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.

Just a heads up - if you're filing more than 10 1099s, you're required to e-file them with the IRS now! The old rule used to be 250 forms, but they've been lowering the threshold. So even if you mail or email copies to your contractors, you'll still need to submit them electronically to the IRS.

Thanks for all the helpful information everyone! As someone who's been dealing with 1099s for my small consulting business, I wanted to add that if you do decide to email PDFs, make sure you keep detailed records of when you sent them and any delivery confirmations you receive. The IRS may ask for proof that recipients actually received their forms if there are any disputes later. I learned this the hard way when one contractor claimed they never got their 1099 (even though my email showed it was delivered). Now I use email services that provide read receipts or delivery confirmations, and I save screenshots of those confirmations with my tax records. Also, don't forget that even if you email Copy B to contractors, you still need to file Copy A with the IRS by the January 31st deadline. The electronic distribution to recipients doesn't change your filing obligations to the government.

This thread has been incredibly helpful! I'm also self-employed with COBRA coverage and was making this way more complicated than it needed to be. Just to summarize what I'm understanding from everyone's advice: - My COBRA coverage gets reported on 1095-B (which I don't even need to file) - As self-employed, I should use the self-employed health insurance deduction on Schedule 1, Line 17 - This is much better than trying to itemize medical expenses since there's no 7.5% threshold - The deduction is limited to my self-employment profit One thing I'm still unclear on - do I need to wait for my 1095-B to arrive before I can file, or can I go ahead and file my return with just my COBRA payment records? My insurance company is always slow sending these forms out.

I went through this exact same confusion last year! As a fellow self-employed person with COBRA, I can confirm what everyone else is saying - you want the self-employed health insurance deduction, not the itemized medical expenses route. The key thing that helped me understand this: the 1095-B from your COBRA coverage is just proof you had insurance. You don't submit it with your taxes. What matters for the deduction is how much YOU paid in premiums (not what your former employer contributed). In TurboTax, I found the self-employed health insurance section under "Business Income and Expenses" then "Business Expenses." It asks for the total amount you paid for health insurance premiums during the year. Just enter your total COBRA payments and you're done. One heads up - make sure you calculate this correctly if you had any employment income during the year too. The deduction can get limited if you were eligible for employer coverage during part of the year, but since you mentioned you've been contracting all year, you should be fine to deduct the full amount (up to your self-employment profit). Good luck with your return!