ARE YOU OR YOUR LENDER EXCLUDING GUARANTEED PAYMENTS TO PARTNERS FOR SERVICES FROM PAYROLL COSTS?
Although K-1 distributive share of income or distributions from partnerships are not a payroll costs, I believe guaranteed payments to partners for compensation of services should be included as a payroll cost.
Opinion and Cite:
[Pending Regulations and Guidance From the SBA]
Per SBA and HR 748, distributions and allocations of profits reported on form K-1 from a partnership do not constitute compensation for computing payroll cost.
However in my opinion items reported on line 4a of the K-1 “Guaranteed Payments to Partners for Services” meet the definition of “Payroll Costs” under the Act. HR 748 Sec 1102. This is compensation for services.
(viii) the term `payroll costs'--
``(I) means--
``(aa) the sum of payments of any compensation
with respect to employees that is a--
``(AA) salary, wage, commission, or similar
compensation;
``(BB) payment of cash tip or equivalent;
``(CC) payment for vacation, parental,
family, medical, or sick leave;
``(DD) allowance for dismissal or
separation;
``(EE) payment required for the provisions
of group health care benefits, including
insurance premiums;
``(FF) payment of any retirement benefit;
or
``(GG) payment of State or local tax
assessed on the compensation of employees; and
``(bb) the sum of payments of any compensation
to or income of a sole proprietor or independent
contractor that is a wage, commission, income, net
earnings from self-employment, or similar
compensation and that is in an amount that is not
more than $100,000 in 1 year, as prorated for the
covered period; and
In addition
Box 4a. Guaranteed Payments for Services
Guaranteed payments are payments made by a partnership to a partner for services that are determined without regard to the partnership's income.
Note: Guaranteed Payments for Services are not 1099 income that would otherwise be excluded from payroll costs.
Greig Davis CPA CVA MST - Dental CPA
Dental ROI Associates PC – Dental CPA’s
Results by Design
615-712-5992
Dental CPA Nashville, Dental CPA Michigan, Dental CPA California, Dental CPA Pennsylvanian, Dental CPA Tennessee, Dental CPA Texas, Dental CPA Dallas, Dental CPA Philadelphia. Dental CPA Detroit, Dental CPA Grand Rapids