Understanding Schedule K-1 self-employment income for partners and LLC members in ProConnect Tax

Below are answers to frequently asked questions about self-employment income for Form 1065, Schedule K-1 in the Partnership return.

What’s included in self-employment income for partners?

The amounts included for self employment (SE) income on the Schedule K-1, box 14 depend on the type of partner selected in under Partner Information, as well as amounts allocated to that partner:

• For both general and limited partners, guaranteed payments are considered self-employment income.
• For limited partners (and LLC members), nothing else, including overrides, can affect SE income.
• For General partners and LLC Managers, SE income also includes the distributive share of partnership income.

This input is on Input Return ⮕Partner Information ⮕ Partner Information. Scroll down to the Miscellaneous Info section and check the box labeled General Partner/LLC Manager.

How does the program calculate self-employment income?

The program creates a worksheet to show the calculation of net earnings from self-employment. 

Follow these steps to view the Self-Employment Worksheet:

1. Go to Check Return ⮕ Forms ⮕ US ⮕ Worksheets.
2. Scroll to Self-Emp. Worksheet

How do I enter adjustments or overrides for self-employment income?

There are SE income adjustments and overrides inputs.

1. Go to Input Return ⮕ Schedule K ⮕ Other Schedule K Items.
2. Select the Taxes tab.
3. Scroll down to the Self-Employment section. 
4. These adjustments and overrides can be specially allocated on the Special Allocations tab.

The worksheet also gives you an adjustment of certain items, including:

• Plus Certain Rental RE Income
• Plus Passthrough SE Income (Loss)
• Plus Passthrough Ordinary Income (Loss)
• Less 4797 Gain or (Loss)