Partner in Partnership was treated as an employee

Technical topics regarding tax preparation.
#1
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A new client came to me, wanting me to prepare their 2018 tax return. They gave me everything, including their partnership K-1 and a W2. I didn't look too deep into at the moment, but now that I'm working on their taxes I realized that the W2 was for their partnership, which I know is a no no. After discussing this with my client I've learned they've been doing this the past 3 years and have prepared the taxes themselves.

My questions is how should I address this? I've talked to other tax preparers and got mixed answers. Some say amend everything for the past 3 years but explain the costs and mess it can create (which I have). Then some say just file 2018 as is, but explain going forward this can't be done.

I'm conflicted on which route to take.
 

#2
sjrcpa  
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TravisReynolds wrote:some say just file 2018 as is, but explain going forward this can't be done.

This gets my vote.
 

#3
JR1  
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Lots of threads on this.
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#4
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JR1 wrote:Lots of threads on this.


I did my due diligence and searched before I posted this but didn't really see one that was similar to my situation.
 

#5
JAD  
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I would file as is and correct going forward. It's not like you are participating is some tax shelter that is costing the govt a lot of money that it is due. The govt collects more on amounts treated as wages, in total.

Amending the prior 3 years...what a mess! And for what. This issue is not that big of a deal, IMO. It would be a bigger concern if they continued this treatment after being informed.
 

#6
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I agree that the dynamic of a partner receiving a W-2 is pretty innocuous.
The things to make sure aren't also going on relate to benefit plans. Improper enrollment or evaluation of benefits to owners can completely invalidate plans, in some cases.
Definitely correct going forward though.
Additionally, this treatment likely decreases the partner's ability to take QBID.
~Captcook
 

#7
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Thanks for the tips everyone. I'm going to relay this and suggest we just file as is.
 

#8
JR1  
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Yeah, it's way too late to fix 2018 payroll filings now....I wonder if they've now done 3 qtrs wrong in 19?
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 


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