Hi everyone! this is a new business owner question - I started a business last summer and a few months later I took on a minority business partner (20%) that is also a sales rep. When I filed taxes this year I issued him a 1099 and now his accountant is asking me for a K1. I didn't issue a K1 for myself and just filed it all as pass through income(?) with a deduction for the commissions he was paid. I claimed the buy-in he paid me as income as well.
How do I remedy this? Can I file an amendment to issue both of us K1s and cancel his 1099?
Get a local tax pro for this. There's a difference whether you are sharing ALL profits with the sales rep or just giving the sales rep a 20% commission. If the sales rep bought into the company and you're sharing profits you file a 1065 and you'll need help with getting everything straightened out and filed for both federal and state.
You used the words minority business partner. That means you file a partnership return, 1065. The partnership return will produce a K1 for each of you. You will enter his 20% ownership and your 80% ownership. You would use the Small business software.
You should look at the IRS business center. This will help you understand what you are doing and how to do it.
If the sales rep is an independent contractor, then the 1099 is correct. He would not be asking for a k1 unless he thought he owned part of the business. Clarify with him, if needed. Check your paperwork and minutes of your meeting to be sure. Keep all meeting minutes, those are required in a partnership. Be sure to follow the rules.
If a partnership, you will need to amend what you filed already as a sole proprietor.
Once your original return is accepted and the finances are settled, you can file an amended return.