Need to file amended 1120-S to fix Shareholder's Basis Statement error?

Thanks for the clear explanation. Does this mean I need to redo the entire 1120-S form, or can I just submit the corrected Shareholder's Basis Statement with an explanation? Also, will this trigger any kind of review or increase my chances of being audited?

You'll need to complete the entire 1120-S form again with the "Amended Return" box checked. Simply submitting the corrected statement alone isn't sufficient for official amendment purposes. Filing an amended return for a straightforward correction like this shouldn't increase your audit risk. The IRS understands that errors happen and corrections are sometimes necessary. What tends to trigger audits are substantial unexplained changes in income or deductions, not technical corrections to basis calculations. Just make sure you clearly explain the specific change you're making in the attached statement.

Does taxr.ai actually work for complex S-corp returns? I've got rental properties in my S-corp which makes my basis calculations pretty complicated. Would it handle that or is it more for simple corrections?

I'm skeptical about AI tax tools. How does it compare to just calling an accountant? And does it actually show you the legal requirements or just general advice? My experience with most "AI tax help" has been pretty disappointing.

It absolutely works for complex S-corp situations including rental properties. The system specifically asked me about pass-through income, property basis adjustments, and accumulated adjustments accounts. It handled my situation which included depreciation recapture and passive activity loss limitations. Regarding accountant comparison, I initially called my accountant who quoted me $400 just to review my amendment. The taxr.ai service provided more detailed guidance than my previous accountant ever did. It cites specific IRS regulations and revenue procedures, and explains exactly which circumstances require amendments vs. which don't. It's definitely not general advice - it's specific to your uploaded documents and situation.

How does this actually work? Do they just keep calling the IRS until they get through? And do they need any of your personal tax info before they start calling?

This sounds like complete BS honestly. The IRS won't talk to random people about your tax situation due to privacy laws. How would this service get around that? Sounds like a scam to me.

They use an automated system that navigates the IRS phone tree and waits on hold so you don't have to. When they reach a human agent, they call you and connect you directly to that agent. It's basically a "skip the line" service. They don't need or ask for any of your personal tax information initially. They just need your phone number to call you back when they reach an agent. Once they connect you to the IRS, you're the one having the direct conversation with the agent, so you provide your personal information only to the IRS, not to the service.

Does this mean the IRS actually cross-references the basis statements with individual returns? I thought they just sat in a file somewhere and never got looked at unless there was an audit.

The IRS doesn't automatically cross-reference every Shareholder's Basis Statement with individual returns during normal processing. You're right that they often sit in the file until needed. However, these statements become extremely important if your return is selected for examination or if you claim substantial losses from the S-Corp on your individual return. The IRS has been increasingly focusing on basis issues in recent years, particularly for single-shareholder S-Corps where they've found high rates of noncompliance with basis tracking. Having accurate basis statements creates a consistent paper trail that protects you if questions arise years later.

There's no specific penalty just for filing an amended 1120-S to correct a basis statement if it doesn't change the tax liability. Your accountant probably charged extra for the additional work, not for penalties. I've filed amendments for clients many times with no penalties when we're just correcting technical errors that don't affect the bottom line. The only time penalties come into play is if the amendment results in additional tax owed, in which case there could be late payment penalties and interest on the additional amount. But for basis statement corrections with no tax impact, there's typically no penalty.

Thanks for explaining that. I suspected my accountant was overcharging me! The amendment didn't change any tax amounts, just fixed an error in how my loan to the business was recorded in the basis calculation. Sounds like I shouldn't have had to worry about penalties at all.

Thanks for sharing your experience, Emily! This is really helpful to hear from someone who actually went through the process. I'm curious - when you say the basis errors can compound over multiple years, can you give an example of how that might play out? I'm trying to understand what kinds of future problems I might be setting myself up for if I don't file the amendment now. Also, did you have to amend your personal tax returns for those years as well, or was correcting the 1120-S sufficient to fix the basis issue?

Great question! Here's a concrete example of how basis errors compound: Let's say your basis statement showed $10,000 when it should have been $15,000. If you take a $12,000 distribution in a later year, the IRS would see that as $2,000 taxable income (distribution exceeding basis) when it should actually be tax-free since your real basis was higher. Even worse, if you later sell the S-Corp or liquidate it, your gain/loss calculation will be wrong because it's based on your accumulated basis over the years. The IRS could argue you owe additional taxes plus penalties and interest going back multiple years. I only had to amend the 1120-S - didn't need to touch my personal returns since my K-1 amounts were already correct and I had been properly reporting everything on my 1040. The basis statement correction was just an internal S-Corp calculation that didn't flow through to my individual return amounts.