Reconcile accrual based 1065 (K-1) guaranteed payments that weren't received until following year?

[skowronek]

I'm a SMLLC (taxed as S-Corp) doing cash based accounting. I am also partner in another LLC and receive guaranteed payments. However, in previous year we all were not paid for last 2 months, yet the partnership (accrual based) recognized the guaranteed payments on our K1s. 

I eventually received the payments, but in the following year. How do I reconcile having reported the accrual based income from previous year on my K2, with the receipt of the actual funds in the current year on my own 1160s using TurboTax Business for my LLC?

Thanks for help.

[M-MTax]

Do you mean the balance sheet on your 1120S and the K1 you received? 

That was hard to follow. 

You should just reverse the entry from the previous year. 

[skowronek]

Thanks for reply. Maybe this will clarify.

Also, I'm in the middle of auditing (and potentially) amending my returns, thus the question.

Example scenario:

2018

Checks received in 2018: $80,000

Guaranteed Payments reported on 2018 K-1: $100,000

Then in 2019

Received remainder 2018 payments: $20,000

Where I am using cash based accounting yet didn't receive actual cash in the year it reported on my K1, how do I reconcile the difference in 2018 and 2019?

Keeping in mind, this all passes through to my personal returns.

[Mike9241 · Accepted solution]

te $100K is taxable income in 2018 since that is the accounting method used by it. the extra $20K would go on schedule M-1 line 2

in 2019 the $20K would go on M-1 line 5

the reason is that even individuals that uses the cash basis must report certain income on the accrual basis.  some partnerships/llcs and corporations are required to use the accrual basis. thus the individuals (owners) would report on their 1040's as shown on the k-1 despite different accounting methods.

look at it this way. the tax laws allow contributions to retirement plans (and certain other items) for year X to be made in the following year yet get the tax deduction in year X. this is in effect an accrual method.  

[skowronek]

Thank you @Mike9241 . This is exactly what I was looking for.