Schedule K-1 on a personal business?

[david77]

I'm using TurboTax Home and Business, and I entered my wife's tutoring business (a LLC) income in the Business Income & Expenses section. I know we need to create and submit a Schedule K-1 (Form 1065), but what I am unclear on is if we also need to enter the Schedule K-1 information from her business in the Personal Income section, under Business Investments and Estate/Trust Income? I fear that doing so will double count her business income. Thanks for any insights you all may have!!

David

[RobertG]

If your wife has a single-member LLC, she should not prepare and file a partnership return, (Form 1065) or issue herself a K-1.

A single-member LLC is considered a disregarded entity by the IRS. So all business income and expenses are reported on SCH C as a part of your personal 1040 tax return.

The IRS does not recognize an LLC as a business entity.  The IRS only recognizes individuals, partnerships, and corporations.  You need two entities to have a partnership, so she is not a partnership.

[david77]

Thanks Robert. Both she and I are partners (husband / wife), even though it is essentially her business. So my understanding is that we do need to file the 1065 and Schedule K-1's. It's just not clear to me in TurboTax Home and Business if we need to report her income both in the Business income section (which is a stand alone tab / section) AND in the Personal income section where it has Schedule K-1 under the subsection Business Investments and Estate/Trust Income? I suspect we don't, and fear that doing so would double count her business income, but I was hoping someone could verify that.

[Rick19744]

What is your state of residence?

[david77]

Maryland.

[andrew_campagnol · Accepted solution]

Hi, 

If it is a partnership LLC, then the K-1 Information gets entered in the"Personal" section of your 1040, NOT the "Business" Section. The Business Section of the 1040 is Schedule C. K-1 Information entered will generate Schedule E "Partnership Profit and Loss". At the bottom of the "Personal Income" selections you will see K1 Information. 

If there are multiple activities for your partnership, i.e. Rental Income plus some other ordinary business, then you need to run the interview twice, and each time make the proper selection for the K-1 information - whether it is ordinary income, rental income, etc. This will hopefully generate the 2 copies of Sched E you would need. Otherwise a single Sched E is ok. 

[david77]

Thank you Andrew! That's what I figured, but I'm glad to get a confirmation.

[Whistler63]

Andrew, my siblings and I share interests in a farm and I am a "Limited Partner". However, because I live out of state, I have individual farm-related travel expenses, which I would like to claim.

The farm K-1s are prepared by a CPA. I entered my required data into TurboTax Premier. However, I don't see a Schedule E to enter the above-mentioned expenses.

Any suggestions on how to proceed?

[DianeC958]

In order for you to take the travel expenses there needs to be a part of the Partnership Operating Agreement that states you are required to pay certain expenses for the partnership yourself.  Then you can deduct these expenses on your personal tax return as Unreimbursed Partnership Expenses.

Individual partners and shareholders may deduct unreimbursed employee expenses that are:

• ordinary and necessary,
• paid or incurred during the tax year, and
• are for carrying on a trade or business of being an employee.

As you put in the information for the K-1, TurboTax asks you if you have an Unreimbursed Partnership Expenses (UPE).  Click on  Yes, then you can enter the expenses.