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