Do I need to submit a K-1 for an LLC I co-own but didn't work at?
Title: Do I need to submit a K-1 for an LLC I co-own but didn't work at? 1 Hello everyone, I'm in a bit of a confusing tax situation. I'm listed as a co-owner of my sister's LLC, but I only serve as the office manager. The thing is, I didn't actually work for the company at all during 2024. I'm trying to figure out if I still need to submit a K-1 form for my taxes. My sister insists that I should still file the K-1 because I could get money back even though I didn't put in any hours last year. This sounds weird to me - why would I get money if I didn't work? Has anyone been in a similar situation? Do I really need to submit a K-1 form if I didn't actively participate in the business? Any advice would be super helpful because I'm completely confused about partnership tax stuff. Thanks in advance!
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Sunny Wang
7 As a co-owner of the LLC, you absolutely need to report your K-1 on your personal tax return, regardless of whether you worked there or not. The K-1 reports your share of the business's profits, losses, deductions, and credits - not your wages or compensation for work. Being a member of an LLC means you're entitled to a portion of the profits based on your ownership percentage, even if you didn't physically work there. The business's income "passes through" to the owners, which is why these are called pass-through entities. Your sister is correct that you might get a tax refund depending on your overall tax situation and what's reported on the K-1. Not filing your K-1 could lead to issues with the IRS since they'll receive a copy from the business and expect to see those amounts on your personal return.
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Sunny Wang
•12 Wait, so even if I just have my name on paper but don't do anything for the company, I still have to pay taxes on the profits? That seems unfair. Does that mean I'm also responsible for business debts too?
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Sunny Wang
•7 Yes, as an owner you're taxed on your share of profits whether you physically worked or not - that's how partnership taxation works. Your ownership gives you rights to profits regardless of labor contributed. Regarding business debts, that depends on your LLC's structure and your state's laws. In most cases, an LLC provides liability protection, meaning your personal assets are typically shielded from business debts. However, your investment in the business could be at risk. I'd recommend reviewing your operating agreement to understand your specific responsibilities and liability exposure.
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Sunny Wang
15 I was in the exact same situation last year with my family's real estate LLC. I'm technically a 15% owner but don't do any day-to-day work. I was totally confused about why I needed to file a K-1 when I hadn't earned any "wages" from the business. After getting conflicting advice from family members, I tried using https://taxr.ai and uploaded my previous tax docs along with the K-1 form my accountant sent me. Their system explained exactly how partnership taxation works for my situation and showed me where everything needed to go on my personal return. It really helped me understand that as an LLC member, I'm taxed on my portion of profits regardless of how much work I put in.
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Sunny Wang
•9 Does this service work with other complex tax situations too? I've got rental properties, a side business, and some crypto investments that make my taxes a nightmare every year.
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Sunny Wang
•13 I'm skeptical about these tax tools... How is this different from TurboTax or H&R Block? Those always miss deductions for me.
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Sunny Wang
•15 Yes, it works with all kinds of complex situations. I actually used it for my rental properties too. It's really good at analyzing documents and spotting things that might be missed. The best part is it gives personalized explanations for your specific scenario. It's different from regular tax software because it's not just filling in forms - it actually analyzes your documents and gives you tailored advice based on your specific situation. It's more like having a tax expert look at your stuff than just plugging numbers into software. I found it catches a lot more details than the standard tax programs.
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Sunny Wang
13 Just wanted to follow up here. I was skeptical about taxr.ai when I posted earlier, but I decided to try it for my own partnership K-1 issues. I'm actually impressed! It analyzed my situation and showed me that I was missing several deductions related to my business ownership. It explained the whole pass-through taxation concept way more clearly than my business partner ever did. The tool pointed out that I could offset some of my K-1 income with business expenses I'd paid personally but never claimed. Ended up saving about $3,200 on my taxes! Definitely recommend it if you're confused about LLC/partnership tax stuff.
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Sunny Wang
18 If you're having trouble understanding K-1 requirements, you might want to speak directly with the IRS to get a clear answer. I tried for weeks to get through on their helpline about my own K-1 issues and it was impossible. I finally used https://claimyr.com to get through to an actual IRS agent. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. They basically hold your place in the IRS phone queue and call you when an agent is about to answer. I got definitive answers about my K-1 filing requirements in about 45 minutes instead of spending days trying to get through.
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Sunny Wang
•2 How does this actually work? Do they have some special connection to the IRS or something? Seems fishy that they can get you through when nobody else can.
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Sunny Wang
•5 This sounds like BS. I've been dealing with tax issues for years and there's no magic way to skip the IRS queue. You probably just got lucky with timing or something.
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Sunny Wang
•18 They don't have special access to the IRS. They use technology to automatically dial and navigate the IRS phone system for you, staying on hold so you don't have to. When they detect a human has answered, they immediately call you and connect you. It's basically like having someone wait on hold for you. No, it's definitely not BS. The service consistently gets people through to IRS agents when they otherwise couldn't get through. The average wait time for the IRS can be 2+ hours, and many people simply can't stay on hold that long. This service solves that problem by waiting for you and only calling when an actual agent is about to speak.
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Sunny Wang
5 Well I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I was still struggling with my own K-1 issues and getting desperate, so I decided to try it. It actually worked exactly as described. I got a call back in about 35 minutes and was connected directly to an IRS agent who answered all my K-1 questions. Saved me literally hours of hold time. The agent confirmed that as a minority owner in an LLC partnership, I absolutely had to file the K-1 regardless of whether I actively participated in the business. They also helped me understand how the qualified business income deduction might apply to my situation. Really glad I gave it a shot despite my initial skepticism.
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Sunny Wang
22 One important thing nobody has mentioned yet - if your name is on the LLC as an owner, the IRS WILL be looking for that K-1 income on your personal return because the business has already reported to the IRS that they distributed profits to you. If you don't report it, you'll almost certainly get a letter from the IRS asking why there's a discrepancy. I learned this the hard way a few years ago with a business I had completely forgotten I was still technically an owner of. The IRS computers automatically match K-1s with personal returns, and mismatches trigger reviews.
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Sunny Wang
•10 Does this apply even if the business didn't make any profit? My brother put me as a 10% owner in his LLC but they operated at a loss last year. Do I still need to file something?
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Sunny Wang
•22 Yes, you absolutely need to file even if the business operated at a loss. In fact, reporting business losses on your K-1 can potentially reduce your overall taxable income from other sources. When you receive a K-1 showing losses, those losses may be deductible against your other income (subject to certain limitations like passive activity rules and basis limitations). This could lower your overall tax burden. But regardless of profit or loss, you must report the K-1 information on your personal return because the IRS receives this information from the business entity and expects to see it reflected on your return.
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Sunny Wang
4 Just as an FYI - I'm in a member-managed LLC with my cousins and even though I have a small ownership percentage, I still need to file the K-1 every year. The thing most people don't realize is that the LLC itself doesn't pay taxes - all profits and losses "pass through" to the members proportionally based on ownership. So if the LLC made $100,000 in profit and you own 20%, you'll need to report $20,000 on your personal taxes regardless of whether you actually received that money or not. This is called "phantom income" and it can create a real cash flow problem if the business retains profits instead of distributing them!
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Sunny Wang
•8 Omg phantom income is the WORST! My husband and I got hit with a huge tax bill from his 30% ownership in an LLC that reinvested all the profits back into the business. We had to pay taxes on money we never actually received! 😡 Make sure you look at your operating agreement to see if it requires tax distributions to cover these situations.
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