PatriciaV:
I don't believe the Partner SEP-IRA payments should be reported on Form 1065-Line 18 as a deduction. The IRS Form 1065 instructions for Line-18 state: "Don't deduct payments for partners to retirement ... plans including ... simplified employee pension (SEP) ... on this line. These amounts are reported in box 13 of Schedule K-1, using code R, and are deducted by the partners on their own returns."
I can get Turbotax-Business to leave Form 1065, Line-18 blank by leaving (Forms View) Form 1065 p5-6; Schedule-k; Line-13e(E) blank. If I then fill in Line-13e(O) with the information it will replicate on Schedule K-1 Line-13 as it should, but Schedule K-1 still reduces the "Current year net income" in the "Partner's Capita Account Analysis by the SEP-IRA amount (which I believe may be incorrect).
Since the SEP contribution is not (I believe) considered a deduction for the business, it doesn't seem it should be deducted from the partner's net income in Schedule M-1, nor subsequently in the Partner's Capital Account Analysis" on Schedule K-1 (but I am not sure).
I also note that on Form 1065, Schedule K, "Analyses of Net Income (Loss) per Return", the (incorrectly??) reduced amount is listed in the "b Limited partners" row, rather than the "a General Partners" row. Schedule K-1; Part-II; Line-G lists both of us as "General Partner". It seems this information should be in the "General Partner" row.
In summary:
1. I Believe your response regarding listing SEP-IRA contributions to the partners to be incorrect, as summarized above. Please clarify if I am mistaken.
2. I am still unclear whether (or not) the SEP distributions should be deducted from Net Earnings in the "Partner's Capital Account Analysis" on Schedule K-1. I cannot find clear IRS guidance on this.
3. Why is Turbotax-Business placing all income in the "Limited Partners" row at the bottom of Schedule-K, even though we are "General Partners"? Note that Schedule K-1 lists us as "General Partners".
