How do I split 1099-K across two partners?

[charleyj21]

My collaborator and I have a facilitation business together. We're both sole proprietors. I received the 1099-K through Stripe for the total amount -- it's under my name. My collaborator files her taxes quarterly. I'm filing annually. How do I ensure that I only pay taxes on my half of the 1099K? Thank you ! 

[VolvoGirl]

First of all you probably should be filing a partnership return.  But for your Schedule C you need to enter the full amount and then put her half under Contract Labor.  And give her a 1099NEC for it.

[Vanessa A]

You can enter the 1099-K on your return, then you can issue your collaborator a 1099-NEC then report the amount you issue to her as a business expense under contractor labor.  This will remove the income from your return.  You can issue the 1099-NEC through this TurboTax link. 

[charleyj21]

Thanks for your help. I was also researching other questions on the TurboTax site and came across this example - https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/full-1099-k-but-we-on...

Can you help me understand why it makes sense to pursue the NEC route, rather than the approach detailed here? 

[charleyj21]

One follow up - I've been paying my collaborator along the way. Does that change your suggestion at all? (Apologies for all of the questions and thanks for your patience with me -- I'm new to this) 

[VolvoGirl]

They're both basically the same.  You can ignore the 1099K and enter it as Other self employment income or as Cash or General income.  You don't need to get a 1099NEC or 1099Misc or 1099K.  Even if you did you can enter all your income as Cash.  Only the total goes to schedule C.

And you can prepare and file the 1099NEC on Turbo Tax.  

[VolvoGirl]

Yes you need to give her a 1099NEC for all you paid her including half of the 1099K amount.  

How to prepare 1099 & W2
https://ttlc.intuit.com/community/forms/help/how-do-i-create-w-2-and-1099-forms-in-turbotax/00/25869

You can prepare W2 and 1099NEC & 1099MISC in either the Desktop Home & Business program or the Online Premium version.

For Online Premium:
Sign in to TurboTax.
Select Tax Home from the left menu (you might already be there).
Scroll down and select Your account.
Select Create W-2s and 1099s.
This will log you in to Quick Employer Forms.
Follow the instructions to create forms online for your employees or contractors.

[VolvoGirl]

And by the way, she is paying estimated payments quarterly.  She still files an annual return like the rest of us.   You should also be sending in quarterly estimated payments.

Turbo Tax guide to Estimated taxes

A Guide to Paying Quarterly Taxes - TurboTax Tax Tips & Videos

You must make quarterly estimated tax payments for the current tax year if both of the following apply:

- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits.

- 2. You expect your withholding and credits to be less than the smaller of:

    90% of the tax to be shown on your current year’s tax return, or

  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months).

 Turbo Tax can figure the estimates and print out the 1040ES forms to pay.  Or you can pay them directly on the IRS website

[AmeliesUncle]

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@charleyj21 wrote:

have a facilitation business together.

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The definitely sounds like a Partnership, rather than two sole proprietorships.  I recommend you consult a good tax professional (that is experienced with Partnerships) about this situation.

[Carl]

I recommend you consult a good tax professional (that is experienced with Partnerships) about this situation.

Agreed. Especially if your state taxes personal income. Otherwise, you could be in for a double whammy.