March Madness is upon us and if you are business owner or investor, your company’s tax return was probably filed a few weeks ago unless it was extended. For those of you who didn’t extend the return to September, you should have received your Schedule K-1.
Some of the biggest tax issues and confusions I consistently see each year are due to the receipt of the K-1. I could spend days talking about what each line item means. This week, however, I wanted to focus on the Material Participation Test. This test affects each recipient of a K-1 as it determines if you have active or passive income/loss. Each year you need to go through the following tests and pass just one of them:
Once you figure out your status, now what do you do? Well, now the real fun begins! There is another set of tests that you will need to consider before reporting the K-1 on your taxes.
If you received a K-1 and do not have a tax advisor, please feel free to forward me your questions. Since the 7/15 filing deadline will be here before you know it, I would be happy to answer them for you!
The NY Accounting, Tax and Advisory Expert Blog