As a newcomer to this community, I'm amazed by how thoroughly this thread has addressed what seems to be a really common issue in partnership taxation! Reading through everyone's experiences has been incredibly educational. What really stands out to me is the disconnect between what's actually legal (dual W-2/K-1 compensation) and what some tax preparers believe to be true. The fact that so many experienced professionals have encountered identical resistance from preparers suggests there's a real knowledge gap in the industry when it comes to partnership structures. The resources everyone has shared here are invaluable - Revenue Ruling 69-184, Publication 541, Form 1065 Instructions, and Treasury Regulation 1.707-1(c). Having all these IRS citations compiled in one place is going to be incredibly helpful for anyone facing similar preparer pushback. What I find most encouraging is how many different approaches people have used successfully: showing IRS publications, having preparers call other CPAs for peer confirmation, getting attorney letters, and even recording calls with IRS agents. It's clear that with the right documentation and persistence, this issue is very resolvable. For Mateo's original question - your arrangement is absolutely legitimate and your preparer needs better education on partnership taxation. The fact that your partnership agreement clearly separates employment duties from ownership interests puts you in a strong position. Don't let uninformed resistance force you into a suboptimal tax structure when you have a perfectly legal and advantageous arrangement!

As a newcomer to this community, I want to thank everyone for such an incredibly detailed and helpful discussion! Reading through all the responses has been like getting a masterclass in partnership taxation. What really resonates with me is how many experienced professionals have faced the exact same pushback from tax preparers who seem to be operating on outdated information. The consistency of everyone's advice - particularly around Revenue Ruling 69-184 and Publication 541 - gives me confidence that this dual W-2/K-1 structure is not only legitimate but actually quite standard in the partnership world. I'm especially impressed by the variety of approaches people have used to educate resistant preparers: IRS publications, peer consultations, attorney letters, and even direct IRS confirmation. The "preparer education packet" idea mentioned earlier seems like such a proactive way to handle these situations. For anyone else new to partnership structures, this thread demonstrates the importance of having clear documentation in your partnership agreement that separates employee duties from ownership interests. It also highlights why working with tax professionals who stay current on complex areas like partnership law is so crucial. Mateo, your arrangement sounds completely legitimate and well-structured. If your current preparer continues to resist after being shown the actual IRS guidance, it might indeed be time to find someone with more partnership taxation experience. You shouldn't have to compromise on a perfectly legal and advantageous tax structure because of uninformed resistance. Thanks again to everyone who shared their expertise - this community's knowledge base is truly impressive!

Great point about the W-4 form! I think I might still be using the old terminology. I filled out my W-4 when I started this job in 2023 and checked the box for "Single or Married filing separately" with no additional amounts entered anywhere else. Should I be filling out a new W-4 with the current form to make sure my withholdings are calculated correctly? And would that help with the commission withholding issue, or is the 22% supplemental wage rate going to apply regardless of how I fill out the form?

This is exactly what happened to me when I switched to a commission-based role! The key thing to understand is that your employer's payroll system is required to withhold at the supplemental wage rate for commissions, which is currently 22% for amounts up to $1 million. This happens regardless of your W-4 settings. However, you can definitely optimize your overall withholding strategy. I'd recommend using the IRS withholding calculator (or one of the tools others mentioned) to figure out your total expected tax liability for the year, then adjust your regular salary W-4 to account for the overwithholding on commissions. You might be able to reduce withholding on your twice-monthly salary checks to balance things out. Also, make sure you're using the current W-4 form from 2020 or later - the old allowances system doesn't exist anymore. The good news is that any overwithholding will come back to you as a refund, but I understand wanting to keep more of your money throughout the year instead of giving the government an interest-free loan!

This is such a common dilemma for new LLCs! From what I've seen in similar situations, the $2k monthly guaranteed payment route might actually work better for you given your income level and the QBI considerations mentioned earlier. Here's why: with $27k in net income and you being the active partner, a $24k guaranteed payment would be reasonable compensation for your services. This leaves only $3k to be split as distributions, which means your silent partner gets their fair share ($1.5k) without you having to pay self-employment tax on income that really reflects your labor. The key insight others touched on is that you'll pay self-employment tax on your distributive share of partnership income regardless of whether it's distributed. So structuring it as guaranteed payments might actually be cleaner from a tax perspective, even though you lose some QBI deduction benefits. Have you run the numbers both ways including self-employment tax, regular income tax, and the QBI deduction impact? That comparison should give you a clearer picture of which approach saves more money overall.

As someone who just went through this exact decision process with my LLC partnership, I wanted to share what ultimately worked for us. We ended up going with a hybrid approach that balanced the tax benefits of both structures. After consulting with our CPA and running detailed projections, we settled on a $18k guaranteed payment for the active partner (me) plus unequal distributions of the remaining $9k split 70/30 in favor of the active partner. This gave us the benefits of reasonable compensation for services while still maximizing QBI deduction eligibility on the distributed income. The key insight was that the guaranteed payment amount should reflect fair market value for the services provided - not just what's left over after distributions. We documented this by researching comparable salaries for similar roles in our industry and including that analysis in our partnership agreement amendments. One thing that really helped was creating a detailed operating agreement that spelled out exactly how we determined the guaranteed payment amount and distribution percentages. This documentation will be crucial if the IRS ever questions our allocation methods. The tax savings compared to either pure guaranteed payments or pure distributions was significant - about $2,400 in our case when factoring in SE tax differences and QBI benefits. Definitely worth the extra complexity in our partnership paperwork!

This has been such an educational thread! As someone who just started their first "real" job out of college, I was completely baffled by all the different deductions on my paycheck. I kept thinking something was wrong because after federal income tax, I was seeing additional deductions for "OASDI" and "Medicare" that I didn't expect. I actually called my HR department thinking there was an error, but they explained it the same way everyone here has - these are separate payroll taxes that everyone pays. What really helped me was actually calculating it out: on my $55k salary, I pay about $3,410 in Social Security tax (6.2%) and $798 in Medicare tax (1.45%) on top of my federal income tax. Seeing the actual dollar amounts made it much more concrete than just thinking about percentages. One thing I wish I had known earlier is that you can actually see these taxes listed separately on your pay stub every pay period, so you can track them as you go rather than being surprised at tax time. It's also reassuring to know that the Social Security and Medicare taxes I'm paying now will contribute to my benefits when I retire. Thanks everyone for sharing your experiences and practical tips!

This thread has been incredibly helpful for understanding the tax breakdown! As a newcomer to this community, I just wanted to share a resource that helped me when I was similarly confused about payroll taxes. The IRS actually has a really clear publication (Publication 15) that explains the difference between income tax withholding and payroll taxes. What I found most helpful was their explanation that FICA taxes (OASDI + Medicare) are "pay-as-you-go" taxes - meaning the amount you pay is fixed based on your wages, while income tax withholding is just an estimate that gets trued up when you file your return. This distinction helped me understand why my payroll taxes never change (always exactly 7.65% of my wages), but my federal income tax withholding can vary if I adjust my W-4 or have other circumstances change. For anyone still wrapping their head around this, I'd also recommend looking at your pay stub and calculating what percentage each deduction represents of your gross pay. Seeing the actual math makes it much clearer than just reading about it in theory. Thanks to everyone who contributed such practical explanations - this community is a great resource for tax questions!

As someone who's dealt with similar contractor classification issues in healthcare, I'd strongly recommend double-checking whether all your medical professionals should actually be classified as contractors versus employees. The IRS has gotten much stricter about this, especially in healthcare where there's often significant control over how and when services are provided. For hospice care specifically, if you're setting schedules for on-call physicians, providing equipment, or directing how they provide care to patients, you might need to reclassify some as employees rather than contractors. This would mean W-2s instead of any 1099 form. The control test is really important here. That said, for legitimate contractors, you're right that 1099-NEC is typically the correct form for professional services. Just make sure you can pass the IRS contractor test first - it'll save you major headaches down the road if they audit your worker classifications.

Given the approaching deadline and the complexity you're dealing with, I'd recommend focusing on getting the forms filed correctly first, then addressing any classification questions later if needed. For your immediate situation: Use 1099-NEC for the physicians receiving stipends for on-call services and for any nurses you're paying directly. The 1099-MISC Box 6 is really for direct medical payments (like insurance reimbursements to providers), not for professional services contracts. For nurses through staffing agencies, you're correct that the 1099 goes to the agency, not the individual nurses. And as others mentioned, make sure you have current W-9s on file with correct TINs. One quick tip from my own experience with medical contractors - if any of your physicians have incorporated their practices, double-check whether they're C-Corps (which are generally exempt from 1099 reporting) versus other entity types. This can save you some paperwork and potential errors. The worker classification question raised by others is valid and important for long-term compliance, but for immediate 1099 filing purposes, if you've been treating them as contractors and have documentation supporting that relationship, proceed with the 1099-NECs to meet the deadline. You can always reassess classifications for next year if needed.