1099-NEC and K-1 For Same Work

Forum|Forum|3 years ago
February 6, 2023
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My wife and I are partners in an LLC that we started in 2022. We have yet to file the 1065 (but will do so soon) and we issued K-1s to ourselves as a result of the work and distributions occurring in 2022.

My wife did some consulting work through the LLC and the company she consulted for sent her a 1099-NEC for the work. I'm worried that filing both the K-1 and 1099-NEC on our return will result in us getting double-taxed on the amount. Would love advice on what to do here. Thanks!

TurboTax Premier Online

Best answer by MinhT1

If your wife did the consulting through the LLC and the income has been reported by the LLC, then the form 1099-NEC should have been issued to the LLC and there would not be any double reporting of income. You should have submitted a form W-9 to your client in the name of the LLC. You can ask your client to correct the form 1099-NEC to make it out to the LLC.

Please note that if you live in a Community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin) your husband-wife LLC is a disregarded entity and you could report its income and expenses on your personal joint return on Schedule C..

MinhT1Answer

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mattdabbs

Here is the issue.

When you file the 1065 it includes all the LLC 1099 NEC's built into the profit/loss.

Then later Turbo tax asks you to enter any 1099s you might have. So there is a worry that by not putting those in that you aren't reporting the 1099s but they were included in profit/loss on lines 1 & 14 on the 1065. Does that make sense? Can we just attach the 1099s and expenses to the 1065 to make sure they get reported? And if we do that, then later when TT asks for any 1099s we don't include them.

Is this correct or what is the right way to do this?

DianeW777

It depends. If you are saying that the 1099-NECs are income from the service and business of the partnership, then the income should be included with other income that is reported on the Form 1065. This would reflect the correct profit on the K1s and you would not duplicate it on your personal return.

If this is the case and if the 1099-NECs were reported in your personal social security numbers (SSNs) and not the EIN of the partnership you can nominee that income to the partnership using the information below, so the IRS is looking for the income on the right tax return.

Nominee Returns.

Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received). You must also furnish a Form 1099 to each of the other owners.

File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area. (Provided on the Form 1096)

On each new Form 1099, list yourself as the payer and the other owner, as the recipient. On Form 1096, list yourself as the nominee filer, not the original payer. The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.

The forms filed with the IRS should be the red copy so if you don't have a color printer, go to the IRS website and order the forms here:

Unlikely and incorrect scenario:

If you are saying the partnership is paying you and reporting the payments on Form 1099-NEC, then the partnership would have written off that expense and the partners would have to claim that income on their personal returns. They would also report their portion of the net profit from the K1.

@mattdabbs

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