K-1 Distributions


When completing the Form 433-A and the taxpayer has income from K-1 does anyone have any suggestions on what method they use to compute this? Assuming the taxpayer had K-1 income of $42K on their most recent tax return but they do not actually take any monthly distributions.


Good afternoon Jerrod,

Question for clarification. In your assumptions, does the taxpayer receive W-2 wages from the company that he received the K-1 income from and if not why?




Thank you for your response. Yes the taxpayer receives a W2 from the same company as the K-1



Are you asking what will the IRS use as income for the taxpayer who is submitting the OIC given your assumptions ?





That is correct.



I recently had a case where the taxpayer had formed an LLC and was being tax as a Sole Proprietor prior to becoming my client. He had amassed a tax liability of over $250,000 and as you can guess much of it was due to paying self-employment tax on most of his earnings.

I advised him to make a S-Corp. for the beginning of the year and start paying himself a salary. This allowed him to pay all his personal bills from his personal account as well as minimize the SE taxes.

When the OIC was filed, the wages were shown on line 30 section 7 of the 433-A (OIC) and the distributions were shown on line 34 of section 7 of the 433-A (OIC).

THE INCOME FROM THE K-1 DID NOT COME INTO PLAY…the case settled for $6,768.60.

I hope this helps?




Good morning, can some one who have active business request OIC?


Yes!! Of course!!! I do them every day!!

Email me at Keith@keithjonescpa.com if you need help!