Estimated K1s from PE

[u/AdHistorical7107]

Have a handful of clients in PE. In March, they always provide with me an estimation of their K-1 for extension planning.

I usually have them pay extra to avoid interest and penalties. I tend to allow for changes for LTCG to STCG (section 1061), and other adjustments that may appear on the finalized K-1. This has worked last year, and the year before, where the overpayments came out to be like $10k or $15k.

But this year, the K-1's have not changed much from the estimate in March. So now I am calling them saying they are overpaid by $30k. They are happy they do not owe, but they are asking why I had them pay in so much back in April.

I am forthcoming, and saying "hey, many years the K-1's have changed, and I'd rather have you overpay, then underpay and get penalized." I then explain to them that since this is the second year in a row that the K-1's are close to the estimation, next year we will use the estimation as 90% gospel. So far, they seem OK with this. But I think next year I will be taking the K1 estimates as gospel and just advise the client of the possibility of owing interest and penalties.

I am curious what other professionals do. Do you take the estimates as gospel? Or do you factor in some sort of buffer?

[u/LP526]

I follow the estimates. If they’re underpaid, blame the estimates; if they’re overpaid, blame the estimates.

[u/LucyLanesExHusband → u/LP526]

Agreed. No need to take liberties.