Partners in Peril

The Tufts Law Firm also fights for shareholders (of closely-held S corporations), partners (of partnerships, joint ventures, LLPs, limited partnerships, or LLLPs), or members (of LLCs) who come to distrust the information appearing on the K-1 they have received.

Far too many tax return preparers of IRS Forms 1120S or 1065 prepare K-1s without regard to terms of the parties' economic relationship appearing in a shareholder agreement, partnership agreement, or operating agreement.

If you or your tax advisor are concerned about the information appearing on a K-1 you have received, now is the time to act. Recently, the IRS has enacted a K-1 Matching Program that is aimed at picking up on mismatches that occur as the result of erroneously prepared K-1s.

If you do not take prompt action with regard to an erroneous K-1, you may not have an opportunity to challenge any adjustment made in the future. This is because of a special tax principle called the duty of consistency. In these settings, careful attention must be given to the terms of the shareholder agreement, bylaws, organizational documents, partnership agreement, or operating agreement, plus any side agreements. Also, special procedures and filing obligations may exist under the Federal tax law. You can ill afford not to take proper, prompt action.  I stand ready to be of assistance to you or tax advisors when faced with what appears to be an erroneous K-1.

If you are a shareholder, partner, or member, or a tax advisor and are in receipt of what you believe is an erroneous K-1, please contact us and learn more about our partners in peril program.