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If an LLC, pays a K! owner less pay out than the pay out…

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If an LLC, pays...

If an LLC, pays a K ! owner less pay out than the pay out reads.

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

Can a K1 LLC pay out less than the K 1 reads? K1, reads $20,000

Accountant's Assistant: Is there anything else the Accountant should be aware of?

But the cash received was $17,000

Submitted: 5 months ago.Category: Tax
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12/19/2017
Tax Professional: Lev, Tax Advisor replied 5 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,860
Experience: Taxes, Immigration, Labor Relations
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I assume that is an LLC with several members - correct?

.

Such LLC for tax purposes is classified as a partnership.
The partnership doesn't pay income tax - but instead is passing ALL taxable income to partners - and K1 reports to each partner his/her share of the partnership income.
That is - K1 reports income realized by the partnership - REGARDLESS if that income is distributed or not.

So - the actual distribution may be more or less than taxable income reported on K1.

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Customer reply replied 5 months ago
If the actual distribution is less, the owner, pays tax on money's not received. So what steps are required going forward?
as in next tax year? or steps that repay for the shortage..
Customer reply replied 5 months ago
In other words my share is less than I received......so how do I ever get reimbursed?
K 1 reads 20,000== I received $17,000, I pay tax on $20,000 , and then ?
Tax Professional: Lev, Tax Advisor replied 5 months ago

The partner generally doesn't pay taxes on distributions...

The distribution itself is not taxable in most situations....

BUT what is taxable for the partner - his/her share of the partnership income - REGARDLESS if distributed or not.

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Tax Professional: Lev, Tax Advisor replied 5 months ago

Partners may decide not to take any distribution holding all gain within the LLC - and distribution will be zero - but still taxable portion will be reported on K1 and will be included into each partner's individual tax return.

So if your portion is $20,000 which is reported on K1 - THAT amount is added to your income even if you actually received zero distribution.

That is how the partnership is taxed - as a partner - you are taxed on your share of teh partnership income - and not on distribution.

I am not sure where other $3000 were spent - may be it was reinvested in business? That is between partners to to use LLC's money.

Or you may talk to the managing partner and ask why $3000 were not distributed and if that amount will be distributed in a following year.

Sorry if you expected differently.

If you do not like how the partnership is taxed - you may dispose your partnership interest - and in this case - will ONLY receive compensation for your services. In this case - you will be taxed ONLY on that compensation and will not be a partner.

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Tax Professional: Lev, Tax Advisor replied 5 months ago

I appreciate if you take a moment to rate the answer.

Experts are ONLY credited when answers are rated positively.If you still have any doubts, need clarification - please be sure to ask.I am here to help you with all Social Security / Tax related issues.
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