I have a client that is a partner in a small attorney partnership. My client opted to have his distributions from the partnership flow through payroll, thus payroll withheld taxes on behalf of my client. Payroll issued my client a W-2 at the end of the year showing all payments and taxes withheld. This presents two problems. First, my client and wife's 2018 income is under $315,00, thus he believes that the income received through his partnership should qualify for the full 20% QBI deduction. However, all of his income flowed through payroll and a corresponding W-2 was issued by the partnership to my client. He wants to know if W-2 "wages" can qualify for the QBI deduction, if so, how do I, in turn, reflect the same in Lacerte? Second question, how do I reflect the W-2 "wages" and corresponding tax withholding in the partnership tax return on the K-1s?
Any guidance is well received.
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Third problem - How can you have a partner be an employee? Sounds like the partnership needs to redo some payroll returns and the partnership return. This make the other two questions less of a problem.