Assuming the schedule K-1 is issued for 2008 - you may amend your tax return and you will owe additional taxes, penalties and interest.
You may ask to forgive penalties based on unforeseen circumstances.
You may postpone amending the tax return - however - you will pay additional penalties and interest.
If according to the court the taxable amount will be less - you will be able to amend the tax return again - and claim overpaid amount to be refunded.
Your tax liability depends on your tax bracket, filing status, deductions, etc.
It is also depends on type of income reported on the K-1.
If that K-1 from S-corporation?
Let me know your numbers - and I will help to estimate your tax liability.
I filed a 1040 with schedules A, C, D, D-1, C (form 8829), C (form 4562), C (form 8829). The numbers are broken down like this: AGI-$84,380; Taxable Income-$56,179; Total Tax - $6,624; Total Payments made already- $7,672. Refunded $1,048.
We filed married with 1 dependent. $17,701 itemized deductions.
The K1 was from a S-Corporation. The boxes are as follows: Box 1- 101,927; Box 11 - 594, Box 12 (A) 371, Box 15 (a) 857, Box 16 (c) 36.
Do you need any further information? That sums it all up.
Your estimated ADDITIONAL income tax liability on $101,927 ordinary business income is $25390 plus ~$7500 NC state income tax.All other items are small and there effect will be minimal.
That is assuming S-corporation paid reasonable wages from S-corporation and they were reported on W2.
S-corporation is not taxable entity - all tax liability is passed to shareholders regardless in actual funds were distributed or not.
You may argue if these funds were not used properly - but as long as S-corporation received that income and pro-rata share were properly calculated according to your ownership - you are responsible for taxes.
Let me know if you need any help.