tax returned type filed incorrectly, Sch C should have been a partnership. Since the amendment date for 2004 has expired is there a way to correct the type of return filed. This would involve the partners personal 1040 Individual return would require changes. Need information how this can be accomplished because I need to correct 2005 and 2006. Thank you.
This is a common misunderstanding. There is absolutely NO time limit for filing an amended return, although it may be too late to claim a refund or credit.
However, "how this can be accomplished" depends on what exactly you are trying to accomplish. You may not be able to change something for which you have "established an accounting method" by treating it improperly for three years.
Thank you for your response. the only thing I need to do is only change it from a Sch C to a 1065 partnership. When I do that I will have to amend their 2004 1040 to reflect the K-1 replacing what was reflected as business income from Sch C, everything else will stay the same. Is this acceptable to amend the 1040 at this late date to reflect the k-1s since they file married joint on their 1040? Then I will have to do the same thing on the 2005 and 2006 which I did find errors on the 2006 but is not expired yet, so can make the corrections on the 1065 for it. I need to do all these since this couple bought the business in 2004 to get them on the right tract before I file 2007. The husband and wife have a legal document drawing up the partnership. The wife is not receiving any credit for her share on the business and on her social security. Thank you so much, I did not realize that you could still amend returns after they expired time wise. I do understand about the no refund or credit stuff. Again thank you so much for helping. Flo
>>only change it from a Sch C to a 1065 partnership<<
I suggest simply converting it to a partnership from now on. The fact that a partnership previously existed on paper is not relevant to whether he actually operated as a sole proprietorship. For years he declared under penalty of perjury that it was so.
Now he learns the result and wants to retroactively recharacterize it. It's a little too dodgy for me.
From OP's 8/9/08 post, it appears this is a H/W partnership and changing the tax returns will only affect whose account the social security earnings and tax is allocated to, not bottom line on MFJ 1040. As stated, no 1065 any more, just two Sche C's, and only IF the spouse actually participates in the business, not just because her name might be on the partnership agreement. I would forego the closed year. SSA records will have to be updated for changed years.
If it is only the H/W, then you don't have to file a 1065 according to IRS. Even if it were 2 non-related people, no 1065 required but they, as always, have to keep clean books.
Let us know if you go through 3 court cases. They could be used for precedent, assuming the facts and circumstances were similar.
But in the meantime we would be interested in what authority, if any, you cited for such a position. I mean, if the IRS is questioning this arrangement so often it must at least be questionable.
>>The authority is listed in the instructions for Form 1065, pg 2 under definitions<<
Okay, that's a reasonable point although this thread is really more about operating a business than "mere co-ownership of property." If you want to bring it down to a matter of specific word definitions, be sure to note the difference between "joint undertaking" that you cite and "joint venture" in the paragraph immediately above it.
Whose crazy idea was it to base our tax system on such flimsy ideograms anyway? Why don't we do it like other countries, with proper symbols of authority like uniforms and guns? Much less ambiguity that way.
Yes only 2 people, husband and wife, live in Texas a community property state. If a Sch C is filed, even if you file joint, then only one person more less gets Social Security documentation. My Tax Program, Laceret, when you mark joint for the Sch C, it always comes up with the message that a partnership needs to be filed. I am ready to file the current 2007 taxes but was attempting to determine if should file 1065 or not. I have not seen the new law about filing two Sch Cs. Please send information on the ruling would certainly be beneficial. I had another couple in same situation in ARK which the social security people had me to file amendments on their to change from him to her since he is dying of cancer and she has nothing paid into her social security. But ARK is not a community property state. I argued over this for about three years but they would not budge. Reading responses, it must be one of those IRS Toss Ups. This is an assisted living health care, wife works full time, husband does all the bookwork and paperwork, he has another job. He doesn't work it full time like the wife, so appears the wife's name should be on Sch C instead of his. That is probably going to cause a stink) Maybe could eliminate him off the "C" since he does not actually work at the facility. Oh he does all the maintance, repairs, upkeep, but he is not hands on with the patients. Thank you to everyones response.
>>husband does all the bookwork and paperwork, he has another job<<
If the husband does not "material participate" then this whole discussion of qualified joint venture is moot. Use the passive loss definitions involving number of hours and so on to determine material participation.
I think the clearest explanation of the matter is right on the IRS web site at [http://www.irs.gov/businesses/small/article/0,,id=97732,00.html] and [http://www.irs.gov/businesses/small/article/0,,id=177376,00.html].
The IRS had stated in Rev. Proc. 2002-69 that although generally a business owned jointly by a married couple must use Form 1065, in community property states they could choose to file as either a sole proprietorship or a partnership. Some people said that meant they could split Schedule C's, but I don't think that was true until the new law last year.
Thank you everyone for all the information and help. I guess one just gets tunnel vision and can't see the whole issues and problems until someone point that out. Especially not thinking about the passive and his not actually participating in the daily operation...just get numb with all of the ins and out. Again, Glad to know there are so many smart and thinking people out there.I think the only thing I am going to do is switch the sch c from him to her who runs the business by amending the Sch C to reflect it under her name and SS number. AGain Thanks so very much. I will continue to check back if further discussion continues.
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