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In 2020 I worked full time for an LLC of which I was a general member, therefore was considered an independent employee receiving guaranteed payments in place of W2 salary and reported to me on a K-1. I also had a side business I was trying to get going, selling a few custom specialty items online. This side was operated under a sole proprietorship.
I did get COVID-19 and took 2 weeks off from my primary, self-employed work and 5 days when my son got it. When using TurboTax Home & Business to prepare my taxes, I tried to enter information to take advantage of the Sick Leave Credit and because my income was larger in 2019, wanted to use the 2019 net income from Self-employment. TT automatically pulled in a (loss) value that was based on my side business (sold one product and had some expenses so ended 2019 with a small loss). Since that was not my net income from my primary self-employment, I don't want to use it. TT says it pulled it from Schedule SE Short form.
My question is what value do I use for the 2019 net income? Do I use my K-1 - total income? Some other number? How to make sure it is not considered by the IRS as an error? Should I remove my side business reporting since it was minor and resulted in no income or deductions?
Thanks in advance.
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For clarification, do you pay Self-Employment tax on the K-1 income?
According to the IRS:
"Guaranteed payments are those made by a partnership to a partner that are determined without regard to the partnership's income. A partnership treats guaranteed payments for services, or for the use of capital, as if they were made to a person who is not a partner. This treatment is for purposes of determining gross income and deductible business expenses only. For other tax purposes, guaranteed payments are treated as a partner's distributive share of ordinary income."
Yes, there is self-income reported on lines 14 of the K-1.
Then combine your self-employed earnings on your K-1 with the net income from your side business and that is your earned income for the year.
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Raph
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Raph
Community Manager
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Raph
Community Manager
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Raph
Community Manager
in Events
Raph
Community Manager
in Events