If someone is a member and active participant in the business of an LLC then, for purposes of a K-1, what is the distinction between the values that go in Box 14 "Self-employment earnings" and Box 1 "Ordinary business income?" Is there a publication that explains the accounting difference?
I can't even tell: If a dollar paid out to a member is Box 14 then is that dollar not included in the sum reported in Box 1?
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Hi Dbooksta
I am glad to be able to help you. Hope that you are doing great!
If I understand your question correctly
Here goes:
So to answer your final question, a $1 earned by a member and reported in box 1, would also be a $1 that may be taxed the net payroll tax equivalent of 7.65%.
SE tax kicks in when earnings from self-employment are $400 or more.
I hope this helps!
there are two taxes on active participation in a non-passive activity. the regular income taxes on box 1 income. if there are guaranteed payments on 4a or 4b those are also subject to income taxes but only 4a would be subject to SE tax self-employment tax (schedule SE). so one should see box 14 being equal to the sum of boxes 1 and 4a.
you would be out of pocket 100% of the SE tax less the tax benefit you get from the deduction for 1/2 of the SE tax you paid.
so assuming $100,000 in box 14 and you're in the 24% bracket the cost of the SE Tax would be
100000 * .9235 * .153 = 14130 = se tax
14130 /2 * = 7065 deduction for se tax
7065 * .24 = 1696 = tax savings on SE tax deduction
net SE tax cost 14130 - 1696 = 12434
or a net out of pocket of
If the member is not taking a salary/wage, so there are no "guaranteed payments," but the member is an active participant in the business, then Box 14 = Box 1?
I have entered everything on the K-1 but #20 code Z stmt. on Statement it says w-2 wages 19973 and ubia 6048. in turbo tax it will not accept it. I enter code Z and 19973 and it tells me its an error. Ordinary business income was -39, This partner was paid 52,000. Is it giving me the error because there was a loss or am I doing it wrong?
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