LLC business expenses
I receive a K-1 from an LLC each year. Where can I deduct my personal
expenses incurred (such as mileage, meals and entertainment and
supplies) as a result of doing work associated with this LLC?
A limited liability company is usually treated
as a partnership for tax purposes. This seems to be your case, as
you are receiving a Schedule K-1, which is an information form filed
by the partnership or LLC to advise the partners or members of their
distributive share of the company's income and expenses.
1040 Schedule E instructions provide that you can deduct unreimbursed
ordinary and necessary expenses you paid on behalf of the partnership,
if you were required to pay these expenses under the partnership
agreement. A partnership agreement can be either oral or written.
A partnership agreement may be modified with respect to a particular
taxable year subsequent to the close of such taxable year, but not
later than the date (not including any extension of time) prescribed
by law for the filing of the partnership return. The modifications
may be either oral or written.
Typical partner expenses that may not be reimbursed
by the partnership could be travel, including the use of the partner's
automobile for business purposes, cellular phone and entertainment,
subject to the 50-percent limitation (unreimbursed meals and entertainment
are only 50-percent deductible).
partner expenses should be claimed on Schedule E on line 27 and should be labeled
as "UPE." You should not combine these amounts with other partnership
items as the IRS matches the partnership K-1 items to your tax return. Any combining
could flag your return as omitting income or overstating losses.
do not have to detail the items that were unreimbursed, but you obviously should
keep a record of what was included. You may even want to complete a Form 2106,
Employee Business Expenses, for your records to help you with the automobile portion
of the expenditures and also entertainment. However, unlike an employee, you would
carry the total to Schedule E and not Schedule A.