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Jon Andrews
Jon Andrews, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 3118
Experience:  I deal with all levels of tax planning and controversy - from the ordinary to the complex.
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In 2008, my LLC had a net loss of approx (100,000). The LLC

Customer Question

In 2008, my LLC had a net loss of approx (100,000). The LLC is taxed as a partnership with 20% of the income/loss allocated to myself (I materially contribute) and 80% of the loss to my spouse (it is passive loss to her). Because we had a net loss, we do not have earned income and thus do not qualify for the Earned Income or Additional Child Tax credit. I did have 30,000+ in guaranteed payments to myself but Turbo Tax apparently thinks that does not qualify as earned income (the EIC calculator returns the response "you do not have any earned income". It turns out that if I had 1099'd myself the same 30,000 as an independent contractor, I would have qualified for the EIC. Shouldn't the guaranteed payments have had the same effect? Do I have a case to amend my return and claim the EIC?
Submitted: 7 years ago.
Category: Tax
Expert:  Jon Andrews replied 7 years ago.

Guaranteed payments are considered earned income. The guaranteed payment amount should have been shown as earnings from self-employment on the K-1. Depending on the nature of the partnership business, that may or may not be reduced by your allocable $20,000 partnership loss.