LLC AS PARTNERSHIP

[Pacun]

K1 reads ordinary income -5000 (loss)

guaranteed payment to partner 8000

In what amount does the partner need to pay SE taxes?

[jklcpa]

What else does the K-1 report? Any 179? Is the SE income shown in box 14?

You can't assume that the partnership's ordinary income or loss is for SE taxable. As an example, a partnership's ordinary income can include gains on 4797 that are not SE income.

[mcb39]

Follow the lines on the K1 and post them to the K1 worksheet. In most cases, the Guaranteed Payments would be SE income, unless he is an inactive partner.

[imjulier]

Marilyn-

Is that your license plate? Funny!

Julie

[mcb39]

Yes, it is. Actually I was surprised that the State would issue it especially as WI is right up there with the highest taxed states. However, my boys did that and the explaination was "Tax Preparer" so it flew. I love it. It's all in the interpretation!

[Pacun]

Everything is for services provided by the partners. The problem is that they pay themselves too much and therefore the partnership ends up with a loss.

[OldJack]

Since this is a 1065-LLC, check last years tax return to see if the profit/loss was treated as self-employment income. If all k1 income is being reported as SE income you have only $3,000 net subject to SE tax, otherwise you have $8,000.

[mcb39]

Everything is for services provided by the partners. The problem is that they pay themselves too much and therefore the partnership ends up with a loss.

The fact that they pay themselves too much should have nothing to do with the profit or loss; unless you are referring to the Guaranteed Payments. If that is the case, then the Guaranteed Payments should be shown on the K1 as SE Income. And, of course, the loss under Ordinary Income should negate the SE down to 3000. Old Jack has this exactly right, unless there is something that we don't know. Did you also prepare the Partnership return?