Washington (July 29, 2002) -- The Internal Revenue Service's Schedule K-1 matching program could result in honest taxpayers spending valuable time and scarce cash resources on accountants and tax preparers to prove their returns were correctly filed in the first place, according to Senator Kit Bond."The last thing small business owners need is to spin their wheels proving their returns are accurate simply because the IRS and its computers do not have the data to explain a mismatch," Bond said. "That is a heavy burden that amounts to an unnecessary, virtual audit."
Data reported on Schedule K-1 is often adjusted before it is reflected on the individual's tax return because of limitations on losses and other tax law provisions that affect the amount of taxable income. Such adjustments would produce disparities between income or loss reported on the Schedule K-1 and the taxpayer's final 1040 return, triggering unnecessary tax-due notices.
In a letter to IRS commissioner Charles O. Rossotti and Small Business/Self-Employed Division commissioner Joseph Kehoe, Bond urged the IRS to help taxpayers report the information from the Schedule K-1 in a manner that will allow the agency to verify its accuracy and enable taxpayers to avoid a matching-error notice in the future. "Ideally, this should be accomplished by modifying Form 1040 so that taxpayers can directly report the information from the Schedule K-1," Bond wrote.
-- Electronic Accountant Newswire staff
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