Skip to main content
December 31, 2022
Question

Partner's Capital Account...the "beginning capital account" amount is wrong on previous year's tax return

  • December 31, 2022
  • 2 replies
  • 0 views

If on Part 2 section L on schedule K-1, the amount is incorrect for "beginning capital account" and "ending capital account", is it fine to simply enter the correct amount this year, or even leave it blank?

    2 replies

    December 31, 2022

    leaving it blank might will likely prevent e-filing 

    a partner needs this info to properly track tax basis

    the IRS requires schedule L

    The partnership must report your beginning capital account and ending capital account for the year using the Tax Basis Method, including the amount of capital you contributed to the partnership during the year, your share of the partnership's current year net income or loss as computed for tax purposes, any withdrawals and distributions made to you by the partnership, and any other increases or decreases to your capital account determined in a manner generally consistent with figuring the partner's adjusted tax basis in its partnership interest (without regard to partnership liabilities), taking into account the rules and principles of sections 705, 722, 733, and 742. See the Instructions for Form 1065 for more details.

     

    leaving it blank if possible would likely be considered filing an incomplete return and the IRS could well ask for revised k-1's and then assess penalties for late filing of about $200/month/partner for each month late. 

     

     

     

    Rick19744
    Employee
    January 2, 2023

    A few follow-up questions:

    • You don't indicate what is wrong about the prior year capital account.
    • Is this something you just noticed, or did you file the return knowing it was incorrect?
    • This error will have an impact on each partner / member tracking their tax basis.
      • While the facts are limited, this error could lead to the partner / member having filed an incorrect individual tax return
    • Depending on the response to bullet 1 and 2, this will impact any suggestion on correcting this matter.
    *A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.