• Partnerships
  • A partnership is the relationship existing between two or more persons who carry on a trade or business.
    • Each person contributes money, property, labor, or skill, and expects to share in the profits and losses of the business.
    • A partnership is not a taxable entity.
    • Each partner includes his or her share of the partnership’s income or loss on his or her tax return.
  • (Form 1065; Schedule K-1 Form 8865)
  • (Personal return needed for verification of profit sharing)

The worker must determine what part of the partnership belongs to the client by reviewing the percentage owned by the client that is shown on Schedule K-1.

• The worker considers that percentage of the countable income and allowable expenses for the person.
• Line 14, only the taxes and licenses required for the business can be deducted.
  • Personal taxes are allowed for in the work-related expenses
• Part II, Section E, is the percentage of the client’s ownership in the Partnership.
  • If completed, Schedule E of Form 1040 will show further possible expense deductions.

The worker uses the percentage of the business owned by the client shown in Section E on this form to determine the percentage of the gross income and allowable expenses shown on Form 1065 to consider for the person.