Discussion:Small error resulting in too much income in the PY. 1120S AAA/RE balance off. How to best fix?
From TaxAlmanac
Discussion Forum Index --> Basic Tax Questions --> Small error resulting in too much income in the PY. 1120S AAA/RE balance off. How to best fix?
Discussion Forum Index --> Tax Questions --> Small error resulting in too much income in the PY. 1120S AAA/RE balance off. How to best fix?
| 11 March 2014 | |
| Hi All -
I figured this would be common problem, but I couldn't find anything that closely matched my situation. Here it is: Erroneous information from the client at the prior year end resulted in reporting about $1500 more in income than we should've in 2012. (S-corp) Now, we've made the entry on the books for 2012, but what do we do on the 2013 tax return? Do we: A) Report correct 2013 income, and have AAA and RE be off by the amount of the error? B) Run the difference through 2013 income (via sales, since that's where it was) and make AAA = RE, which in this case it should since there are no temp differences. C) Survey says? | |
| 11 March 2014 | |
| I spent more time reading this than I would spend deciding to go with B. Do it every year with more clients than I can count. | |
| March 11, 2014 | |
| I wouldn't bother with 2012. If you did REPORT it for 2012, you reverse it in 2013. If you didn't REPORT it in 2012, why would you F up the books and yourself? Take it out of 2012, report in 2013 and all is well. | |
Harry Boscoe (talk|edits) said: | 11 March 2014 |
| Survey #2: How many of us would save even more time by not making the "correcting" entry in the 2012 books in the first place? | |
| March 11, 2014 | |
| Exactly. Once the books are closed, they are closed. Gotta take something big enough to amend for to open them. | |
| 11 March 2014 | |
| Survey #2: How many of us would save even more time by not making the "correcting" entry in the 2012 books in the first place?
I like that one, but let me ask: A $1,500 credit went to Income in 2012. Where should that credit have gone to? And Craigums are you keeping double-entry books for this client? Or, does he give you a sheet of paper and say, "These are my income and expense numbers?" | |
Harry Boscoe (talk|edits) said: | 11 March 2014 |
| "Where should that credit have gone to?" It shouldn't have went nowhere, no how, in 2012. | |
| 11 March 2014 | |
| So, then, your take is that there's no "books" here, with debits and credits...In other words, the $1,500 wasn't a bank deposit, say a shareholder advance, that simply got booked to income in 2012 on accident?
You're probably right... Or, does he give you a sheet of paper and say, "These are my income and expense numbers? | |
| March 12, 2014 | |
| Had my most difficult return, files in two dozen states, S corp...I get it all done and he says, "Huh, I just saw the savings account wasn't reconciled. I have $150 of interest income."
| |
