Schedule K-1 - allocation percentage - Sales, Tips

[theleeb]

Hello, so far I have not seen a way to subcategorize income for allocation purposes for an LLC partnership on Schedule K-1

The partnership agreement simply states that all profits are split in half (two-member LLC).  But I know each of the partners agreed that each will keep the tip-related portion of each sale, although that is not specifically mentioned in the agreement, probably because the percentage of tips earned by each partner is likely to vary from year to year.  I do see a "Special Allocation Percentage" area...each identified by a number (e.g., #1) but no description.  So not sure how to report the tip income per partner.

Any advice is appreciated!

[KristinaK]

My preferred method would be to do this:

1. Determine how much of the ordinary income should be allocated to each partner. I assume that the tips are included on line 1a of Form 1065. As an example, let's say that the ordinary income excluding tips is $100,000. This will be divided 50/50 between the partners. Let's say the total tips are $20,000 but allocated 60/40. Partner I will have $62,000 allocated to them. Partner II will have $58,000 allocated to them. 

2. Go to Forms Mode (top right corner of TurboTax), and find Sch K-1 Wks (left panel)

3. Under Special Allocations, enter the amount you want to be allocated to each partner. 

4. Then go to Form 1065 p5-6, and enter A in the column for Special Allocations (see the screenshots below showing how it should look). 

5. The final result you are looking for is that each partner's Schedule K-1 will show the correct allocated amount in box 1.