Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

Partnership & S-Corp Tax I file partnership tax returns

Partnership & S-Corp Tax...
Partnership & S-Corp Tax ?

I file partnership tax returns for my LLC. The LLC is used to rent residential real estate. I am a partner, one of two owners, in the LLC.

As of yet, I do not deduct expenses for the work that I do. May I deduct expenses for the work that I do- such as managing the property or cutting the grass? If I can deduct these expenses, what documentation should I keep and how much can I charge? Could you please refer me to a particular tax publication/page if I can deduct these expenses?

Assuming I can not deduct these expenses, is there any way for me to do the work and deduct these expenses (for my time)? Are their any considerations that I should keep in mind when doing this?

An LLC can elect to file taxes an S corporation. If I were to elect the LLC to file as an S corporation (instead of as a partnership), could I save on social security or other taxes? I am not sure if this would benefit me since I rent residential real estate. Could you please refer me to a particular tax publication/page if I can save on taxes using this method? Do you see any issues with electing the LLC to file as an S corporation?
Show More
Show Less
Ask Your Own Tax Question
Answered in 12 minutes by:
6/3/2010
BK-CPA
BK-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 933
Experience: Owner of a CPA firm
Verified

S-Corps cannot use special allocations or make partnership elections, etc., so you are more limited, but at the same time you're not subject to self-employment tax on rental income anyways with a partnership, so typically I'd suggest a partnership other factors held equal.

 

Your services are a deduction for the partnership, and income to you. Your taxable income should go up and your partner's should go down. It sounds like a W2 would be appropriate for wages, but if you use management fees and a 1099-Misc, that is also common if appropriate.

 

Your income, or management fees, derived from the partnership could get run through your own single-owner S-Corp to save on self-employment taxes, but I doubt this would be worth it unless you were also managing other properties and were darn sure you weren't properly considered an employee of the partnership.

 

Thank you for your question.

 

Ask Your Own Tax Question
Customer reply replied 7 years ago
I appreciate your time and expertise. I am a little unclear on this.

Are you saying that I could deduct my fees for managing the properties and cutting the grass if I'm issued a 1099-MISC or W2? It doesn't make a difference that I am a partner (owner) in the LLC.

Is there anything else I need to file to use these deductions for the LLC (income for me)? Could you also please refer me to a tax publication for making these deductions?

I would get a tax deduction for the LLC (which goes to my personal tax return) in this scenario, but I would have to pay higher personal taxes. Do you think there is any monetary benefit in deducting "my fees" since the income goes right to my personal tax return and both are taxed there?


The deduction is easy... just record it on the 1065.

 

The W2 and/or 1099-Misc is appropriate for someone that is working for / contracting with a partnership, S-Corp, C-Corp, etc., even if 100% owned in the case of a corporation. I personally give myself a W2 each year as a shareholder employee of my 100% S-Corporation, even though all the other income flows through to me too. Why? Employment taxes and, in the case of states, employers' unemployment taxes as well.

 

Remember, you recognize income while the company takes a deduction, so the overall effect is a wash from the IRS point of view, income to you, and a deduction for your partner(s), so long as it is done in an arms' length transaction and not a tax avoidance scheme...

 



Edited by BK-CPA on 6/3/2010 at 3:14 AM EST
Ask Your Own Tax Question
Customer reply replied 7 years ago
This is the part that's confusing:

From what we discussed, residential real estate businesses do not pay extra self employment and social security tax.

I would get a tax deduction for the LLC (which goes to my personal tax return) in this scenario, but I would have to pay higher personal taxes.   

Is their any benefit in using this deduction for my own "fees" (property management and grass cutting)? There are several apartments in this LLC; so I am concerned about this.   

There is no benefit to you (save more income for your work). The tax benefit goes to your partners and to the IRS. There is no choice in the matter.



Edited by BK-CPA on 6/3/2010 at 3:24 AM EST
BK-CPA
BK-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 933
Experience: Owner of a CPA firm
Verified
BK-CPA and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask BK-CPA Your Own Question
BK-CPA
BK-CPA
BK-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 933
933 Satisfied Customers
Experience: Owner of a CPA firm

BK-CPA is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
Suppose my taxable income in 220,000 this year and the tax
Suppose my taxable income in 220,000 this year and the tax rate is X up to 200K, but Y for 200and over, do I pay Y on the full 220K or just that above 200K? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Can I report rental income in my tax return on a property
Can I report rental income in my tax return on a property thar is owned by my father? He does not live in the US is not a US citizen and can sign a document to allow me to receive the rental… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Dose mean can not deduct state income taxes only or dose it
dose mean can not deduct state income taxes only or dose it includes property taxes too … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
For a ny state partnership tax return, if you file an
For a ny state partnership tax return, if you file an extension but don't pay anything and then end up owing a lot. Do they still recognize the extension or do they charge a failure to pay penalty (fo… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I have questions regarding 179 deduction for LLC with
i have questions regarding 179 deduction for LLC with multiple partners.If I purchase suv under my individual name will I be allowed to take 179 deduction.For the standard mileage I usually just turn … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,217 satisfied customers
I had some self employment income where I was paid in
I had some self employment income where I was paid in bitcoin. I also made some bitcoin payments to a couple of businesses for what would be considered commissions. Would I report the income and expen… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
723 satisfied customers
Income from the leasing of cars...is it self employment
Income from the leasing of cars...is it self employment income? … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Filing my tax returns - did not receive a 1099 from aetna?
filing my tax returns - did not receive a 1099 from aetna? but i see it was put on return the last two years ( I've moved) don't even know what this is for but act asking for it … read more
abci168
abci168
Principal
27 satisfied customers
I just found my s corp and state tax returns for 2014 for
I just found my s corp and state tax returns for 2014 for which I thought were mailed. there is no money due but what are the consequences on mailing now and what if I don't? … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,217 satisfied customers
We have a -term tax client - an LLC - whose tax return is
We have a long-term tax client - an LLC - whose tax return is due on extension Friday. Because of health problems, the owner is running very late and finishing an accurate return by Friday is not like… read more
taxmanrog
taxmanrog
Master\u0027s Degree
698 satisfied customers
I'm trying to figure out how a partnership "deducts"
I'm trying to figure out how a partnership "deducts" contributions to a partner's retirement plan … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I am finalizing a personal tax return and my client has 8 or
I am finalizing a personal tax return and my client has 8 or 9 K-1 forms from operating companies that he owns. One company that i do not prepare issued a K-1 with a line 1 income of $242,089 and a se… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
723 satisfied customers
I am preparing a partnership tax return for 2016. The
I am preparing a partnership tax return for 2016. The partnership holds commercial rental property. one of the partners, 50%owner, passed away in April 2016 and left his interest to his spouse. i woul… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
A Nevada partnership (LLC form in Nevada) own property in
A Nevada partnership (LLC form in Nevada) own property in Nevada. in 2016, the partnership hire a manager in California to manage Nevada rental property (this manager is show on the Nevada Secretary s… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Deductible unreimbursed partnership expenses are deductible
Deductible unreimbursed partnership expenses are deductible on Line 28 of Schedule E. In this case the expense is a tractor with a cost of $ 25,000.00. This is a depreciable asset and would not normal… read more
Matthew Breecher
Matthew Breecher
President
MBA (Graduate Legal Studies)
285 satisfied customers
I am preparing the personal tax return for my employers, and
I am preparing the personal tax return for my employers, and I just found out they operate an LLC. What is the rule of thumb for determining whether to elect to be taxed as partnership or corporation.… read more
Matthew Breecher
Matthew Breecher
President
MBA (Graduate Legal Studies)
285 satisfied customers
I am preparing a tax return for a partnership. It is an LLC
Hello,I am preparing a tax return for a partnership. It is an LLC that is husband and wife (70/30 split) with a handful of small non-investor partners. This couple earned far more in 2016 than in prev… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
On my income tax return, can I deduct property taxes for a
Hi, On my income tax return, can I deduct property taxes for a second home, out-of-state? If yes, can I claim it only on my federal income tax return, or also on my state income tax return?… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x