Tag Archives: K-1

ANOTHER – Year End Tax Planning Tip – Bonus Via W-2 or K1?

This tax tip applies to folks who have enough control of their income to make a decision on how it flows. S Corp owners or the like may find this tip interesting, again we are not recommending, only REMINDING ! See your tax professional for your specific situation.

Bonus Via W-2 or K1

Depending on your situation, you may find it better to have left over income for the year be paid out via your corporation or other entity as non-W-2 income or net income to the corporation. See example below…

This MAY avoid some tax burden, but this technique should not be abused as the IRS may frown heavily on abuse.

Here is a good example: Owner/Employee takes a salary though out the year and funds are left over at the end of the year. Before just taking a salaried bonus, check with your tax professional on what options you may have.judge-learned-hand

Again, REMINDER, not recommendation… never get in the gray on taxes, however there are no gains to be had by paying more taxes than you would otherwise need or better said by Judge Learned Hand:

Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.

Hope you have enjoyed our Year End Tax tips, if you have missed any, just go here for a complete, concise list!

Have a great “Well tax arranged” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

Important Notification on K-1 (Clients) … K-1 No More!

With tax forms arriving in bulk last week and this week, we wanted to remind everyone (clients) about the pesky K-1.

If you are waiting for a K-1 as in years past….Good News !K-1

No Core holding K-1’s This Year

Last tax filing year (2012) marked the final year of a core position with a K-1. The investment was sold and we FINALLY ended our marriage with the annual K-1 tax form wait.

As you may recall it was always late, complicated, and ran through several areas of our tax return. Even with these tax troubles our reason for selling was not bound by this, (we TRY to not let the tax tail wag the dog) but it is gone, and will not be in your core 2013 tax return!

Have a good day !

John A. Kvale CFA, CFP

PS With so many posts last week …. we wanted to take it easier on your in-box this week !

8222 Douglas Ave # 590
Dallas, TX 75225

IRA K-1’s DO NOT get filed for tax purposes

K-1’s have been mailed out and posted electronically, finally. As a friendly reminder most companies deliver K-1’s to regular investment accounts AND IRA or other qualified types of accounts.

BE CAREFUL…IRA/Qualified type of K-1 reporting is not filed on your personal income tax or other tax filing reports. ONLY TAXABLE reporting K-1’s are needed for tax purposes.K-1

You may ask why do they report to me something that is unnecessary?

Great question…No it’s not to confuse us (tax season is especially confusing already) it is to cover their bases. As an example, while many may have a title such as  “John Doe IRA”, which seems easy to determine it is an IRA, what about “John Doe ILIT Trust Qualified Family Fund” ….. That one, as you can see can go either way.

If you or your tax professional have a question on whether to report or not to report, give us a call, we will know as “Donald the Brain” manually adjusts the basis for everyone (taxable and non-taxable) for the most accurate tax and return reporting.

Have a Great Day!


8222 Douglas Ave # 590
Dallas, TX 75225

When to file your taxes?? Early birds, calm your feathers, especially if you receive these forms (But not on Saturday, Post Office suspends Weekend Service)

While procrastination can often times cause disruption of goals, especially topical so soon after new year’s resolutions, being too early to file your taxes can also create issues.Early Bird

We recommend you file your taxes no earlier than mid to late March and you may consider even later if you receive any of these forms:

  • K-1 (Frequently very late delivered)
  • 1099 Consolidated’s (Often times corrected)
  • Small Employer W-2’s (Corrections prevalent)

While it is not a huge deal to file a 1040X (Corrected tax return) it certainly takes away from the relief you may have experienced when you originally sent that return.

Not that haste makes waste, but in this instance, take a seat, relax, take a load off and get comfortable as your best bet for filing your tax return is still over a month away!

One last point, do not wait until the last-minute as that may lead to our prior saying of “haste makes waste” and will certainly bring stress into the equation.

Have a Great Day!


PS Don’t expect forms on Saturday as the post office just announced later this year to suspend saturday delivery. Nice tax savings !

PSS If you are cringing at this special week of tax issues, don’t worry you are almost finished….but hold on….this is important stuff, especially our coming Friday post!!

8222 Douglas Ave # 590
Dallas, TX 75225

What is a K-1? An Important “Double Tax” Item Regarding K-1’s Being Incorrectly Reported

This weeks question from our field of dreams (clients and friends) is about the K-1 tax form.

A K-1 is a document that reports ownership related income. Since many entities are pass through (non-taxable) entities and are generally not taxable, the K-1 form gives the IRS a trail of where the money went, and how much of it went to the receiving person or entity, creating a taxable event for the K-1 recipient.

Do not include K-1’s that reside in an IRA or other tax sheltered investment on your tax return!

If a K-1 recipient holds the investment in an IRA or other tax sheltered type of investment, DO NOT FILE YOUR K-1 INFORMATION ON YOUR TAX RETURN, YOU ARE PAYING EXTRA TAXES!  Most K-1 creators rightly send them to all recipients regardless of the recipients tax status. If a tax filer shows unnecessary taxable income from the K-1 on his/her tax return, they may be paying extra taxes.

Why do K-1’s arrive so late during the filing season?

The IRS does not have a deadline for filing K-1’s,  such as the February 15th deadline for most other tax statements.  Also, K-1’s are often more complicated and may be only finalized after other types of returns are completed, thereby delaying their delivery.

We are not CPA’s, so be sure to check with your tax professional before making any changes based on this article.

If you are a K-1 recipient, be sure that K-1 investment is in a taxable account before reporting it on your return and you may avoid unnecessary double tax payments.

In closing, it’s a long weekend for many, as Banks and Markets are closed on Monday, in Honor of Presidents Day. As we often do, Monday will be a great day for us to sneak into the office and catch up on overdue items.

Have a Great Looong Weekend, and I look forward to bringing you comments from the Speaking Event tomorrow!

Thanks for reading!




Tax Season – Not All K-1’s are Created Equal, Be Careful What You Report

Be careful in the reporting of tax liabilities from K-1’s that may have made their way to you in the mail from an investment holding.

As a quick review a K-1 is used to report income attributed to ownership percentage generally from a partnership, corporation, or other similar entity. 

Not all K-1’s are created equal. 

Form K-1

K-1’s that you receive from a holding in an IRA or other tax deferred account DO NOT GO ON YOUR FEDERAL TAX RETURN as they are not a taxable event. If you report a K-1 from an IRA or other type of tax deferred account on your federal tax return you may pay extra taxes.

How to determine if your K-1 is from an IRA or other type of tax deferred account:

The way your name is written on the K-1 is the only way to be sure of the account type. Extra language such as “Trustee”, IRA, FBO, Sep or other, are signs your K-1 is possibly from a tax deferred type of account and might not be reportable.  Upon discovery of this language it is a good idea to review your account holdings to determine if the K-1 is in fact from an IRA or other qualified holding. If in doubt contact your tax professional or you may call the number on the K-1 for greater detail as well.

If the K-1 is not taxable, why did they send it to me?

With the complexity of tax laws and investment products, most investment companies have made the decision to distribute K-1’s to all investors of their partnership or over report to everyone.

As a reminder, we are not tax professionals and this advice is general in nature.  Please consult your tax professional for specific questions.

Have a Great Day!