1040-US: Self-employment income calculation for general partners and LLC member-managers

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Question

How is self-employment income affected by entries in the related K1 screens for line 1, farm partnerships, and line 2, nonfarm partnerships, on Schedule SE?

Answer

For general partners and LLC member-managers, the tax application uses the amount you entered in Screen K1-4 in the Net earnings (loss) from self-employment field and reduces it by auto expenses, home office expenses, depreciation and section 179 expense, depletion, unreimbursed partnership expenses (entered in Screen K1-6), employee business expenses from Form 2106 with a special occupation code 4, and other expenses entered in Screen K1-3 in the Other deductions field.

Conversely, for limited partners and other LLC members, these separately stated partner expense items will not reduce amounts entered in the Screen K1-4, Net earnings (loss) from self-employment field.

The Net Earnings from Self-Employment Worksheet provides a comprehensive audit trail of the calculation.

Note: Schedule K1 expenses included in the calculation of net self-employment earnings may be further limited by basis and at-risk calculations.

Related topic: Schedule SE FAQs (1040)

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