@rcabrasley1 wrote:
I guess let me clarify...
I receive a K1 from a partnership. The partnership paid out cash distributions for the year 2019. Do I simply enter all the information from the K1 and my tax impact will be adjusted accordingly in turbo tax? I believe the total cash I received for 2019 is reflected on line 19 with code A. Also reflected in section L with my tax basis figured. So is this all I need to do in order to figure out what tax I owe on the cash distributions, or do I have to report that elsewhere on my personal income?
Thanks!
If the business made a profit, that profit is reflected on the K-1 and is taxable, regardless of whether or not any of the profit was paid to the owners. The payouts are not separately reported and are not separately taxable—the profit is taxed regardless of whose bank account it is in.
As @Critter-3 indicates, you do want to keep on top of the finances. If the business has 4 equal co-owners, the profits are taxable 25% to each owner, even if one owner takes more cash out than the other owners. There might be cases where this would be reasonable (such as, one owner is much more hands-on than the other owners) but you need to be aware of the arrangements and all owners should be in agreement in advance on what those arrangements are.
