Need help with Partnership LLC K1 forms and capital accounts reporting

The capital accounts on K-1s should reflect each partner's individual share of the business capital, not the total capital of the LLC. So you would not put the entire capital amount on each partner's K-1. Since they're 50/50 partners, you'd typically split the beginning capital account balance equally between them. However, since your husband contributed additional personal funds for expenses, his capital account should be adjusted to reflect those contributions. For the final return, you'll need to show the starting capital for each partner, any additional contributions (like your husband's personal expenses), their share of income/loss for the year, any distributions taken, and the ending balance (which should be zero if they completely liquidated the business). Make sure the ending capital account on each K-1 matches what they actually received in the final distribution.

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I wanted to follow up about my experience with taxr.ai that was mentioned earlier. I was initially unsure about using it, but with my accountant booked solid during tax season, I gave it a try for our 3-person partnership. The system actually understood all our complex basis calculations and even identified that we had been incorrectly handling guaranteed payments in previous years. It provided clear explanations about how to properly allocate the beginning capital, track my additional contributions, and close out the K-1s correctly for our final year. The partnership-specific guidance was surprisingly detailed - it even generated the exact amounts to enter in each box of Form 1065 and Schedule K-1. Definitely saved our business thousands in accounting fees and potential penalties from errors.

If you're still having issues after trying to figure this out yourself, consider using Claimyr to get connected directly with an IRS agent. I called for weeks trying to reach someone about a complicated K-1 issue similar to yours, and kept hitting the "call back later" message. Used https://claimyr.com and got through to a real IRS agent in about 20 minutes, who walked me through exactly how to handle partnership capital accounts during dissolution. They even explained the exact differences in how contributed expenses should be handled. You can see how it works here: https://youtu.be/_kiP6q8DX5c Since you're dealing with a final return, getting something wrong could mean amended returns later, which is a huge headache. The IRS agent confirmed things I couldn't find clear answers about anywhere online.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I was still desperate for help with a similar partnership dissolution issue, so I tried it anyway. Got connected to an actual IRS agent in about 30 minutes who walked me through the entire process of how to handle capital accounts for a final partnership return. The agent confirmed I needed to split the beginning capital 50/50, add any additional partner contributions separately, then show the final distributions that zeroed out each account. They even explained which boxes needed to be checked to indicate it was a final return and how to handle the different basis calculation methods. Saved me from making several mistakes that could have triggered an audit. Completely worth it when dealing with something as complicated as partnership dissolutions.

Don't forget to check if either partner had a negative capital account before the final distribution! This can create unexpected tax consequences. If one partner's capital account went negative during operations (meaning they took out more than they put in plus their share of profits), that negative balance is treated as income to that partner when the partnership dissolves. Also, make sure you file Form 8594 (Asset Acquisition Statement) if the partnership is selling any assets as part of the dissolution. And don't forget to file Form 966 to formally dissolve the entity with the IRS.

One more thing - check if either partner had any unreimbursed business expenses (UBE) they paid personally. These can be reported on Schedule E of their personal returns rather than being treated as capital contributions on the K-1. This is often better tax treatment since capital contributions don't directly reduce tax liability but UBEs can.