Partnership

[JoshinNC]

Thanks

RNuse09: your posts make me nervous. As someone who prepares many Forms 1065 and who took 32 hours of CPE specifically addressing those returns this year, I firmly believe you should not be preparing the partnership return at all. You don't have the expertise to do so and in my opinion, it is malpractice to prepare a return in an area in which you have no expertise. I think you should suggest to your client that they find a practitioner who has experience with these returns. Then, if you want to practice in this area, first take CPE, study materials about partnerships, etc. I subscribe to PPC's 1065 Deskbook which is an excellent resource and I use it often. I'm not trying to be hard on you but I really believe you're in over your head.

For saying what I was thinking!

[BOB W]

Everyone has to start someplace. These posts will either chase RNuse9 away from this client or make him dig in and do a lot of reading to get up to speed. His issues are on the basic side of partnerships and he should be able to catch on quickly( if he chooses). He has enough time to get the info needed before any tax return is due.....

RNuse9, Partners (1065) are never employees. They get paid in 1 and/or 2 ways. 1= draw against profits, just like a sole proprietor. 2= guaranteed payments (GP), GP is a deduction against net profit. All profits and GP are subject to SE taxes.

GP to only one partner will distort the other partners' share of the net profit because it is a deduction against net profit just like any other deduction. If that is what you are looking for then it is OK (uneven sharing of Net Profit). If not, then GP has to stop or all partners need to get GP. It is probably easier for all partners to take a draw against Net profits and pay Estimated Tax payments.

As far a taking a paycheck and issuing a W-2 at the end of the year, that should stop. Is there any damage being done?, some say "no". A pay check has the same effect on the partnership net profit as a GP does, it reduces NP.

Most 1065's require a Balance Sheet and partners' (capital) basis computation. This area is a learning process that needs to be studied. If you can't learn this area give the client to someone else. If you want to continue in this direction get the "books" out and get to it.

The three partners require 2 separate accounts for each partner in order to maintain "Basis" calculations for each.
They are Capital and Withdrawal accounts for each partner.

Good Luck.............