K-1s are often the last in the long line of documentation needed when filing taxes. As such, we always recommend to our clients that they begin this process as early as possible. In fact, it is our policy to begin collecting and reconciling K-1s in July and August, and even into September.

What is a Schedule K-1?

• A Schedule K-1 lists taxable income related to certain business entities.
• K-1’s should be filed by entities who are permitted to shift the income tax liability from the entity earning the income to those who have an interest in it.
• The Schedule K-1 is the form that reports the amounts that are passed through to each party with an interest in the entity.
• The form itself itemizes the income received from these businesses and breaks it down into specific categories.

Who Has to File a Schedule K-1?

• There are two main groups of taxpayers who need to file K-1s:
  • Owners of Pass-Through Entities and Beneficiaries of Trusts or Estates.
  • The Owners of Pass-Through Entities include S-Corps, Partnerships, and LLCs taxed as S-Corps or Partnerships.

Pass-Through Entities

• A pass-through entity is a business entity for which income, losses, credits, and deductions are reported on the owners’ personal tax returns. That income is then taxed at the owners’ individual income tax rates.
• Each partner or shareholder – basically, anyone who has a beneficial interest in the entity – is expected to attach the Schedule K-1 form to their personal income tax return.
  • S- Corps use tax return Form 1120S for their annual tax returns. The S Corporation provides Schedule K-1s that reports each shareholder’s share of income, losses, deductions and credits. The shareholders then use the information provided on the K-1 to report the same information on their separate tax returns.
  • Partnerships prepare a Schedule K-1 to report each partner’s share of income, losses, tax deductions and tax credits that the business reported on the informational 1065 tax form.

What’s Reported?

A Schedule K-1 shows the income or loss depending upon the share of business owned, or percentage of stock owned, by that partner or shareholder.

• Dividends, deductions, gains, and losses are reported on each partner’s or shareholder’s K-1.
• Guaranteed payments are also reported on partner’s K-1s where relevant.
• A capital account analysis for each partner, or percentage of stock ownership for each shareholder, is included on the K-1.

Beneficiaries of Trusts & Estates

Beneficiaries of a Trust or Estate also need to file a Schedule K-1.

• There are Trusts & Estates who will pay their taxes directly, but oftentimes it is passed through to the beneficiary to pay. When this occurs, the beneficiary will receive a K-1 that shows the income they are required to report on their personal tax returns. When a beneficiary receives a distribution of income, the Trust or Estate reports a deduction for the same amount on its 1041.

The biggest difference between the Trusts & Estates group and the Pass-Through Entity Ownership group is that Trusts & Estates beneficiaries should not include the Schedule K-1 with their tax return. Instead, they can keep the K-1 with their records and only use it to report trust or estate income losses, deductions, or credits.

When are K-1s Due?

• Schedule K-1s are due to the taxpayer by March 15^th. If an extension is filed, the due date is September 15^th. Those who have received a K-1 are expected to include it with their tax filings (when relevant) in April.
• Because K-1s are often received late, and since they can add complexity to a tax filing, Plumb works with our clients as early as possible to begin the K-1 collection process on their behalf.

At Plumb, we can help you manage, track, and collect all the various K-1s you are due to receive each year.  As K-1s are received, we reconcile them against the transactions in your books to ensure accuracy and work with the appropriate parties if corrections are needed.  We can then provide reconciled year-end financial statements to the CPA for finalizing tax returns.

Plumb Family Office Accounting delivers financial peace of mind by assisting high-net-worth individuals and family offices know where your money is going, so your trusted advisors can effectively manage it. We work in partnership with your team — including wealth, CPA, and other advisors — to provide the highest quality of data and financial reporting to establish a holistic view of your assets and financial holdings. This gives you true control of your wealth and establishes the foundation for effectively implementing your financial strategies.

 

March 25, 2022.

ACCLAIM | WealthBriefing Recognises Leaders Across the Global Wealth Management Industry

Anneke Stender, Executive Vice President of PLUMB Bill Pay, talks to this news service about how it has stood out from the crowd.

 

What sets you apart from your peers this year and why?

PLUMB Bill Pay was developed by financial experts and accounting professionals with a deep understanding of the unique challenges of high-net-worth individuals and the needs of family offices.

What sets PLUMB apart is our fusion of bill pay technology and high-touch services. Of course, we have expertise in family office accounting, but we fuse this with secure technology that streamlines and improves bill pay processes. We serve as an extension of your family office team, treating all our customers and partners with the utmost care and precision- this includes overseeing not just bill pay and accounting, but managing wires, capital calls, and any other issues that arise that we can assist with.

 

How have your colleagues contributed towards the success of your organization?

At PLUMB, we stay ahead of the curve by creating our own proprietary Bill Pay Workflow Application tailored specifically to the HNW and single/multifamily offices. We understand the accounting necessary to support complex estate planning and consolidated reporting. The PLUMB Bill Pay app integrates with QuickBooks Enterprise, QuickBooks Desktop, QuickBooks Online, and SAGE Intacct to ensure ease-of-use and clear financial reporting.

The innovation behind our technology is powered by our ever-growing team of trusted professionals. Our team’s high level of knowledge and service in the UHNW individual space is the foundation of our technology, as well as what fuels the ongoing innovation of our product.

 

What are you going to do to stay on the front foot in a fast-growing but also challenging region such as this?

Our focus is “Service First”. Serve our clients. Serve our referral partners. Do a great job and do that by embracing our role in the UHNW industry. Obviously, technology is important, and we will continue to invest and grow our software platform along with continuing to provide a high level of service, evolve based on customers’ needs, and stay on the pulse of changes to stay ahead of the curve.

 

What have been the challenges you have had to overcome to reach such a standard?

We hire superstars. Now, our definition of a superstar is different than most. Our superstars are the foundation of great brands. Our superstars are client and Bill Pay associates, client relationship managers, and everyone else on the team that is there, day-in and day-out, serving their clients, contributing to their team, and providing white glove service. How do we sustain our high standard of service? By celebrating our team members. By investing in our team members. By creating technology that is industry leading and enables them to create an ever increasingly better client experience. Really, we’re just getting started, there is so much more to build!

 

How has your business and business model reacted to the pandemic? Has morale amongst your colleagues held up well during the pandemic? What have you done to bolster their spirits?

Team members are tough to come by and we do our best to retain and incentive them in unique ways to keep them with PLUMB. We embrace the challenges that our team members are going through and do our best to accommodate their needs. Frankly, some of our team members’ challenges initially caught us off-guard and we realized that the pandemic is not a “one size fits all” answer. We created a regular check-in between team members, virtual group events, and other team-building activities. Our “Monday Morning Kick Off” meeting became much more vibrant. Some things worked and have been adopted long term, other things did not. We will keep striving, trying new activities, while keeping our cadence of tried-and-true practices.

 

Have your differentiators become more important to your business? Are they still relevant?

High touch technology fused with top level service is our up-front differentiator. With that being said, when our clients’ need us to dig deeper, they come to understand and value the depth and breadth our team brings. While we continue to invest in and improve our proprietary bill pay technology, it’s our smart and caring people that routinely make the difference. Our team serves our clients and partners with the utmost care. Exceptional service will always be relevant.

 

Whom do you look to for inspiration?

Our clients, old and new, bring us inspiration. Each one started with their dream, and they are inviting us to play a role in that dream. We take that role of stewardship seriously.

 

What do you hope will be the result of receiving this accolade?

Spread the word about us, our people, and our story. We are a 20+ year overnight success that the world is just starting to know. This award is a testament to our best-in-class services and a foundation of technology and bank-level security that has led to our growth and success this year.

 

About Plumb Bill Pay

Plumb Bill Pay is a high-touch technology family office bill pay and accounting service provider whose services are custom designed to meet the needs of high-net-worth and ultra-high-net-worth clients.

 

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Contact Plumb Bill Pay today.