Posted: 9/24/2025 10:25:01 AM EDT
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I am being made a shareholder in a private company where I work as a W2 employee and was told that I will now also receive a K1 statement. This is a new area for me so not sure what I am in for. My Spidey senses make me think my tax burden will greatly increase, more so than my paycheck  Anyone else a W2 and K1, any tips or tricks I should be aware of? |
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Yes, what would you like to know? A couple things that I had to change as a result: 1. Get a tax guy if you don't have one already. You are likely going to have to now do quarterly estimates, and there is a certain amount you can be off by before penalties start. A good tax guy can estimate all that for you and keep your nose clean. 2. Get used to filing extensions :) 3. read up on section 199A and enjoy it while it lasts. :) |
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Originally Posted By mnew007: Yes, what would you like to know? A couple things that I had to change as a result: 1. Get a tax guy if you don't have one already. You are likely going to have to now do quarterly estimates, and there is a certain amount you can be off by before penalties start. A good tax guy can estimate all that for you and keep your nose clean. 2. Get used to filing extensions :) 3. read up on section 199A and enjoy it while it lasts. :) Thanks. I guess I don't know enough to know exactly what I should be asking. Will I be taxed on just my shares, what the company is worth or how does that work? I understand shares/stock in a public company, they have a known value but the whole private company share thing is a bit confusing. I already have a CPA I have been using a few years. What it comes down to is after a lot of years of dedicated, hard work, I am being rewarded with a nice pay raise and some other perks but in my mind, I just figure I am going to get raped by the tax man. |
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Originally Posted By USCG_CPO: What it comes down to is after a lot of years of dedicated, hard work, I am being rewarded with a nice pay raise and some other perks but in my mind, I just figure I am going to get raped by the tax man. I don’t understand. Do you not like making money? You’re only going to get taxed on income. Income is GOOD, right? |
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Originally Posted By Bladeswitcher: I don’t understand. Do you not like making money? You’re only going to get taxed on income. Income is GOOD, right? Oh I love making money, just seems the past few years I make a bit more but the tax man takes a lot more. The IRS loves me, wife and I both work plus I have my .mil retirement so they see 2 people with 3 income streams. Once it is all in place I will go visit my CPA. Was just asking here to see if anyone might have some tips or tricks I should be aware of. |
| What is the structure of company, is it a C corp,S corp? C corp is easy because the company pays its own taxes then you only get a K1 if you are paid out a distribution in which case it's just more personal income you show and you're taxed on that. A pass through entity like an S corp can be tricky if there are retained earnings not being distributed because you get taxed on your percentage of business taxable net income whether you saw that money personally or not by simply being an owner. I experience both situations above every year and also get a W2 from each of those companies. |
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Originally Posted By akpatriot22: What is the structure of company, is it a C corp,S corp? C corp is easy because the company pays its own taxes then you only get a K1 if you are paid out a distribution in which case it's just more personal income you show and you're taxed on that. A pass through entity like an S corp can be tricky if there are retained earnings not being distributed because you get taxed on your percentage of business taxable net income whether you saw that money personally or not by simply being an owner. I experience both situations above every year and also get a W2 from each of those companies. @akpatriot22 S Corp |
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Originally Posted By USCG_CPO: @akpatriot22 S Corp Your K1 will reflect whatever your share of the business tax return income is. That could be a profit or loss. You may or may not personally 'see' either of those but it will affect your tax situation. I don't know what type of industry or how things are typically operated at your company. I'm sure the other owners don't want the negative effect of excess taxes so I wouldn't worry too much that you might experience that situation. Many companies get their returns close to zero profit anyway. I would think if your ownership share would create a bigger material effect on your financial situation you'd be made more aware of what that would look like. The S corp I have is still very much in growth mode so a lot is held back and reinvested yet the company also shows plenty of profit. The company just distributes out our K1 tax burden based on 37% plus state taxes to make us square on the deal or more so depending on the individual situation. |
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One of the benefits you will see is that if you receive compensation through retained earnings rather than salary (as seen on your W2) you will not have to pay the 7.65% FICA, and the company won't have to pay their 7.65% towards it- so that leaves an additional 15.3% total that won't be going to the tax man. What the company decides to do with it of course is based on overall financial health. |
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Im not a tax professional. Open a llc as the holder.of your shares. You can now use that to write off a lot of your daily expenses. You also need to talk to your tax guy about your "dual status" as a owner and a employee, this was a huge issue with my bussiness and the irs. |
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Im not a tax professional. Open a llc as the holder.of your shares. You can now use that to write off a lot of your daily expenses. You also need to talk to your tax guy about your "dual status" as a owner and a employee, this was a huge issue with my bussiness and the irs. |
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Do you know about how much income you're getting on the K1 versus the W2 each year? I get a K1 each year but there's not enough on it to matter compared to my W2 income. |
Heller II - Challenging DC's bans on semi-automatic rifles, large-capacity ammunition feeding devices, and its onerous and expensive handgun registration process. http://www.HellerFoundation.org/
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Originally Posted By Bubbles: Do you know about how much income you're getting on the K1 versus the W2 each year? I get a K1 each year but there's not enough on it to matter compared to my W2 income. @Bubbles Not sure but looking like it will be in the 6 figures. |
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Originally Posted By USCG_CPO: @Bubbles Not sure but looking like it will be in the 6 figures. Originally Posted By USCG_CPO: Originally Posted By Bubbles: Do you know about how much income you're getting on the K1 versus the W2 each year? I get a K1 each year but there's not enough on it to matter compared to my W2 income. @Bubbles Not sure but looking like it will be in the 6 figures. I'd contact my CPA now before he gets busy during tax season. |
Heller II - Challenging DC's bans on semi-automatic rifles, large-capacity ammunition feeding devices, and its onerous and expensive handgun registration process. http://www.HellerFoundation.org/
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Originally Posted By mnew007: Yes, what would you like to know? A couple things that I had to change as a result: 1. Get a tax guy if you don't have one already. You are likely going to have to now do quarterly estimates, and there is a certain amount you can be off by before penalties start. A good tax guy can estimate all that for you and keep your nose clean. 2. Get used to filing extensions :) 3. read up on section 199A and enjoy it while it lasts. :) This. The more money you make, the taxes you pay, it’s not a big deal. The company should do distributions for quarterly tax estimates. When applying for a loan, they might 2”will want to see your K1’s too. They might ask to see the company financials too, but it doesn’t sound like you’ll have enough shares for that to be an issue. |