"Stanley Shi" <stanleyshi[at]hotmail.com> wrote:

- quote -

You need professional help YESTERDAY - Partners in a
partnership do NOT get wages and the associated benefit of
withholding. Instead, the partners are responsible for
making estimated payments.

You may have also made a HUGE mistake by forming a General
Partnership instead of an LLC. I can't tell from the
limited info you gave us here, but I would guess that you
could at least have gotten some liability protection by
forming an LLC if you got no other benefit.

Gene E. Utterback, EA

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stanleyshi[at]hotmail.com (Stanley Shi) wrote:

- quote -

The first thing you should have done is get a local tax
professional. Since you did not do this, the next thing you
should do is get yourself a local tax professional. Usually
they will save you more money than they cost.

Missy Doyle

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Stanley Shi wrote:

- quote -

Individuals pay taxes; partnerships do not.

- quote -

Just the 1040es (not 1040-SE!)

One further note, however. Just yesterday a possible new
client called, being referred by one of my clients. He and
his partners had been operating a karate studio for last two
years, but he hadn't filed returns for those years, much
less a partnership return when I asked him.

So I asked him if he and partner have a written partnership
agreement? I figured I knew the answer, and yes, they did
not. So I told him I would be glad to help when they had
one signed, at least for the start of year 2003.

So if y'all haven't taken that step, it's time.

Cheer$,
Harlan Lunsford, EA n LA

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stanleyshi[at]hotmail.com (Stanley Shi) wrote:

- quote -

A partner is not an employee and is not subject to employer
taxes. Any cash a partner takes out of the partnership is a
distribution of partnership income, and the partner is
subject to tax on the entire distributive share, regardless
of the amount actually distributed.

The individual partners should make quarterly estimated tax
payments to the IRS and the states where they reside and
where the partnership does business (which may or may not be
the same). The partners will be subject to self-employment
tax, which in effect means they pay both the employer's and
the employee's shares of the FICA taxes.

Note that if not all of the partners are residents of the
same state, or the partnership does business in more than
one state, some states may require the partnership to
withhold personal income taxes from the distributive shares
of nonresident partners.

If the partnership has employees (who are not partners), the
partnership must withhold federal and state income taxes,
Social Security and Medicare taxes from their wages, pay
unemployment insurance taxes to the state, and file federal
and state payroll tax reports, just like any other employer.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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"Stanley Shi" <stanleyshi[at]hotmail.com> wrote

- quote -

You shouldn't have "wages" from a partnership. You will be
taxed on your share of net profits and any "guaranteed
payments to partners" (among other specific income items),
regardless of whether you took that amount of money from the
partnership.

- quote -

Each partner is responsible for paying tax on their income.
Generally this is done through quarterly estimated payments
using Form 1040ES.

- quote -

Form 941 is for payroll (to employees), and not to report
the income or tax of the partners.

At this point, you should call a local CPA or EA and set an
appointment to get the blanks filled in.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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My friends and I formed a General Partnership for business.
We have 6 partners and we applied for an EIN from IRS. Our
questions are:

1. When we have gain and get wages in a quarter in our
business, how should we pay SS, Medicare and income Tax?
Should the partnership pay tax to IRS or the individual
partners pay tax to IRS quarterly?

2. What types of Forms (941, 1040-SE or others) should be
used for the filing quarterly

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