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New business question on schedule k-1

Forum|Forum|6 years ago
April 17, 2020
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We started an LLC in November 2019, we put 10% back into the company and pay all expenses before any of the partners get paid. On the schedule K-1 box 14 it has an amount as income but it wasn't. What can I do to get this correct on business taxes

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Best answer by Anonymous_

@Wolvesconstruction wrote:

On the schedule K-1 box 14 it has an amount as income but it wasn't.

Did you prepare the Form 1065 for the LLC? Why do you believe it was not income?

Generally, if you materially participated in the business operations, your share of the net profit is considered income from self-employment and reported on Line 14 of your K-1.

A

Anonymous_Answer

Employee

@Wolvesconstruction wrote:

On the schedule K-1 box 14 it has an amount as income but it wasn't.

Did you prepare the Form 1065 for the LLC? Why do you believe it was not income?

Generally, if you materially participated in the business operations, your share of the net profit is considered income from self-employment and reported on Line 14 of your K-1.

W

WolvesconstructionAuthor

Because we started business October 15,2019 we only had 1 incoming payday. After putting 10% back into company and paying all expenses the partners only got $ 1000.00 ea for income. The rest of the money is left in checking account to pay up coming bill and expenses. So I'm not sure what I need to correct on the 1065 tax form.

A

Anonymous_

Employee

Partners are considered to be self-employed; they do not have a "pay day" or get "paid", generally, with the possible exception of guaranteed payments which are another matter.

Rather, partners typically share profits/losses in relation to their ownership interests and the amount of net profit passes through to the partners (on their K-1s) regardless of whether or not the partnership actually distributes any cash (or other property) to them.

In short, the partners are liable for any income tax due on their share of the partnership's net profit; leaving the profit in the partnership checking account does not alter that reality.