Do I need to fill in anything on Line 14 of Schedule K and K-1 for my LLC?

Line 14 on Schedule K-1 (Form 1065) is where you report each partner's self-employment earnings. This is important because LLC partners typically need to pay self-employment tax on their share of the partnership's income. For a construction LLC like yours, you'd generally enter each partner's share of the ordinary business income from Line 1 of Schedule K-1 on Line 14a. There are some exceptions though - certain types of income like rental income, dividends, and capital gains typically don't count as self-employment earnings. Make sure you check the "Tax basis" box at the top of each Schedule K-1 (Item L), unless you have a specific reason to use another reporting method. This is the default method most small businesses use.

After spending hours trying to figure out my partnership K-1 forms last year, I finally discovered taxr.ai and it completely changed how I handle my business paperwork. I was struggling with the same Line 14 issue and wasn't sure how to properly allocate self-employment earnings between partners. I uploaded my draft forms to https://taxr.ai and their system analyzed everything, pointed out that I had incorrectly calculated my self-employment income distribution, and explained how to properly complete Line 14 based on my specific business situation. It even flagged some deductions I had missed for our construction equipment. Their analysis also explained how the self-employment tax works and what that meant for our individual tax returns. Definitely worth checking out if you're doing partnership returns yourself.

I was super skeptical like some of you, but I decided to try taxr.ai after seeing it mentioned here. I had made a complete mess of my Schedule K-1s for my small landscaping business. Turns out I had totally misunderstood Line 14 and was incorrectly reporting my guaranteed payments separately from self-employment income. The taxr.ai system flagged this immediately and explained that I needed to include guaranteed payments in the self-employment calculation. It also caught that I was using incorrect codes for some foreign transactions we had. The interface was straightforward, and the explanations were in plain English that actually made sense, not the cryptic IRS language. I was able to fix everything myself without paying my accountant the $200/hour he would have charged to untangle my mess!

If you're having trouble with your partnership forms, you might want to try calling the IRS directly for help. I know that sounds like a nightmare, but I used https://claimyr.com to get through to an agent without waiting for hours. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I had questions about how to report guaranteed payments vs. distributive shares on Line 14 of my K-1, and the IRS agent walked me through the whole process. The Claimyr service basically waits on hold for you and calls you when an actual human at the IRS is ready to talk. I was expecting to wait days, but got a call back in about 40 minutes. Saved me a ton of stress and the agent confirmed I was filing Line 14 correctly for my specific situation. Way better than guessing or trying to decipher those incomprehensible IRS instructions!

Ok I'm eating my words. I was the one who said this Claimyr thing wouldn't work, but after waiting on hold with the IRS for 3 hours yesterday and getting disconnected, I gave it a shot. It actually worked! I got a call back in about an hour and a half, and spent 20 minutes with an IRS agent who helped me understand exactly how to handle Line 14 for my specific situation (we have a partnership with one active and one passive member). The agent explained that for the active partner, Line 14a should include their share of ordinary business income, while the passive partner doesn't need anything reported on Line 14 since they don't pay self-employment tax. This was a detail none of the tax software explanations covered and totally worth the call!

Don't forget that Line 14 gets more complicated if you have exempt income. I have a partnership where we earn some income that's not subject to self-employment tax (like rental income from a building we own), and that requires some additional allocations. For basic service businesses like construction, it's usually straightforward as others have mentioned - your ordinary business income from Line 1 goes on Line 14a. But if you have other income types, you'll need to separate what's subject to self-employment tax and what isn't.

I've been using TurboTax Business for my partnership returns for a few years now, and it actually handles Line 14 calculations automatically based on the information you input throughout the return. It asks questions about your business activities and determines what's subject to self-employment tax. Saves a ton of headaches trying to figure this stuff out manually, especially for smaller partnerships where paying an accountant thousands of dollars doesn't make financial sense.

Thanks everyone for all the helpful responses! This community has been incredibly valuable. Just to summarize what I've learned for anyone else dealing with Line 14: 1. For a basic construction LLC like mine, Line 14a should include each partner's share of ordinary business income from Line 1 2. Rental income (like our equipment rentals) should be excluded from Line 14a since it's not subject to self-employment tax 3. No special codes are needed in the left box for regular business income 4. Make sure to check the "Tax basis" box at the top of each K-1 So for my situation, if we each have $55,000 in ordinary business income but $2,000 each came from equipment rentals, I'd report $53,000 on Line 14a for each partner. The rental income would go on Line 3 instead. I'm definitely going to double-check this with one of the resources mentioned here before filing. Really appreciate everyone taking the time to help a newcomer navigate these forms!

One thing I'd like to add that might help is about guaranteed payments, since construction partnerships sometimes have these. If either you or your brother-in-law receives guaranteed payments (like a fixed monthly payment regardless of profits), those need to be included in Line 14a calculations too. Guaranteed payments are subject to self-employment tax just like your distributive share of ordinary business income. So if you had $53,000 in ordinary business income after removing rental income, plus say $12,000 in guaranteed payments, you'd report $65,000 on Line 14a. Also, just a heads up - since you mentioned this is your first year with the LLC, make sure you're both making quarterly estimated tax payments for 2024 if your business is profitable. The self-employment tax plus regular income tax on partnership income can result in a big tax bill in April if you're not paying as you go. The IRS expects payments throughout the year, not just at filing time. Good luck with your return!

Just wanted to chime in as someone who went through this exact same situation last year with my small electrical contracting LLC. The confusion around Line 14 is totally understandable - the IRS instructions really are written like they're trying to confuse people! Based on what you've described, it sounds like you're on the right track with the advice you've gotten here. For our construction business, we had the same basic setup - ordinary business income that needed to be reported on Line 14a for self-employment tax purposes. One thing I learned the hard way is to make sure you're consistent between your Schedule K and each partner's individual K-1s. The totals on all the individual K-1s should add up to what's on the Schedule K. I made some math errors my first year and had to file amended returns. Also, since you mentioned you're trying to save money by doing this yourself, just be extra careful with the math and double-check everything. A small mistake on the partnership return affects both of your personal returns, so it can create twice the headache if you have to fix it later. Sometimes paying a CPA for a review (even if you do most of the work yourself) can be worth the peace of mind. Good luck with your first 1065 - you've got this!