Have a Tax Question? Ask a Tax Expert
Hello, my name isXXXXX & I'll be helping you today. My goal is to give you a complete & accurate answer that you can understand.
You said that.
The self-employment loss is simply what your self-employment tax (social security tax) would be based upon if it were a positive number.
So do I ignore it if it is a loss?
It has nothing to do with the deductibility of the loss on line 1.
Do you have any other self-employment income from any other source?
What is the form number of the K-1 you received?
Probably not but possibly. Why do you ask?
checking on form number....
It just says Schedule K-1, form 1065
Because if you did, you may have to combine that loss with other income in order to compute self-employment income. Are you self-employed?
I work for various companies that I am a part owner in.
OK, so the LLC is reporting as a partnership;
Yes. The LLC is reporting as a partnership.
Are you an employee of those companies; ie do you receive a W2?
I receive a W2 from a C corp that I am an employee and partial owner of.
Is there any downside to being more than a 50% owner and filling out Schedule B-1, Part II on form 1065?
Downside in what way, you aren't completing a partnership return are you?
I am and am trying to figure out what the significance of loss being identified as self-employment loss in line 14 of the K1. I have not seen it before and cannot figure out why it is outputting that or what I need to do with it on my 1040.
You don't need to do anything with it on your 1040. You are getting it because you must be a general partner.
Downside in the sense that it might be easy to arrange that no one is more than a 50% owner and I am wondering if there is any reason to do that. I was wondering if the change of ownership to over 50% had anything to do with the appearance of the self-employment line.
What does the LLC do?
No. That wouldn't trigger it, it depends upon the activity of the LLC.
OK. So is there any downside, other than having to fill out the form?
Is there any effect at all of becoming more than a 50% owner?
Any change in the ownership of the LLC, would trigger a capital gain or loss computation.
Why is there a section to identify 50% or greater owners?
... if it has no effect on anything?
Just disclosure as far as control; there could be certain transactions or related party activity that could be disallowed, but from a practical standpoint, there really isn't any downside.
OK. Thank you for the help.