I have a new client who came to me to prepare their 2017 tax returns for their two partnerships and individual returns. After a quick glance at their prior year return's it has come to my attention that their former CPA treated their partnerships as S-Corps by processing payroll for the owners and not including any self-employment tax on the profits of the business on their individual return, as well as several other smaller errors. My concern with amending their prior year(s) returns is what it will all entail besides the much larger tax bill. Do you think I will need to amend their 941s and W2/W3 to show that it should have been zero and have them apply those payments as 1040-ES? Do you think my clients should file a claim against their former CPA for errors and omissions? This is how their returns have been prepare every year the companies have been in business and it will cost them a significant amount of money for me to amend all those returns as well as the tax balance due including interest and penalties.
USA Correcting prior CPA errors - Payroll for partners & no SE tax imposed
- Thread starter S&CoCPA
- Start date
Partners by law cannot recieve a w2 from the partnership with very few exceptions. Thus if they were receiving end, technically yes you must amend all 1065s and payroll filings. Would I amend? Probably not but I would do it correctly going forward and put in writing to the taxpayers the issues at hand.