Notary Income on 1065 Return?

[okron38]

I'm filing a 1065 return for my Notary business.  I will have both taxable and non-taxable Notary income for Self Employment purposes.  Is there anything I need to enter on my 1065 return to carve out the portion of my income that is NOT subject to Self Employment taxes or is this done on my personal return only?

[Anonymous_]

There are several ways to handle this on your 1065.

You only need to ensure that the income not subject to self-employment tax does not appear on Line 14 of your K-1.

[okron38]

@Anonymous_ 

Maybe you could have mentioned one?  I did make an adjustment....  I"m allowed to exempt a large portion of my Notary Earnings from Self Employment taxes.  When I make this subtraction it creates a negative income amount for SE (although I have a positive taxable income).  Do you see any issue with this negative number?  I do have a second pass-thru business that would benefit from the credit when they both flow thru to the SE calculation on my 1040 return.

[AliciaP1 · Accepted solution]

No, there will be no problem.  The Self-Employment worksheet within your 1065 is just showing the calculation for the total self-employed income.  Your K-1 from the return will identify that income for input to your personal tax return.  There is the option to adjust for non-taxable Notary services and that is when you will designate the difference for your share of the total income.  Your Schedule SE will back the portion of nontaxable income out of total self-employment income and then will calculate your tax from there.