Part III-14, 'self-employment earnings' is blank.
that's the problem. as blank Turbotax is treating the income as passive not earned.
if you were a limited partner in an LLP that would be correct since LP's are not supposed to have an active role in the LP. now an LLC member may or may not actively participate in the activity and the IRS never issued final regs.
LIMITED LIABILITY COMPANY UNCERTAINTY
Over the years, many LLC members have taken the position that they’re equivalent to limited partners and, therefore, exempt from SE tax (except on guaranteed payments for services). But there’s a big difference between limited partners and LLC members. Both enjoy limited personal liability, but, unlike limited partners, LLC members can actively participate in management without jeopardizing their liability protection.
Arguably, LLC members who are active in management or perform substantial services related to the LLC’s business are subject to SE tax, while those who more closely resemble passive investors should be treated like limited partners. The IRS issued proposed regulations to that effect in 1997, but hasn’t finalized them — although it follows them as a matter of internal policy.
Some LLC members have argued that the IRS’s failure to finalize the regulations supports the claim that their distributive shares aren’t subject to SE tax. But the IRS routinely rejects this argument and has successfully litigated its position. The courts generally have imposed SE tax on LLC members unless, like traditional limited partners, they lack management authority and don’t provide significant services to the business.
if you or others provide significant services or actively participate in management, the return should be amended to reflect their SE income. Failure may invite an IRS audit and then there would follow a bill for SE taxes. penalties and interest. this might not occur for several years meanwhile penalties and interest are increasing. do not wait until next year. get the facts and if necessary amend prior returns.
on the k-1 to be earned income both box 1 and box 14 must have numbers. box 1 is for income tax purposes and has no effect on the S-E tax while box 14 is used to compute S-E tax and has no effect on taxable income
