Re: Overriding Self Employment Taxes for Investment General Partnership

TaxCat1 · ‎March 28, 2023

I checked and there are no guarantee payments.

Any other suggestions on overriding 14c? I don't have even have farm income . Not sure why that 14c is being activated to begin with.

PatriciaV · ‎March 30, 2023

The amount on Form 1065 Sch K Line 14c is calculated as:
Total income (loss) (Line 😎

plus

Other Rental Income (Sch K line 3a)

less

Net farm profit (loss) (Line 5)

less

Net gain (loss) from Form 4797 (line 6)

If all the above are zero, then Sch K Line 14c must be zero. The amount you're seeing on Sch K Line 14c is most likely coming from 1065 Line 8. If your Income at the top of 1065 is zero, there is no explanation for the amount on line 14c.

You have the option to override the calculated value on Line 14c. This will invalidate the return for e-filing, so you'll need to print and mail to the IRS. Also, the TurboTax guarantees no longer apply.

TurboTax Live Full Service Business is another option where a tax professional may be able to resolve this for you.

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TaxCat1 · ‎March 30, 2023

@PatriciaV

Yes, it's coming from 1065 Line 8, because there is income in 1065 Line 4 (which is the pass through passive income from a different partnership).

Query what is triggering Sch K 14c in any case? I almost never see it on K-1's I receive. Maybe a bug with TurboTax Business?

Are you able to escalate the issue to one of the engineers/techs?

Seems like the only way to solve is to override Sch K Line 14c and not e-file (not great).

OR

Enter the pass through income on Sch K Line 11, which does not trigger Sch K Line 14c. (where does this flow to on the 1040)?

PatriciaV · ‎March 30, 2023

There doesn't seem to be a way to specially allocate flow-through income reported on Line 4. If you reported that income on Line 11, you would need to manually enter the allocated income on each Schedule K-1 Line 11 with an appropriate description.

The reason you have self-employment income is because you have only general partners. The IRS rules say that general partners receive self-employment income from a partnership. As long as you indicate that you have only general partners, you will struggle to prepare an accurate tax return.

You may wish to seek the advice and assistance of a local tax professional who has access to commercial tax software that allows more flexibility in how income is reported on the return and the K-1s. TurboTax is not intended to be used in extraordinary circumstances such as your group partnership.

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TaxCat1 · ‎March 30, 2023

@PatriciaV

Interestingly, when I indicate that both partners are limited partners in the K-1 worksheet, Sch K 14c still has an entry, BUT in the K-1 for each partner: 14c is gone.

As a result, I think something strange is going on with Sch K 14c.

If you can escalate, maybe would help?

Thanks for all your feedback and advice. I appreciate the patience with this tricky situation.

Also see this from page 41 of 1065 instructions:

"If the partnership is engaged solely in the operation of a group investment
program, earnings from the operation generally aren't self-employment earnings for either general or limited partners. "