Originally Posted by Cperformance
#1;I own a lawn and landscape company but it is a partnership everything is 50/50 .
Well it turns out now that we are filing our taxes both of us is going to get screwed either way because one has more paid into the company than the other during the year and the other is going to be paying more taxes . I just don't know what to do?
#2;We made together $34000.00 so $17000.00 a piece and he has around 11000.00 in expenses and I have around $5000.00 . Also he drove 6000 miles I drove 2500 miles . We both thought we would be getting money back but I guess it does not work that way? Any help would be appreciated
#1;it depends on the situation. In general,each partner is allocated a share of profits or losses as allocated by the partnership agreement, and taxed accordingly.also partners should pay taxes all partnership profits every year, even if the partnership declines to distribute any of its profits to them. In most cases, distributions are based on how much equity each partner has in the partnership now/ when the biz was first started. However, if you and your partner want to divide earnings in some other way, you can. Many small partnerships don't like to use fixed distribution percentages, carved in stone, because equity shares can change over the life of the partnership depending on individual contributions and withdrawals. Partnerships offer the most flexibility when it comes to splitting up profits and losses for businesses that have more than one owner. Unlike corporations, partnerships allow owners to figure the split however you want as long as you all agree to it in writing. So, for example, a partner who has a 50 percent equity stake in the business could get 35 percent of the profits and 70 percent of the losses and pay less taxes. Aslong as A partnership agreement might allocate the other partner to pay more taxes. In this case, the IRS might view it as an arrangement designed solely to reduce the other partner's tax burden by payng less taxes than the other one paying more taxes. In the absence of a legitimate business reason for such an allocation, the IRS might refuse to recognize it.so, A special allocation without an obvious justification might attract an IRS audit. If the IRS concludes as a result of the audit that a special allocation is illegitimate, it will calculate each partner's tax burden without reference to the special allocation, and tax each partner accordingly.also penalties / interest’d be added unless the taxes calculated paid on time. The IRS might also audit a proportionate allocation if it suspects that it is based on misrepresentation of actual partner capital contributions. In other words, as a partner you/your partner have to pay income taxes on your share of profits even if you don't withdraw a dime, and even if no cash is available for you to withdraw.
#2;as mentionedabove it depends on your agreement. I guess you ned to check it.