More K-1 LLC questions

[Guest Born2Run]

Can anyone direct me to guidance/website on how to calculate earned income for plan purposes for a limited partner in an LLC?

I've got self employment earnings (unfortunately, way under comp limit...) but i'm stumped on whether limited partner is responsible to reduce self employment by employee share of deferrals/match? And i'm assuming they reduce by 1/2 SE tax, but not positive.

The limited partner K-1 shows 90% share in profit/loss/capital.

Accountant was of no help as when i asked for earned income (and gave them definition in plan document) they responded that self employment earnings was on line 14A of K-1 (yea..no kidding!)

I've found little guidance/resources and misery seems to love company as my pension friends run far when i mention K-1/LLC!

Thanks.

[R. Butler]

Start with line 14a

Reduce by partner's share of rank-&-file contribs.

Reduce by §179 deduction

Reduce by other 14(a) adjustments

Reduce by 1/2 SE tax

reduce by partner's share of employer contribs.

It is a circular calcualtion.

[Bird]

R. Butler's list is accurate. The problem you generally run into is that the accountant should really be giving you a preliminary 14A number, then you do all the calcs and tell them the contributions, and they should put the rank and file contributions into the 1065 partnership return, which will change the 14A number but then it will be final. Most accountants can't be bothered; for the rank and file contributions they'll either use last year's accrued contributions deposited this year (wrong, if the calcs assumed they were deducted last year), or actual deposits made during the year (usually wrong), or their own calcs (usually wrong!!!). Then you can have differences in how those expenses are allocated; you might see a 75/25 partnership and assume all expenses are allocated that way, but really, they split them down the middle - whatever, it's a challenge.

To get at least reasonably close, you have to ask what, if any, number they used on the 1065, and then make your own calcs accordingly.

[Guest Born2Run]

Thanks for replies.

Question-since it's 401k plan does Employee share of Employer contributions that you reduce partner comp by (partner expense % * employee er contribs) include 401k contributions or just the match/profit sharing?

[Laura Harrington]

Thanks for replies.

Question-since it's 401k plan does Employee share of Employer contributions that you reduce partner comp by (partner expense % * employee er contribs) include 401k contributions or just the match/profit sharing?

For the rank and file employees, it is all contributions including 401k.

For the partner, reduce by the match and profit sharing, but only reduce by his own 401k contributions if the definition of compensation is net of deferrals.

[Blinky the 3-eyed Fish]

Start with line 14a

Reduce by partner's share of rank-&-file contribs.

Reduce by §179 deduction

Reduce by other 14(a) adjustments

Reduce by 1/2 SE tax

reduce by partner's share of employer contribs.

It is a circular calcualtion.

There are some subtle nuances to this. First, it's §179 deduction claimed. Second, you also reduce by unreimbursed partnership expenses claimed. Third, also reduce by oil and gas properties claimed. The last two are fairly rare from my experience.