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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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Partnership income/loss reported on K-1. Partners also are

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Partnership income/loss reported on K-1. Partners also are indep. contractors with Sched C income/expenses separate from their K-1 info. Is K-1 income subject to SE tax?
Is K-1 included on Sched C? How about K-1 losses - where are they reflected as far as SE income. The situation is partnership lost money, but their indep. business shows profit.

Since our illustrious govt is shut down, can't get thru to IRS - help!

Jeanette Palmer

Lev :

Hi and welcome to our site!
Income reported on K1 (1065) box 1 "Ordinary business income" is subject of self-employment taxes.
While some other income types - such as rental income or interest income - are not subject of self-employment taxes.
Ordinary business income from K1 (1065) box 1 is NOT included into schedule C - but reported on Schedule E, line 28.

Customer:

Okay - but when Sched C shows profit and 1065 shows loss, how is that reconciled to

Lev :

Losses reported on K1 (1065) may be self-employment losses and as such will reduce other income subject of self-employment taxes.
In additional to box 1 - Net earnings (loss) from self-employment is reported on K1 (1065) box 14 with code "A"

Customer:

affect SE taxes?

Lev :

Yes - if net loss from self-employment is reported on K1 (1065) box 14 with code "A" - that amount will go to Schedule SE,and will reduce other income subject of self-employment taxes.

Customer:

Thanks - This is a first for me - your help is appreciated.

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