Do I have to amend my tax return when I get my K-1 form?

February, 19 2021 by Carolyn Richardson, EA, MBA

I e-filed my 2020 Fed. tax in Feb. 2020. I then learned that a K-1 form for a small inheritance will not arrive until Mar. 15 and says something about keeping 10% to pay 2020 taxes. Do I need to file an amended tax return when that form arrives?

Ronald


Hello Ronald,

Thank you for your question. We are assuming you meant that you filed your 2020 federal tax return in February 2021, and that you are waiting for the new Schedule K-1 to arrive for your inheritance.

First, it’s not unusual for income that is reported on Schedule K-1 to get reported to you later than other tax forms. The entities that generate these forms are generally on the same calendar year as you are, so they need time to prepare the returns and get the forms to the beneficiaries. Since this is an inheritance, an estate return would need to be filed first.

As for whether you need to amend your return, it will depend on what is on the Schedule K-1. A Schedule K-1 is a reporting form which will report to you the items of income generated by the estate which are normally distributed to the beneficiaries. This can be a broad range of income depending on the assets of the deceased person. If they had substantial investments, the K-1 will report your share of interest, dividends, and capital gains, plus any associated deductions. If the deceased owned rental properties or a business, the K-1 will also report your share of the income from those activities.

If the income items on the Schedule K-1 are sufficiently large, they will generate additional taxes due on your individual return, which will require you to amend the return. It is also possible that the K-1 items may generate a refund for you. You will want to “run the numbers” to determine the effect the additional information will have on your taxes. If the amendment shows little or no tax due (under $100), you generally do not need to file the amended return. A larger liability would require you to amend. Generally, the omission of income reported on Schedule K-1 from your return will generate an IRS notice regarding the missing income if it is substantial enough to generate a tax liability. If you wait for a notice to be issued, it can result in substantial penalties and interest being assessed in addition to the taxes due.

Keep in mind that since you live in Massachusetts, you will need to amend your state income tax return as well.

Best Wishes,
Carolyn