a look at Form 8082, Notice of Inconsistent Treatment. I've
used it once. In theory, it protects your client from penalties
(assuming reasonable position and still wrong) should the Service
audit the partnership and make a change. Would also allow your
client the peace of mind to sleep.
--
Bruce Cantor, CPA, JD
Admitted in Colorado

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bc <cantor2@ix.netcom.com> wrote:

"Stuart O. Bronstein" <spamtrap@lexregia.com> wrote:

What to do?

Take a look at Form 8082, Notice of Inconsistent Treatment. I've
used it once. In theory, it protects your client from penalties
(assuming reasonable position and still wrong) should the Service
audit the partnership and make a change. Would also allow your
client the peace of mind to sleep.

Thanks Bruce.

--
Stu
http://DownToEarthLawyer.com

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
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On 7/16/2023 5:05 PM, Stuart O. Bronstein wrote:

bc <cantor2@ix.netcom.com> wrote:

"Stuart O. Bronstein" <spamtrap@lexregia.com> wrote:

What to do?

Take a look at Form 8082, Notice of Inconsistent Treatment. I've
used it once. In theory, it protects your client from penalties
(assuming reasonable position and still wrong) should the Service
audit the partnership and make a change. Would also allow your
client the peace of mind to sleep.

Thanks Bruce.

Now the question is whether you wish to advise the partners that you
will be filing Form 8082, since it is highly likely the IRS will raise
the issue with the partnership return. Give the partners a chance to
avoid a bigger problem of their own making.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
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