Schedule C and K-1

[pankaujn]

My wife and I formed an LLC (Domestic Limited Liability) in 2020. I started on my 1040 in December and our business taxes since they are due on March 15.  Completed the latter which generated a schedule K-1. Trying to finish up our Joint Taxes using TurboTax Deluxe. During the interview I'm asked if we received a K-1, which we did. I proceed to enter that information so now it seems as if there are two identical entries in the Business Items section; one for "Business Income and Expenses (Such C)" and right below it "Schedules K-1, Q". The entered information appears to be a duplicate.  Do I remove the entries I had made previously for the Business Income section which generates the Schedule C? This is our first year as filing as an LLC.

[VolvoGirl]

Why did you fill,out Schedule C?  For the same business?  No.  You already filed a separate Business return for it.  Just enter the K-1.  So delete the business Schedule C entries.

[nwang97]

How is the ownership split between you and your wife?  If it's 50/50, each of your K-1's should reflect 50% of the income of the LLC, in which case you should enter both into TurboTax.  They may look identical, but they each represent 50% of the income.  If only one of you owns 100% of the LLC, then only that person should receive a K-1 for 100% of the LLC income.

[Carl]

My wife and I formed an LLC (Domestic Limited Liability) in 2020.

So if both you and your wife own the LLC, that means you have a multi-member LLC. You reported the income/expenses for that multi-member LLC on IRS Form 1065/Partnership return, which is due to the IRS by March 15th. That multi-member LLC issued each of you a K-1. Each of you will enter your K-1's on the 1040 joint tax return.

Under no circumstances and with no exceptions, will you file a SCH C for this business. So if you started the SCH C on your personal joint 1040 tax return, you need to delete that SCH C entirely. The SCH C is only used for a business with one owner, and that is not incorporated. Your business has two owners, so SCH C will not be used.

[ColeenD3]

As nwang97 explained, the K-1 issue can be resolved. If you still have the Schedule C showing, this is how to delete it.

Here's the general procedure for viewing the forms list and deleting unwanted forms, schedules, and worksheets in TurboTax Online:

1. Open or continue your return in TurboTax.
2. In the left menu, select Tax Tools and then Tools.
3. In the pop-up window Tool Center, choose Delete a form.
4. Select Delete next to the form/schedule/worksheet in the list and follow the instructions.

[nwang97]

Sorry, pls disregard my previous reply.  The other responses are much more accurate.

If you have a multi-member LLC, use K-1's and make sure the ownership % add up to 100%.  If you're a single-member LLC (which doesn't seem to be the case here), you'd be taxed as a sole proprietor.  As the others explained, you need to delete the Schedule C.

[marcisikoff]

True you get a K-1 but why cannot that flow into Schedule C for a sole prop under the same name, the K-1 can be used for income and if they used a personal vehicle for the business, it can be depreciated and have expenses deducted to the % of business miles vs total that year.

Why is K-1 income to a partner not allowed to flow to their Sole Proprietor Schedule C as income?

[TomD8]

@marcisikoff --

"Why is K-1 income to a partner not allowed to flow to their Sole Proprietor Schedule C as income?"

Schedule C is for reporting of sole proprietorship income & expenses.  K-1 partnership income from an LLC is not sole proprietorship income.

Do you & your wife own the LLC?  If a husband & wife form a qualified joint venture ("QJV") they would each be able to report their share of the business income on Schedule C.  According to this web reference from LegalZoom, if your LLC was formed in a community property state, you may be able to file as a QJV:

https://www.legalzoom.com/articles/managing-and-forming-a-qualified-joint-venture

You may want to seek professional assistance.

[Cofisch]

A sole proprietorship can own an interest in a partnership.  For example a sole proprietorship designer owns a 50% interest in a partnership. The partnership acts as a clearing house and purchasing agent for the 2 partner designers. Each partner operates their own separate sole proprietorship and as such has expenses that fall outside of the partnership and within the sole proprietorship. The income from the partnership reported on the k-1 by rights, is income earned by the sole proprietorship.