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How do I amend my 2021 federal business tax return to include independent contractor deductions? 

SOLVED•by TurboTax•1•Updated October 11, 2023

Some TurboTax business customers didn’t include the deduction for independent contractors in their 2021 federal and, if applicable, state tax returns, which caused them to file an inaccurate tax return. These customers need to amend the federal and, if applicable, state business tax returns to add the independent contractor deduction. 

To amend your business tax return, follow the instructions below.

  1. Launch TurboTax Business and select Amend a Tax Return, then open your 2021 business return
  2. Select the Federal Taxes tab and then Deductions
  3. On the Your Deductions screen, scroll down and select Start next to Payments to independent contractors. Write down the amount entered and then delete the entry for 2021. Once you have deleted the amount in the box, select Continue. You will re-enter the amount later
  4. On the Your Deductions screen, verify there are $0 payments to independent contractors 
  5. Before you make any further changes, select File and Save As... then add Amended 2021 return to the file name to preserve your original return
  6. Select File then Open Tax Return. From the Work on a Tax Return screen, select Amend a Tax Return, and open the amended tax file. This will be the file that you amend
  7. On the Amended Return screen, select Yes, I need to file an amended return and then Continue
  8. On the Year Being Amended screen, select Amending a 2021 return and then Continue
  9. On the IRS Center Where Originally Filed screen, select e-filed and then Continue
  10. On the Filing an Amended Return screen, select Continue
  11. On the Amended Return screen, select I’d like to continue amending my return and then Continue.
  12. On the Review Section 2 screen, select Continue
  13. On the Review Amended Amounts screen, return to the Income and Deduction section to re-enter the Payments to Independent Contractors by selecting the Federal Taxes tab and then Deductions. Scroll down and select Update next to Payments to independent contractors
  14. On the Enter Independent Contractor Payments screen, enter the amount paid for independent contractor payments that you wrote down in step 3 above and then Continue
  15. On the Your Deductions screen, check that the amount you entered is shown on Payments to independent contractors. Then scroll down and select Done With Deductions
  16. Select Forms from the blue TurboTax ribbon on the right hand side
  17. From the Forms in My Return on the left hand side of the screen, scroll down and select Form 1065-X. The amount entered as independent contractor payments should appear in Part II, line 1, column (b) as the net change 
  18. Select Step-by-Step from the blue TurboTax ribbon on the right hand side to return to the interview
  19. Select Federal Review then Continue
  20. On the Let’s Check These Entries screen, select Check Entries
  21. On the Check This Entry, enter TO INCLUDE PAYMENTS TO INDEPENDENT CONTRACTORS. THE DEDUCTION WAS NOT INCLUDED ON LINE 20 as the text explanation for the change, and then Continue
  22. On the Run Error Check Again screen, select Done
  23. If you need to amend your state return, follow the instructions to amend the state return, as applicable
  24. On the We’re ready to file your taxes screen, select Continue
  25. On the Select Filing Method, e-file isn't available, select File by mail and follow the instructions to print, sign and date the amended return. Please retain a copy of the amended return for your records
    • NOTE: Be sure to print the amended K-1s and provide them to the partners. The amended K-1s will be used to amend the partner’s Individual Federal and, if applicable, state tax returns
  1. Launch TurboTax Business and select Amend a Tax Return, then open your 2021 business return
  2. On the Amended Return screen, select the Federal Taxes tab and then Deductions
  3. On the Your Deductions screen, scroll down and select Start next to Independent contractor. Write down the 2021 amount entered and then delete the entry for 2021 Independent contractor compensation. Once you delete the amount in the box, select Continue. You will re-enter the amount later
  4. On the Your Deductions screen, verify there are $0 payments to independent contractor
  5. Before you make any further changes, select File and Save As... then add Amended 2021 return to the file name to preserve your original return
  6. Select File then Open Tax Return. From the Work on a Tax Return screen, select Amend a Tax Return, and open the amended tax file. This will be the file that you amend
  7. On the Amended Return screen, select Yes
  8. On the Return Year of Amendment screen, select Amending a 2021 return. If you filed a state corporate return, your state return will need to be amended as well. Select Yes and follow the on screen instructions for the state amendment and then Continue
  9. On the Name and Address On Original Return screen, verify the address and answer either Yes or No, as applicable
  10. On the IRS Center Where Originally Filed screen, select e-file and then Continue.
  11. On the Filing an Amended Return screen, select Continue
  12. On the Confirm Your Business Information screen, select the Federal Taxes tab and then Deductions 
  13. On the Your Deductions screen, scroll down and select Update next to Independent contractor 
  14. On the Enter Outside Contractor Compensation screen, enter the amount paid for independent contractor compensation that you wrote down in step 3 above and then Continue
  15. On the Your Deductions screen, check that the amount you entered is shown on the Independent contractor line. Then scroll down and select Done With Deductions
  16. Select Forms from the blue TurboTax ribbon on the right hand side
  17. From the Forms in My Return on the left hand side of the screen, scroll down and select Form 1120X. The amount entered as independent contractor payments should appear in Part I, line 2, column (b)
  18. Select Step-by-Step from the blue TurboTax ribbon on the right hand side to return to the interview
  19. Select Federal Review then Continue
  20. On the Let’s Check These Entries screen, select Check Entries.
  21. On the Check This Entry, enter TO INCLUDE PAYMENTS TO INDEPENDENT CONTRACTORS. THE DEDUCTION WAS NOT INCLUDED ON LINE 26 OF THE ORIGINAL RETURN as the text explanation for the change and then Continue
  22. On the Audit Chances screen, select Continue
  23. On the Run Error Check Again screen, select Done
  24. If you need to amend your state return, follow the instructions to amend the state return, as applicable
  25. On the We’re ready to file your taxes screen, select Continue
  26. On the Select Filing Method, e-file isn't available, select File by mail and follow the instructions to print, sign and date the amended return. Please retain a copy of the amended return for your records
  1. Launch TurboTax Business and select Amend a Tax Return, then open your 2021 business return
  2. On the Filing an Amended Return screen, select the Federal Taxes tab and then Deductions
  3. On the Your Deductions screen, scroll down and select Start next to Payments to independent contractors. Write down the 2021 amount entered and then delete the entry for 2021 Independent contractor compensation. Once you delete the amount in the box, select Continue. You will re-enter the amount later
  4. On the Your Deductions screen, verify there are $0 payments to Payments to independent contractors 
  5. Before you make any further changes, select File and Save As... then add Amended 2021 return to the file name to preserve your original return
  6. Select File then Open Tax Return. From the Work on a Tax Return screen, select Amend a Tax Return, and open the amended tax file. This will be the file that you amend
  7. On the Filing an Amended Return screen, select Yes then Continue. Then Continue again
  8. On the Confirm Your S Corporation Info screen, select the Federal Taxes tab and then Deductions
  9. On the Your Deductions screen, scroll down and select Update next to Payments to independent contractors
  10. On the Enter Independent Contractor Payments screen, enter the amount paid for independent contractor payments that you wrote down in step 3 above and then Continue
  11. On the Your Deductions screen, check that the amount you entered is shown on the Payments to Independent contractors line. Then scroll down and select Done With Deductions
  12. Select Forms from the blue TurboTax ribbon on the right hand side
  13. From the Forms in My Return on the left hand side of the screen, scroll down and select Form 1120S p1-2. The amount entered as independent contractor payments should appear on line 19 
    • NOTE: There's no separate form to amend the 1120-S. Verify that the Amended return box is checked on line H4
  14. On the left hand side of the screen just above Forms in My Return, select Open Form
  15. From the Open Form screen, search for Miscellaneous Statement, then select 2021 US Form 1120S: Income Tax Return for S Corp Miscellaneous Statement from the list and then Open Form
  16. From the Add Miscellaneous Statement screen, enter Amended Statement, then select Add Form
  17. On the Miscellaneous Statement screen,
    1. In the Amended Statement column, enter Amending the original 1120S tax return to include the payments to independent contractors as a deduction on Form 1120S, line 19, Other Deductions. On the Original 1120S, the deduction did not flow through to the 1120S, line 19. I am now including (insert amount from step 3) on line 19 of Form 1120S as a deduction
    2. Title the next column as ORG LINE 19 and enter 0 in the column
    3. Title the final column as AMD LINE 19 and enter the amount from step 3 in the column
  18. Select Step-by-Step from the blue TurboTax ribbon on the right hand side to return to the interview
  19. Select Federal Review then Continue
  20. If the Let’s install the latest tax updates to TurboTax screen appears, run any updates
  21. On the Let’s Check These Entries screen, select Check Entries
  22. On the Audit Chances screen, select Continue
  23. On the Run Error Check Again screen, select Done
  24. If you need to amend your state return, follow the instructions to amend the state return, as applicable
  25. On the We’re ready to file your taxes screen, select Continue
  26. On the Select Filing Method, e-file isn't available, select File by Mail and follow the instructions to print, sign and date the amended return. Please retain a copy of the amended return for your records
    • NOTE: Be sure to print the amended K-1s that have been created and provide them to the shareholders. The amended K-1s will be used by the shareholders to amend their Federal and, if applicable, state tax returns.

For Partnerships and Subchapter S Corporations, once you’ve amended the business tax returns, you’ll need to print and forward the corrected K-1’s to the partners, shareholders or members.

If you need help amending, TurboTax experts are available to answer your questions at 800-4INTUIT (Monday–Friday, from 5 AM to 5 PM PT). When you speak with an expert, just mention Business Tax Independent Contractors so they know exactly what you’re calling about.

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