NESE for partners

[Guest notapensiongeek]

401(k) PSP, 3% SHNEC, calendar year 2007.

We received a Schedule K-1 for the partners that list Guaranteed payments (line 4) of $50,000 and Self-employment earnings (line 14) of zero. When calculating the partner's NESE, is our starting point $50,000, less contributions for staff, less 1/2 SE tax, etc. or is it zero? If Line 14 was a number greater than zero (e.g., $10,000), what would our starting point be?

Any input on this would be greatly appreciated.

Thanks!!

[ERISAnut]

It appears as if you are in the TPA role and looking to find which amounts to use from a Form K-1. It would probably be a good idea to have your client pose this particular question to the CPA who prepared the K-1 (assuming it was a CPA). The key to determining the amount is to assess what portion constitutes "earnings from services rendered." This may be from any, all or none, of the guaranteed payments. So, the term guaranteed payment really tells you nothing.

In practice, a partner may have earnings from services rendered, but then have amounts reduced by their distributed share of gains from the business. This will actually reduce earned income.

[Guest notapensiongeek]

Good call on that one, turns out the client happens to be a CPA...so the answer will likely differ for each client depending on the answer to that question.

Thanks ERISAnut!

[austin3515]

I've never seen guaranteed payments not be included in earned income.

I have seen CPA's forget to fill in the SE box by accident.

Do with it what you will

[Guest Sieve]

Likewise. See this:

http://benefitslink.com/boards/index.php?showtopic=38199