I have a client who is a partner in a law firm and his QBI calculation takes the business income from his 1065 and subtracts a prorated amount of half of his self-employment tax deduction and his retirement contribution. Why are these two amounts being prorated? I can not figure out the calculation and there is not a worksheet in Lacerte to show this reduction.
The one-half self-employment tax and retirement contributions deduction will be allocated to the partnership based on the amount of self-employment income minus any guaranteed payments from that partnership. For example, if the partner's total self-employment income from the partnership is $10,000, but there are guaranteed payments of $7,000, then 30% of the one-half self-employment tax and retirement contributions deduction will be allocated to the partnership.