Income & Related Items

• Screen 10, Income
• Screen 11, Cost of Goods Sold
• Screen 13, Deductions
• Screen 17, Rental Real Estate
• Screen 22, Other Schedule K Items

Facts

Enter the following information for a sample client:

Partner Information	Data entry:
Partner Name	Partner 1
Type of Entity	Individual
General Partner?
Partner Name	Partner 2
Type of Entity	Individual
General Partner?

Use the percentages for end of year profit, loss, and capital for each partner.

Program Considerations

• Enter the gross receipts in full, and enter the returns and allowances as a positive number. These amounts print on Form 1065, lines 1a and 1b, respectively. Gross receipts or sales are reduced by returns and the balance prints on Form 1065, line 1c.

Cost of Goods Sold:

• The entry for beginning inventory prints on Schedule A, line 1 and carries to the respective line on the balance sheet. The entry for ending inventory also carries to the balance sheet. The entries from the Balance Sheet input do not automatically carry to Form 1065, Schedule A.
• All other entries print on the respective lines on Schedule A, and amounts entered for Additional Section 263A costs and Other costs are detailed on supporting statements.

Deductions:

• The program includes deductions on Form 1065, page 1, lines 9 through 20. Supporting statements print if applicable.

Note: The payroll tax expense deduction, reported on Form 1065, page 1, line 14 is reduced by any credit on line 4 of Form 8846. The salaries and wages expense deduction, reported on Form 1065, page 1, line 9 is reduced by the employment credits, Forms 5884, 8844, 8845, and 8861.

• For meals and entertainment, the expenses should be entered in full. The program limits the amount entered to 50% and includes the result on Form 1065, page 1, line 20. The program carries the 50% disallowed amount to Schedule M-1, line 4b.
• The amount of Guaranteed Payments on Schedule M-1 line 3 is reduced by entries in Partner health insurance.

Rental Real Estate:

• Enter the kind of property and its location. If you leave these fields blank, the program may incorrectly calculate and print Form 8825. These entries print on Form 8825, line 1, and the program uses them to identify supporting statements.
• You can check the box to include the income/loss in the self-employment calculation. If you leave this field blank, the program does not include the property's income (loss) in the self-employment calculation.

Other Schedule K Items:

• Use these guidelines when you enter Schedule K information:
• The program carries Schedule K entries to the partners' Schedules K-1 based on the percentages you enter on Screen 8, Partner Percentages (unless specially allocated or overridden).
• You MUST ALWAYS enter the total for the partnership in full in order for it to flow to each applicable line item on Schedule K and M-1/ M-2.

How?

To enter Income, Cost of Goods Sold, Deductions, Rental Real Estate, and Other Schedule K Items:

1. Open the sample client.
2. Click the applicable screen from the Contents tab.
3. Enter the information from the tables above.

Tips & Shortcuts

• If a detailed listing of gross receipts or sales is desired, you can use [Ctrl]+[E] to enter these items in Screen 10.
• The Section lists can be especially useful to navigate "long" screens such as Other Schedule K Items.

Review

You should have entered income and deductions for the sample partnership return and generated the following results on Schedule K / Schedule K-1:

Troubleshooting

Problem: I'm not getting correct amount for Schedule K, line 1.

Solution: Use the following check figures for Form 1065, p.1:

• Line 8 -- $52,400
• Line 22 -- $23,850

If these numbers are incorrect, verify the input that you made.

Problem: I'm getting a negative number for Guaranteed Payments on Schedule M-1 line 3.

Solution: The program reduces Guaranteed Payments on Schedule M-1 line 3 by any amounts entered in Partner health insurance (screen 22). If the partnership made payments for partner's health insurance, be sure to include these amounts as part of your Guaranteed Payments in screen 10.

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