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Old 03-20-2014, 12:53 AM   #1
hardtaxes
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Partnership 1065 k-1

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I'm one member of a two member LLC partnership. We are both engineers and combined our talents on a large project, so we created a partnership. I have never done a 1065 or K-1 before, so I hope this isn't a stupid question. Let's say the partnership made 25,000, with each partner's share of 50% being 12,500, do I need to enter the 12,500 on line 1 under "ordinary business income" AND on line 14 as A-12,500 "self employment income"? Does it not get counted twice? I'm using TurboTax, and it isn't clear where the numbers wind up. I don't want to get taxed twice, but it seems like it really wants me to put the 12,500 on both lines.
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Old 03-20-2014, 12:26 PM   #2
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Without any real knowledge of Turbotax, yes you would record the 12,500 in both places. It should not get counted twice. here is the reason.

You can have pass through income from a form 1065 that is subject to self employment tax (such as you scenario) and also income that is not subject to self employment tax, say a collection of rental real estate that pass out net rental income or loss. Line 14 tells the software that this 12,500 is taxable as self employment income. Line 1 tells the software to include 12,500 in the INCOME taxable stream.
does that help?
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Old 03-20-2014, 12:49 PM   #3
hardtaxes
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Thanks! That's what I suspected. Line 14 is probably only used to calculate self employment tax, line 1 is used to calculate regular income tax. It just didn't look right, but I knew there had to be a reason for it.
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Old 06-18-2015, 01:20 AM   #4
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NOTE: You and your "PARTNER" should have a discussion with an attorney about liability issues and a partnership and its partners.
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