Statute of Limitations

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    Partnership needs to amended Forms 941 for 2012 & 2013 tax years to remove payroll tax liability associated with GPs paying themselves a W2 salary and remitting payroll taxes to the IRS. Trust Fund Penalty was assessed against GPs and we plan to file an OIC-DATL since partners do get paid salaries and thus there is no payroll tax liability. Under normal circumstances, amended partnership returns would be filed to remove wage & payroll tax deductions and to increase K-1 income; and 1040-X would be filed to remove W-2 income, reflect correct K-1 income, and compute SE taxes. Assuming that the IRS agrees that partnership erroneously filed payroll tax returns and removes Trust Fund Penalty, are the partners required to file amended 1040s since the 3-yr SOL is closed and assuming that the 6-yr SOL is not applicable?

    Your comments are appreciated.

    Eric Green

    Bryan, by amending the 941s and 940 it should take care of the penalties. They would then amend the partnership and 1040s for any open year (within 3 years). If they can’t then they can’t. As long as the partners did pick up the income (whether incorrectly through W-2 or not) the IRS should not get too bent out of shape about it, but I see no reason why the three year window should be expanded to 6. Nothing you mentioned has any suggestion of fraud.


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