My company is an LLC. I have a partner 50/50 on that company. My questions is related to expenses of the LLC. Correct me if I'm wrong but in my personal income taxes I don't have to include anything related to my LLC expenses. The LLC will report the expenses to the IRS and report how much revenue it gave to each partner to the IRS. Then on my personal taxes I pay taxes on top of the revenue received and I don't have to worry about the LLC expenses. The expenses will be handled by the LLC taxes. The LLC just report expenses and revenue for each partner. Is it how it works for an LLC? As a side-note, the LLC is also paying city taxes, so it has to compute net profit (revenue - expenses) anyways to pay the CITY taxes, on the business tax side.
"The LLC will report the expenses to the IRS and report how much revenue it gave to each partner to the IRS. Then on my personal taxes I pay taxes on top of the revenue received and I don't have to worry about the LLC expenses. The expenses will be handled by the LLC taxes."
I don't think you understand what goes on here.
You have a partnership and for income tax purposes a partnership is a "pass-through entity." Being a pass-through entity as two significant effects:
As part of the preparation of Form 1065 Schedules K-1 get created - one for each partner - and each partner then enters their Schedule K-1 into their own income tax return.
It sounds like you're new to this "partnership" situation and you've not said who is responsible for preparing the partnership's income tax return, but I'd advise you not to try and prepare the partnership's income tax return yourself, at least initially.
"The LLC will report the expenses to the IRS and report how much revenue it gave to each partner to the IRS. Then on my personal taxes I pay taxes on top of the revenue received and I don't have to worry about the LLC expenses. The expenses will be handled by the LLC taxes."
I don't think you understand what goes on here.
You have a partnership and for income tax purposes a partnership is a "pass-through entity." Being a pass-through entity as two significant effects:
As part of the preparation of Form 1065 Schedules K-1 get created - one for each partner - and each partner then enters their Schedule K-1 into their own income tax return.
It sounds like you're new to this "partnership" situation and you've not said who is responsible for preparing the partnership's income tax return, but I'd advise you not to try and prepare the partnership's income tax return yourself, at least initially.
Thanks, Tom. But how about expenses of the LLC, that were reimbursed to the partners (travel, etc.)? Is this handled on the business tax return or in the personal tax return?
If it's an "accountable plan" - you submit receipts for business-related activities - then the reimbursements are not income to you, they are business expenses reported on the partnership's income tax return. And since you don't report the reimbursements you also do not report the expenses on your own income tax return.