Where do I report an owner draw on llc 1065 k-1? 2 partners who also get a salary. is the draw subject to social security and medical taxes as well?

Forum|Forum|6 years ago
June 4, 2019
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Vanessa11_2

Employee

An owner-draw is not reported on the K-1. The owner draws will simply decrease each individual capital account.

When you have an LLC, all income flows through to the owners of the LLC on the K-1. The 1065 is simply an informational return. This means whether or not you take a draw you will be taxed on your share of the income the LLC receives. All of the income reported on the K-1 will be reported on the individual owners 1040 and will be subject to Social Security and Medicare taxes. The amount taxed has nothing to do with the amount actually withdrawn.

For example, if the LLC has $100,000 in profits with 2 owners and each owning 50%, then each K-1 will report the owners share of $50,000. Each owner will report that $50,000 on their individual 1040. Even if owner A takes $45,000 out and owner B takes no actual distributions they will still BOTH report $50,000 on their 1040.

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TRAINWRECK1

Sorry to say your post is not accurate. Draws (aka distributions) are indeed reported on the K-1. They are reported in box 19 Distributions using a code of A (Cash and Marketable Securities).

MattKing

Thanks. I needed that!!

helen190

Three opposing answers, one right after the other.

This whole owner's draw thing is an absolute trainwreck, especially this year. Thousands? Hundreds of thousands? of small business owners paid themselves "owner distributions?" "owner draws?" last year using EIDL loans. There is ZERO information on what to do with this info on your tax returns. This is a population of people who are all trying to do their taxes themselves on turbotax to save money.

Just like on this thread, the answers to how to handle this on your taxes are 100% contradictory, and this is info allegedly coming from accountants.

"I'm an accountant, and you cannot pay federal back taxes with your EIDL money." "I'm an accountant, and you can absolutely pay federal back taxes with your EIDL." (I happen to know which of those sentences are accurate, but that's an easy one.)

There are literally HUNDREDS of these types of contradictory comments sometimes following a SINGLE article talking about how to handle an owner's draw on your taxes (or paying yourself via your EIDL loan more broadly.)

parvitstax

@helen190 You didn't want to help with the correct answer?

Critter-3

Ok ... why don't you look at the form 1065 instructions ... K-1 box 19 ... cash distributions .... https://www.irs.gov/pub/irs-pdf/i1065sk1.pdf

Of course ... what is distributed to the partners may not be what they are actually taxed on thru the K-1 form. If you do not understand pass thru entities then using a professional the first year is wise for the education alone as well as getting your books in order.