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
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