Level 3

Is necessary to file CA amended s-corp if tax change is zero?

Forum|Forum|4 years ago
July 9, 2021
1 reply
21 views

Bank of America issued a 1099-k with the incorrect TIN of 33-0908383 (this entity) in the amount of $95,000 Multiple attempts to have them correct this error were unsuccessful. The amount is correctly reported on the tax return of 83-1075832. Adding this to line 1A for computer matching. The $95,000 is then subtracted on line 19.

So above is the federal amended info needed so total income matching is satisfied. For both federal and ca the net result is ZERO of course. As I look at the Lacerte directions for a CA 100x I don't see where it is even necessary to file. I don't think they duplicate the federal total income matching. They "piggyback" on the federal. Any thoughts? Thanks.

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qbteachmt

Level 15

The point of filing tax returns is to provide all info that matters. If you already did this, there is nothing to amend.

What doesn't matter is 1099-Misc, NEC or K. These are Informational reporting. They are not the Source Data for what is reported on the tax form. Example:

You might make sales to someone of $40,000 and unless they pay by a "settlement agent" you won't see a 1099-K. That doesn't mean not reporting the $40,000 as part of the entire operation.

And the 1099-K might be settlement for something as Liability and not as income. It's only the reporting of the movement of money. It's not by definition a reporting of Revenue or even for operations. You could have sold a company vehicle and gotten paid through PayPal, for instance. You could have made a deposit on some equipment and gotten it refunded, and it gets reported on a 1099-K because it qualifies for the reporting thresholds; the Purpose is not why it gets reported.

A 1099-K is no reason to amend, unless you "accidentally overlooked" all that info as part of everything you should have reported, already.

It's the same as people who only report what is on the 1099-NEC(s) they get. The IRS realizes your real operations are not reflected on all the information reporting forms. What this does is give them a heads up to expect filings from the entities that have been reported as having something to file, because of the activity reported by that reporting entity. It tells them to "be watching for tax forms."

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B

b_planteAuthor

Level 3

Thanks, very thorough & I think I understand. If you don't mind one follow up. So the added together total of 1099's for this entity (in this case merchant reporting sales income by way of credit card sales) is going to be overstating the sales income by about 100k. You are saying the IRS will not care that the tax return is (correctly) reporting 100k LESS in sales. They will not issue a letter asking anything about the discrepancy between 1099 sales income on 1099s and 1120-s line 1a (gross receipts or sales).

Is that correct what you are saying?

Thank you.

I know for sure if a w-2 is left off, the TP hears about it. Apples & oranges, but still.

🙂

qbteachmt

Level 15

"I know for sure if a w-2 is left off, the TP hears about it. Apples & oranges, but still."

The reporting verification and matching for payroll is quite different. These are not simply informational, but tax-related. I think people's understand of 1099-K would be a lot different if it involved withholding! Look at all the info that relates to W2: employer tax, employee withholding, SS, Medicare, and even retirement, health and other benefits. There is no matching done to 1099-NEC or Misc or K, other than, it runs up a flag of notification. Not of amounts. It tells the IRS who had some reportable activity, so they will be expecting tax filings.

"So the added together total of 1099's for this entity"

Adding together? You use them to Confirm, not to File with. You don't add 1099-NEC together and use that as if that is the gross to report. You don't don't rely on only 1099-Misc for rental income reporting. All 1099-K is not a reflection of the Entity. It's a reflection of the money passed through that settlement agent. It might not even be gross sales; it could have been 50% advance deposits that got canceled and refunded for 2020 due to covid closures. That was part of what I was trying to clarify. You don't "add 1099s." You confirm the data the taxpayer had provided is at least representative of what others state happened for that entity and they stated it by reporting it on 1099 forms. If a roofer taxpayer states they did $10,000 of business, and they give you 1099-NEC totaling $150,000, that's a problem. If they tell you they did $150,000 of business, and they only have $10,000 for 1099-NEC, that's fine. I can do $6million of business, but perhaps no one paid me a total of $600 or more this year = no informational reporting. But you know I should be filing a tax return on $6m. There would be no 1099s to add together.

"(in this case merchant reporting sales income by way of credit card sales)"

It always helps to get more details. Example: Are you the person doing the filing for both of these entities? Is one of them using the other's Merchant Terminal to process their credit card payments (not sales)? Otherwise, what explains the FEIN mix up? Is this a successor entity? A wholly owned sub-entity? What would the IRS and FTB find, if they came looking for more information?

Let me ask this: If this/these entities are subject to sales taxes, don't you also have a problem here? Or, were sales reported properly for each entity, regardless of Payment Settlement method? Or, did the one entity include this $100k of sales in their sales tax reporting, as would be required? Who reported which parts for this purpose?

"is going to be overstating the sales income by about 100k. You are saying the IRS will not care that the tax return is (correctly) reporting 100k LESS in sales. They will not issue a letter asking anything about the discrepancy between 1099 sales income on 1099s and 1120-s line 1a (gross receipts or sales)."

I start with putting the difference into perspective. If a $40,000 gross retail operation let someone else use their CC terminal, resulting in the additional $100,000 of activity, then, Yep; that would appear to be a problem if someone selects their return for examination. If an entity with $350,000 in reported sales doesn't include $100k that isn't theirs, it isn't even relevant, because they already reported their true data and it is more than this information being reported as theirs in error.

Nothing promises the IRS won't send a letter. And only you can determine if what was done originally warrants amendment now. Did this 1099-K get overlooked before the two businesses' filings, and just now came to light, and does that light make a material change to any filings?

The IRS has instructions for what you are asking (can't answer for FTB):

https://www.irs.gov/businesses/understanding-your-form-1099-k

This is part of what is there: "What should I do when the total gross payment amount shown on Form 1099-K does not belong to me?" Also, what to do if you share the terminal. Also:

https://www.irs.gov/payments/general-faqs-on-new-payment-card-reporting-requirements

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