Q: C-Corp Income reported as dividends in 2016 (should have been all wages) - Can it still be amended?
My current wife and her deceased husband had a corporation wherein my wife was a software consultant and the only revenue was from her work. It was apparently set up as a C-Corp. In 2016 all of the money (approx. $180K) was reported as dividend (no taxes paid). Fast forward to 2018 and former husband commits suicide. In 2019 wife resolves all personal tax issues with IRS appox $160K owed. Fast forward to now, August 2024 and she receives a Tax Bill from the IRS from 2016 and 2017 for $115K (including penalties and interest). There are lots of questions here obviously, but I'm looking for initial thoughts.
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A:
Amending a tax return from 2016 is possible, but it can be complicated given the time that has passed. Typically, the IRS allows taxpayers to amend returns within three years of the original filing date, but there are exceptions, especially if there was a significant error or omission, such as misclassifying income.
Given the circumstances involving the death of your wife's former husband and the IRS bill she has just received, it might be beneficial to address this issue as soon as possible. It's essential to gather all relevant documents and records from 2016 and 2017 to reassess how the income was reported and to determine the best course of action for amending the returns.
If your wife has already settled previous tax issues with the IRS, it might be worth discussing the new bill with them to see if it can be reduced or negotiated, particularly given the complexity of the situation.
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