New to being a partner in an organization...what the ************************ is this K1 stuff?

[climbingnerd]

Here's a very broad question.

I'm a new doc, out of residency for a few years. My entire life I've been paid as an employee and I understand how taxes work with the W2. Now in a few short months I'll be a partner of a group, and I expect many changes.

1. Does any one know of a good source (other than the obvious answer of consulting a tax pro) to learn about estimating quarterly income, filing K1 forms, etc.? I'd like to educate myself a little bit. I don't ever recall learning about this, ever, in any sense whatsoever.

2. Can you still be paid as an individual with the K1 form or do I need to start an LLC? I do not want to do an S-Corp (although that is an option; it sounds like a very large headache).

3. Any other advice for this young whippersnapper when it comes to learning about this next chapter of financial life. Thanks.

[jfoxcpacfp]

1. The best way to learn is to prepare your taxes by hand. You will receive a K1 which will give you instructions on where the various numbers should be entered on your form 1040. Estimating quarterly income for your tax estimates is a bit tricky, especially the 1st year. You'll add up all of the "Guaranteed Payments" you have received for the quarter and to that you'll need to include the income of the partnership that will be allocated to you. If the partnership pays out most of the income to the partners and zeroes out the profits, you may be able to simply calculate using your GPs. Depending upon your taxable income, you are required to pay the IRS either 110% of what you'll owe for the quarter or at least 1/4 of the amount of your tax liability for the prior year.


2. Your partnership agreement will dictate whether you as an individual or an LLC owns shares of the organization. iow, if it stipulates that Dr. climbingnerd is a partner, then you can't form an LLC to own your share of the partnership without a change to the agreement.


3. Lots. Download my Guide for New Attendings and Guide for Established Attendings for starters. Highly recommend a fee-only CFP and/or CPA with experience working with doctors.