How do I claim expenses as a 1040?

How do you claim expenses on K-1 income?

  • The taxpayer is a barber. The shop owner called him a partner and gave him a K-1 form. The only thing on the form is $20000 in box 4 and $20000 in box 14. I believe the $20000 will go through Schedule E and end up on 1040 line 17 and it will go through Schedule SE and be taxed on line 56 of form 1040. He had $4000 in expenses. How and where does the barber claim his expenses? If this is his only income, how much will he pay in taxes?

  • Answer:

    What does the WRITTEN partnership agreement say as to expenses?

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That's crazy. Why doesn't the owner give him a 1099-misc so he can file a schedule C? You're right, now he has to file a SCH E and probably has to use those expenses on SCH A and be subject to a 2% floor that's if he does itemize. Otherwise, he may not be able to deduct those expenses. Did this barber invest money into the shop to become an owner? It's a lot easier for both parties if they just did this by 1099-misc otherwise. This way the owner gets to deduct the amount of wages he pays the barber and the barber can deduct the expenses directly against the wages he earns instead of being subject to a 2% floor. Tell this barber he's getting screwed and would rather be paid by a 1099 unless of course he is an actual partner.

Redjr01

That's crazy. Why doesn't the owner give him a 1099-misc so he can file a schedule C? You're right, now he has to file a SCH E and probably has to use those expenses on SCH A and be subject to a 2% floor that's if he does itemize. Otherwise, he may not be able to deduct those expenses. Did this barber invest money into the shop to become an owner? It's a lot easier for both parties if they just did this by 1099-misc otherwise. This way the owner gets to deduct the amount of wages he pays the barber and the barber can deduct the expenses directly against the wages he earns instead of being subject to a 2% floor. Tell this barber he's getting screwed and would rather be paid by a 1099 unless of course he is an actual partner.

Redjr01

What does the WRITTEN partnership agreement say as to expenses?

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