Is it possible to have a K-1 from a 1065 with income in Box 1 and no Self Employment earnings in box 14? I only do personal returns for 2 individuals involved with the business. Someone else does 1065 and issues the K-1s. 3 individuals own an auto repair shop. All 3 have other jobs and none of them work at the shop but are actively involved in running the shop (decision making, overseeing operations, etc). Return is done on a 1065. From the beginning I questioned why it's not an 1120S. There has been income in box 1 for several years but nothing listed for Self Employment earnings in box 14. Is this correct? Really these individuals are not self employed so probably shouldn't be but just wondering if IRS will question why. Also individual has mileage expense that could go as an unreimbursed employee expense. Can this be entered even if no SE earnings? They do have other income subject to SE tax which the mileage would reduce?
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Is your client the General Partner who runs the business? If not, maybe he's more of an "investor" in the business and has ordinary income but does not have SE income. Ask your client. Also, ask him for his copy of the 1065 (he's entitled to a copy). Your questions might be answered there. Maybe one general partner and the rest limited partners. Ask you client lots of questions until you understand the structure. -
No all 3 partners are equal in this business. They are all general partners. They all 3 participate equally in the business. I do personal returns for 2 out of the 3. I can ask for the 1065, but not sure what I'm looking forComment
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If the partners are labeled as General Partners on the K-1, you need to ask your client who actually runs the business, is "employed"/guaranteed payments, pays SE tax, and why don't all the GPs have SE-taxable income if they all participate in the business to the same extent, are not just investors. Or are they all members of a limited liability company defaulting to being taxed as a partnership? Does anyone get guaranteed payments? Read the operating agreement. Ask questions. Read the 1065 to learn about the structure, pages 1-5 and the worksheet for figuring net earnings/loss from SE. Is there a loss? If the tax matters partner is one of your clients, interview him thoroughly until you get your questions answered. Don't sign your name while you have uneasy feelings.Comment
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Originally posted by Bonnie View Post
Generally, if you are a member of a partnership (or a member of a limited liability company that elects to be treated as a partnership) that carries on a trade or business, you must include your distributive share of partnership income or loss in figuring your net earnings from self-employment. This is true even if you are inactive in the business, unless you are a limited partner. Also, include in your self-employment income guaranteed payments you get from your partnership for services you perform for the partnership.
INACTIVE PARTNER - Your self-employment income includes your distributive share of partnership income or loss and any guaranteed payments.
LIMITED PARTNER - Your self-employment income includes guaranteed payments, such as salary and professional fees received for services performed during the year. It does not include a distributive share of partnership income or loss.Comment
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Omission
I would call the person who prepared the K-1 and ask the question. Years ago I saw a K-1 on which the preparer just forgot to enter the income in the SE box.Comment
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Exactly
Yes. Who would better know then the preparer (also, hopefully all partners would know what their agreement is) and would get your answer faster and correctly for your specific situation.Originally posted by Kram BergGold View PostAlways cite your source for support to defend your opinionComment
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