Skip to main content

Profit sharing

Profit sharing is a pay mechanism that ties a business’s performance to its employee’s pay. It refers to payments made to individuals in proportion to the business’s earnings.

Countable Income

Policy indicates S corporations, general and limited liability partnerships, or limited liability corporations might pay a profit share.

  • For general partnerships and LLC member-mangers, include this income in the business’s self-employment income.
  • For S-corps, limited partnerships, and other LLC members, this is unearned income.

Determining the Partnership Type or LLC Member Status

Consult line G on the Schedule K-1 (Form 1065) to see if a client is a general partner/a LLC member-manager or a limited partner/other LLC member.

Countable Income

Unearned profit sharing income appears on the client’s tax return. Consult line 1 on the Schedule K-1 to locate this income. Divide line 1 amount by the number of months by the client received this income in the tax year.

Required Verification

Profit sharing income appears on the client’s tax return. Consult line 1 on the Schedule K-1 to locate this income.

FACS Coding

Select “Other counted unearned income” in the FACS F99 dropdown box, and enter the gross monthly pay amount in FACS F98 field for SSP or TANF income.

A FACS screenshot highlighting the F98 and F99 blocks.

Back to Top