Amending 1120S for ERC

[Terry D EA]

Example:

1. client received ERC (prepared by a third party) for three quarters in 2020 totaling 200,000.00. 

2. Reduce the wage deduction on line 8 by 200,000.00

3. The wage reduction results in an increase in income on line 21 in the amount of $80,000.00

4. The amount in number 3 above passes thru to the single shareholder, thus requiring his/her individual tax return to be amended and pay the additional tax.

Am I correct here?

I have read so many different articles and studied this stuff until my eyes can no longer cross that bad. I am well aware of the need to report the ERC on the K-1 and the affect this has on basis. Some have said there is no impact to the shareholder because of the credit on the K-1. That I think is wrong.

Any help will be appreciated.

[Medlin Software, Dennis]

Without digging, IIRC, for ours, wages were reduced (with likely a note on the item) and the rest fell where it fell. I suspect some did things like show it as a credit or some other means.

Of course, net tax will be higher because deductible expenses were lower, that is the thing folks with no accounting knowledge do not "see", they just see "I got X in free money". We went through similar calcs on PTET actual savings, including cost of money. Good old math is why solar does not work for me (in CA under the current CA rules) despite my testing the solar sellers every now and again - they never include cost of money, that the breakeven is often at or beyond the warranty period, etc.