Schedule K-1: Ordinary business income

[DoDesign]

As a shareholder in an S-corp, I received a K-1 form that is being included in my personal tax return. The Ordinary Business Income (box 1) appears to be the profit for the business for the given year.

Upon entering all information, it later shows Ordinary Business Income as taxable personal earned income. This was business profits. Not salary or even distribution. 

Why is this the case? Am I doing something wrong?  

[tagteam]

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@DoDesign  wrote:

Why is this the case? Am I doing something wrong?  

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No, you're not doing anything wrong.

The figure in Box 1 of your K-1 represents your share of the ordinary income from the business activities of your corporation and is taxed as such. You should see the same figure on Line 5 of your Schedule 1 (1040), which will wind up on Line 8 of your 1040. 

Note that although the amount is taxed as ordinary income, it is not subject to self-employment tax (FICA) as is the salary/wages on your W-2.