I already e-filed my taxes but then later received a shedule k-1 in the mail for an MLP i invested in. The amounts on this form are very small though. Do i need to amend?

[jjrobs399]

As stated in the original question, the amounts on this form are very small and insignificant, is it still necessary to amend my taxes? I cant imagine such small amounts will make any significant difference in my tax liability. I have also heard that sometimes these MLP investments need taxes done in every state the business operates. Is this also true? do i need to file taxes in other states as well with such small amounts?

[PattiF]

An alternative to filing an amended return that may not make a difference in your tax liability would be to first add this income to your AGI from your filed return. Then see where the adjusted AGI would fall in the tax table. Use your filing status and the total income when you add the amount from the K-1 to check the Tax Table. If there is no change in what you would owe, then you do not need to amend your return.

2020 IRS Tax Table

For your second question about the state filing, here is the answer from GeoffreyG:

As such, you should know that it is common practice in the tax accounting community to simply "ignore" the state schedules for publicly-traded MLPs, unless the individual investor in question has a fairly large position in any one, specific, MLP.  That is to avoid the (unnecessary and quite needless) filing of dozens of state tax returns that would otherwise result in no actual tax liability, or the payment of just a few dollars to any given state.

Thus, unless your particular MLP investment is valued at, say, more than several hundred-thousand dollars or so, then you can safely just ignore the state schedule(s) you received with your K-1 package, and focus your efforts instead on your federal K-1 data entry.

If you have a larger MLP investment than that, however, you probably should be using a professional tax preparation service anyway (CPA, Enrolled Agent, tax attorney), rather than doing it yourself through TurboTax, due to the higher level of technical difficulty involved.

This assumes that the amount of income is less than the minimum required for state filings.

[jjrobs399]

Thank you! I appreciate the help. Yea as I said the amount I invested in this MLP is less than $50 and the income on the K1 is literally single digits. I really don't think it is going to matter or drastically change the taxes I owe or get refunded. I just wanted to be sure because I don't want to get an audit over this. But I also don't want to amend the return if it isn't absolutely necessary.

[npierson7]

You can never know what could trigger the IRS audit. Remember, the Form K-1, as other tax form, not just being mail to you, it is also filed with the IRS. So, they know about that income. In other hand, if the amount is small, the underpayment penalties could small, too and won't create an issue for you. It is your choice, we cannot force you to amend your return now. 

[jjrobs399]

So I went back and looked over the 2 schedule k-1's I received from the 2 MLP's I invested in. They both actually have a loss on them and the total loss between both of them is only 5 dollars, I did not sell them during that year either. I also looked in to the tax table and verified that it did not move my AGI in to any other tax liability. Do you still believe it will be ok to not amend the return? I just want to be 100% certain it will not result in any serious penalties or anything from the IRS. But I also don't want to spend the money amending the return if it really won't matter. I just don't know what the best option is.

[JeffreyR77]

Yes, if correcting the error on your original tax return has no impact on your tax liability, there is no requirement to amend your tax return.