Benefits for Partners

[Lion]

I go through this every year. I have one partnership and one S-corp that provide health insurance and a SIMPLE plan. They're enough alike and enough different and the only entities I prepare with benefits, that I manage to get confused all over again each tax season. Of course, the businesses do something a little different each year, also. I have my notes from last year which confirm where some of the entries appear on the Form 1065, but I can't decipher how I entered them.

For the LLC taxed as a partnership, husband and wife, wife active in business and getting guaranteed payments: LLC wrote checks for wife's SIMPLE contribution of $10,500, her health insurance premiums of $11,000 (to keep round numbers), and brand new this year her HSA of $5,800.

Now, some of that I know where it's reported on Form 1065. GP + HI on page 1 line 10, page 4 line 4 (Schedule K) and GP only on page 5 line 3 of Schedule M-1 and HI only on page 3. I'm struggling with the data entry to make that work, but I think I know what the end result should look like for GP and HI.

What about the SIMPLE contribution, and then the company match?

And, the new addition this year of the HSA? Do I include that with HI?

I know I shouldn't work on this one late at night! Last year I was sure I understood the GP/HI part and was shaky on the SIMPLE; however, I was out of balance by the HI amount, so wasn't as wise as I'd thought. This year, I'm still shaky on the SIMPLE, and have no idea about the HSA.

I don't do their personal return, so she wants the K-1 all perfect for her to enter the codes and numbers into TurboTax! She calls me with TurboTax data entry questions! If I can get her K-1 accurate, maybe she won't have as many questions! She also sells Mary Kay and is a musical actress and director, so has at least one Schedule C. So, whatever I do with her SIMPLE isn't the end of the story, since it's based on her Schedule SE numbers, right?

Some of what goes astray with the HI is my data entry; I can't seem to decouple GP and HI so to get both to appear on certain lines but only one of them on other lines. If any ProSystem fx users out there, I think I double entered something and don't know enough about how this return should flow to know where to look when I'm out of balance.

[BHoffman]

Hi Lion -

Here's some info regarding the HSA:

https://ustreas.gov/press/releases/reports/notice%2020058.pdf

See Q2


Here's some info regarding the SIMPLE:

From: http://www.irs.gov/retirement/articl...137830,00.html

"Tax Treatment of Contributions

You can deduct your contributions and your employees can exclude these contributions from their gross income. For example, sole proprietors may deduct them on Schedule C (Form 1040), Profit or Loss From Business, or Schedule F (Form 1040), Profit or Loss From Farming, partnerships deduct them on Form1065, U.S. Return of Partnership Income, and corporations may deduct them on Form 1120, U.S. Corporation Income Tax Return, Form 1120-A, U.S. Corporation Short-Form Income Tax Return, or Form 1120S, U.S. Income Tax Return for an S Corporation."

Employers portion of SIMPLE is shown on the K1 in box 13, code R.

I would probably be letting the client know that:

1. Her tax debt is completely dependent on what she is doing in Turbo Tax.

2. Her partnership is offering fairly complex transactions regarding benefits - a good thing, but very difficult for a nonprofessional to report correctly. A mistake is going to cost her a lot more than your fee.

3. She should take advantage of your skills and be willing to pay for them as you can do a very good job for her. I'd be right out front about that. That turbo tax thing over the phone is really ridiculous.

"Help me help you"

http://www.youtube.com/watch?v=p-oHuogx6_Y

[erchess]

Too Many Cooks

I don't think I would work with a client who wanted to self prepare or take to another pro issues I felt competent to handle. Now of course if they have issues I can't handle I'm willing for them to take those issues elsewhere and come to me for what I can do.

I am currently preparing a bunch of back years for a guy and come to find out he has someone else negotiating with the NCDOR on his behalf. I only have two years left to do so I am not going to upset the apple cart but I am thinking seriously of telling him that if he wants me to do his 2010 return he needs to assure me that I am also his source for future representation.

For some of the back years he did his own returns and for other years he never got around to filing. But the years he did contained outrageous errors including putting self employment expenses on F 2106 and carrying to Schedules A which without those expenses amounted to less than the applicable standard deductions. As near as I can tel his representative did not blanch at these errors.

[Lion]

This all helps...

This all helps. Thank you very much, B and Eric.