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Schedule K-1 question


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So, I'm not a CPA, and I wondered if this statement from a client's CPA makes sense, where there are two or more Schedule k-1's, but not a CG/ASG, and there are no participating employers? To me it seems odd, but perhaps it is perfectly normal:

 

The K-1 from that (other LLC) will have a substantial effect on his K-1 from (XXXX), but it won't change his earned income from (XXXX). His 2023 self-employment income from (XXXX) is expected to be ($$$$$) prior to employer contributions and reduction for self-employment taxes.

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Is XXXX the member of Other LLC - as opposed to the individual himself? If so then it might make sense as the income from Other LLC would flow through to XXXX (and affect the K-1) but would not be earned income with regard to XXXX.

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

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Let me see if I can give you accurate information pertinent to the question. XXXX is the business sponsoring the XXXX plan. Joe Schlobotnik is a 70% owner of XXXX, which is an LLC taxed as a partnership. Joe has ownership in some other LLC's taxed as partnerships, but not considered a CG nor an ASG. None of the other LLC's are signed on as participating employers.

???

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What I am wondering is, if you look at the K-1 for "Other, LLC," who does it list as the member? Is it Joe, or is it XXXX?

It's certainly possible for one LLC to be a member in another LLC. That would also explain why the income from one would affect the other. Ultimately it's all going to flow through to Joe's 1040.

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

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