deltaone23
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I have a question regarding self-employment income and the correct way to input that income in the TurboTax software for my specific situation. I operate a single-member LLC that is a disregarded entity for tax purposes which provides consulting and other services. That LLC is in turn a member in a multi-member LLC that is taxed as a partnership (Form 1065). I received a Schedule K-1 from the partnership (which was sent to me directly because my single-member LLC is a disregarded entity). I believe I need to report the income from the Schedule K-1 on my Schedule C since I materially participated in the business and the income is subject to self-employment taxes.
I assumed that when I go into TurboTax Online and go to Self-Employment, there would be an option there to indicate that the source of the income was from a K-1, but that isn’t an option (it only has 1099, 1099-NEC, etc.). What are the right steps to get TurboTax to fill out the forms in the right way?
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- TurboTax Premier Online
posted
February 19, 20246:22 AM
last updatedFebruary 19, 20246:22 AM
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5 Replies
MinhT1
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Where to put self-employment income from Schedule K-1?
As your single-member LLC is a disregarded entity, all income and expenses are reported on your personal tax return. The income and expenses of the LLC are reported on Schedule C.
And the Schedule K-1 from your LLC's participation in the multi-member LLC is reported in the K-1 section of your personal return. The LLC's share of earnings reported in box 14 of the Schedule K-1 is subject to self-employment tax.
In TurboTax Online, you can enter your Schedule K-1 by following these steps:
- Open your tax return
- Click onFederalin the left-hand column, then onWages & Income
- Locate the sectionS-Corps, Partnerships, and Trustsand click onthe arrow on the right
- ClickStartnext to Schedule K-1
- Choose the correct form for your Schedule K-1 (Form 1065, 1120S or 1041)
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February 19, 20246:33 AM
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deltaone23
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Where to put self-employment income from Schedule K-1?
Thanks for the reply. The thing is, theincome on the Schedule K-1isthe income of the LLC. So do I report that income in the K-1 section of my personal return (which I think will go to Schedule E), or should I not report it there and instead report it on Schedule C?
Or if the answer is "both", how do I make sure that I am not taxed twice on the income?
February 19, 20248:37 AM
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Where to put self-employment income from Schedule K-1?
If all the income of your SMLLC is reported by the multi-member LLC, you should enter only the information from Schedule K-1 for that investment.
Are you paid by the parent LLC? If so, are those considered guaranteed payments reportable on Schedule K-1? This income is considered self-employment and is subject to Self-Employment taxes.
Yes, Schedule K-1 activity is reported on Schedule E of an individual's tax return.
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February 19, 202411:11 AM
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KennyGee
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Where to put self-employment income from Schedule K-1?
How about if there are expenses to offset that SE K1 income?
February 25, 20247:22 AM
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PatriciaV
Employee Tax Expert
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Where to put self-employment income from Schedule K-1?
According to the IRS Instructions for Schedule E: "You can deduct unreimbursed ordinary and necessary partnership expenses you paid on behalf of the partnership on Schedule E if you were required to pay these expenses under the partnership agreement. You can only deduct unreimbursed expenses on Schedule E that are trade or business expenses."
If the LLC agreement does not allow for payment of unreimbursed expenses by a member, those expenses are no longer deductible. Under the Tax Cuts and Jobs Act, the itemized deductions for job-related expenses subject to the 2% of AGI floor are suspended for expenses incurred after December 31, 2017 through 2025.
TurboTax will ask you about unreimbursed expenses at the end of the Schedule K-1 entry process.
@KennyGee
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February 25, 202412:05 PM
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