Discussion:LLC Guaranteed Payments
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| 5 February 2006 | |
| I have a 6 member partnership. member 1 is 95% owner and does most of the work. He is considered a general partner and his k-1 shows ordinary business income of 65000 and a guarantted payment of 40000. WHat does he have to pay SE tax on? | |
DR BRISKET (talk|edits) said: | 5 February 2006 |
| 105K--90K FICA and $105K Medicare SE tax | |
| 18 February 2006 | |
| I have a similar question: I have an LLC where one member's share of ordinary business income is a loss of $20,000. That same member received a guaranteed payment of $80,000. Unless I am missing something, those two items should net on the K-1, line 14, and that member's self-employment income should be $60,000.
Similarly, on Schedule K of the 1065, the LLC's total loss of $200,000, should net with the guaranteed payment (that was the only one), and the LLC's total self-employment income on line 14 of schedule K, should be a loss of $140,000. The LaCerte program does not appear to agree with this. It is does not net the share of LLC loss with the guaranteed payment for the one member and shows $80,000 as self-employment income on that member's K-1 and $120,000 as self-employment income on schedule K of form 1065. Which treatment is correct? | |
| 18 February 2006 | |
| It depends on whether you are treating the working member as a limited partner. The ordinary losses allocated to limited partners will not be used to compute SE income or loss. However, the guaranteed payment will be used to compute SE income. | |
| 18 March 2007 | |
| I am doing my boss' tax return on TurboTax Home & Business. He is 99% owner of an LLC in which he has 118k guaranteed payment, 300k loss in the LLC, and 10k health benefits paid. If I enter everything as they ask for it from the K-1, the program throws the 10k to the Schedule A and nets the business loss and guaranteed payment so no SE tax is calculated. I would expect to see the 10K go to line 29 of the 1040 and SE tax calculated on the guaranteed payment. Am I right and does anyone know how to manipulate this frustrating program to get this result??? | |
| 18 March 2007 | |
| ha ha ha, Turbo Tax. Good luck.
How can he deduct SE Health Insurance if there is a loss? Only on Schedule A. | |
| 18 March 2007 | |
| Also, make sure you look at the Basis rules and the At Risk rules to determine how much (if any) of his loss he can claim. Again, good luck. Software is not a substitute for a good tax professional. Garbage in, Garbage out. Turbo Tax software is known to print out whatever someone puts in, right or wrong. | |
| 18 March 2007 | |
| I'd give it back and tell your boss to take his return to a professional - What's going to happen if you make a mistake entering the info? Do you want him to come back to you in couple years when he gets that IRS notice. The "box" won't help you. | |
| 18 March 2007 | |
| Mom, Turbotax is preparing the return in accordance with the proposed limited partner regulations under Sec. 1402. If you feel that the proposed regulations are wrong, then you should be prepared to justify any departure from those regulations. | |
| 18 March 2007 | |
| Thanks for the comments and suggestions. I am not out on a limb however. In my former job, I was a tax preparer (actually prepared this return at my firm) but of course had better software than this. If not for that, I would not have know the return was in error. You are right however, he cannot take SE Insurance with a loss. It's late and I gapped that. He is 100% at risk and has signed personal guarantees for all company loans so I understand how that should affect his pass through of losses. Long story short, I found the answer to the Turbo Tax dilemna. You basicly have to force SE calc. I feel sorry for anyone using this to prepare their own returns if they don't really know what they are doing. | |
| 25 March 2007 | |
| I am doing the taxes for my small 2-member LLC using 2006 TurboTax for Business. We take "owner draws" and don't have any guaranteed payments. Even after meeting with a CPA, I'm still struggling with this question. I'm at the end trying to get the balance sheet to balance. My Assets (just cash since none of the depreciated assets entered earlier carried over to this page) do not equal my Liabilities & Capital (no liabilities, only capital in our case, which seems to be our profit).
Last year was our first year in business, we used a professional CPA, and he did not do a Schedule L for us (since it wasn't required...under $250K). I sure wish I had that to work with! I'm new to this discussion board, so if this type of question is not appropriate, please kindly let me know. | |
Bporter421 (talk|edits) said: | 16 April 2007 |
| I have two LLC's, one is a construction company and one is an architectural practice. I have a partner in the construction company who handeled (through a professional)the taxes for that entity this year. On my K-1 I had a large amount of guaranteed payments not expected. When I called the professional he explained that the fees for service paid from one LLC to the other was a guaranteed payment and subject to self employment tax. Does anyone know if this is correct? | |
| 16 April 2007 | |
| assume you mean the GP is for payments made by construction company to your wholely owned SMLLC...if so, it is technically correct. Make sure you don't double count that income because it is probably included in your gross revenues in the architectural LLC. | |
Bporter421 (talk|edits) said: | 16 April 2007 |
| Thats exactly the question. To me it seems a double dip because we would normally assume this to be revenue on the architectural side. The other question is the self employment liability. This revenue went into the expense cost of runnning the architectural business, gross revenue. Does this not create an undue liability for SE tax? | |
| 16 April 2007 | |
| ...as long as you don't report the same income twice, it should not create and S/E tax problem. | |
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