Are You Or Your Lender Excluding Guaranteed Payments to Partners for Services From Payroll Cost? We Think These Should Be Included In Payroll Costs – Dental CPA Opinion

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.

 

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