Schedule K-1

Forum|Forum|3 years ago
April 24, 2023
1 reply
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According to my boss, the company I work for (and have a 5% stake as a partner in) had the option to file my taxes on my behalf. He claims that I should not have any liability from this and sent me a Schedule K-1 after I already filed form 1099-NEC.

Do I have to file an amended return? He already filed this K-1 form on my behalf and claims I should not have any liability, but also claims that I should file an amended return. When I fill out the information from the K-1 form he filed online, it claims I owe around $8,000 more, even though I already paid around $9,700 in estimated tax throughout 2022 and only have $33,562 reported on my guaranteed payments. Not sure what I am doing and if it is wrong (I'm 23).

Not A Product Question

Anonymous_

Level 15

@johnkennedy32 wrote:

According to my boss, the company I work for (and have a 5% stake as a partner in)....

You might want to get clarification from your boss or the PR (Partnership Representative), but if you are a partner, you should be receiving a K-1 (1065) each tax year (which you clearly need to report on your 1040).

Opus 17

Level 15

Assuming the company is a multi-member LLC, partnership, or S-corporation, the company issues a K-1 statement to each co-owner listing their share of income, expenses and other items. You report the K-1 on your personal tax return along with any other wages, personal deductions (like gifts to charity), dependents, or personal credits.

Whether or not you should also get a 1099-NEC for your participation in the company activities depends on how the business does their accounting and the terms of the partnership. For example, if you only have a 10% ownership stake but you have more than 10% participating effort, there would have to be some way of rewarding that effort, either by making you a W-2 employee, or by issuing a 1099-NEC. (If it is an S-corp, I believe you must be a w-2 employee if you perform work for the business.) This way, a passive owner receives a share of the profits but an owner who materially participates gets either a larger share of the profits, or gets wages plus profit participation.

All of which is to say, it is possible that you would get both a K-1 and some kind of compensation for work performed, but that compensation might have to be as a W-2 employee rather than a contractor, and the whole situation needs to be reviewed by a CPA to make sure both you and the business are doing things properly.

Anonymous_

Level 15

It should be highlighted, at this point, that general partners in a partnership are considered to be self-employed and not employees of the partnership (i.e., they would not receive a W-2 from the partnership).