Where do I enter employER vs employEE retirement contributions using TurboTax Business?

[Anonymous]

In the TurboTax Business Edition, under the Deductions tab, Compensation and Benefits features "Employee compensation & benefits" where you can enter "retirement" or there is an option for "Member retirement contributions" where you can allocate by amount to each employee. 

Are these both for employER contributions or is one for employEE contributions?

I have a two-member LLC partnership and I'm wondering where to document the salary-deferred contributions and where to document the employer contributions.

[Critter]

Employee deferments are simply a portion of their wages ... it does not need to be reported separately on the 1065.  And I hope you are aware that the Partners cannot be employees of the same partnership.  

And the employer portion of the retirement goes on line 18 under retirement plans :  

https://www.irs.gov/pub/irs-pdf/f1065.pdf

[Anonymous_]

Below are a couple of relevant screenshots from TurboTax Business which, along with @Critter's response, should serve to point you in the right direction.

[Anonymous]

Hello,

Thank you for the screenshots. These are the exact areas that I described in my question.

According to the Instructions for the 1065, elected deferrals ("employEE" contributions) are supposed to be recorded on the 1065 so that they can show up on the K-1 under section 13 with a code of R. If I include those amounts in the "Member Retirement Contributions" section under "Compensation and Benefits" then it shows up accurately on the K-1.

For employER deferrals, I can enter it in the "Employee compensation and benefits" section under "Compensation and Benefits." These are deductible to the business.

However, the elected deferrals ("employEE") are not supposed to be deducted as Income (Loss) on Your Books because they are deducted on an individual's return, but on the Balance Sheet, it is showing that amount being deducted.

That said, am I supposed to include the elected deferrals ("employEE") in the total compensation of the employee and also include it under the "Compensation and Benefits" section, or do I subtract the retirement contribution from total compensation.

Ex: Partner A makes a total of $10,000. $5,000 is a cash distribution and $5,000 is deferred to retirement. In the Business Info/Partner Member Information section, do I list $10,000 as the Cash Distribution to Partner A and list $5,000 under the Federal Taxes/Deductions/Compensation and Benefits/Member Retirement Contributions? Or, do I list $5,000 for the Cash Distributions section and $5,000 for the Member Retirement Contributions?

[Critter]

First  on the TT Business program there is the FORMS mode where you can see your entries on the actual forms  and  then you need to read all the learn more options if you are not sure but most of all I highly recommend you seek local professional assistance if you are not familiar with a form 1065 to get educated.   

If you are completing a 2018 calendar year partnership return it is very very late and the penalties are adding up quick. 

[Anonymous]

Yes, thank you. I'm aware of the Forms view, hence why I have referred to the lines on the K-1. I'm also familiar with the 1065. However, I'm not sure how to get the software to do what it's supposed to do, which is why I am here, asking about the software, not the tax laws. Are you able to answer my questions?

[Critter]

I do not have access to the Business program any longer and can only give general info ... but @Anonymous_  may be able to assist ... if not contact TT support for more help. 

[Anonymous_]

@Anonymous You are on the right track because we are talking about pre-tax benefits (i.e., which should not appear as ordinary income nor taxable distributions)

One major issue here is the balance sheet which, in TurboTax, needs to be manually adjusted in many instances.

[Anonymous · Accepted solution]

@Anonymous_ @Critter 

I ended up contacting TT support and determined that, as I suspected, the issue is simply the software not supporting this sort of situation. So, for anyone who happens to need an answer to this as well, here it is:

First of all, for anyone not familiar with the tax rules regarding partnerships and allowable 401k contributions, here it is: https://www.irs.gov/retirement-plans/one-participant-401k-plans

1. Business Info > Partner/Member Information > Member Capital > Cash Distributions Member Received from LLC: This should include the sum of the cash distributions AND the elective deferrals to retirement ("employEE" contributions).

2. Federal Taxes > Deductions > Compensation and Benefits > Employee compensation and benefits > Retirement: This is only for "common law employees" and does not apply to a sole-proprietorship or partnership. (This is what shows up on Line 18 of the 1065.)

3. Federal Taxes > Deductions > Compensation and Benefits > Member retirement contributions: This is where you will enter the employer non-elective deferrals ("employER" contributions). (This will show up on the K-1 on Line 13, Code R.)

4. For the elective deferrals ("employEE" contributions), you will then have to go to the "Forms" button in the upper right hand corner, find the K-1 form(s), and manually override Line 13. If you included "employER" contributions, Code R will already be present with the amount contributed from the company. If you are only including "employEE" contributions, there will be no code.  Right click to manually override and ensure that the sum includes "employEE" and "employER" contributions. Then, include "STMT" on the line next to it, and write a note indicating how much was contributed by each.

On the individual's taxes, they will only be deducting the "employEE" portion, since the "employER" portion has already been accounted for.

Ex: Partner A makes $10,000, contributes $5,000 of that amount to retirement, and the company contributes an additional $2,000 to retirement as part of its profit-sharing plan. $10,000 is the amount that will be considered "cash distributions to member received" (see #1 above). $2,000 will be considered "member retirement contributions" (see #3 above). $7,000 will go on Line 13, Code R of the K-1 ($5,000 employEE + $2,000 employER).

A couple screen shots to help:

Note: