question.jpgIn Federal Income Tax

If I am a partner in a partnership, do I have to pay self-employment tax?

A partner in a general partnership must pay self-employment taxes on their share of the partnership income. However, a partner in a limited partnership does not have to pay self-employment taxes on his or her share of partnership income, except for any guaranteed payments received from the limited partnership for services performed by the partner.

If someone is retired from a partnership and receives retirement payments from that partnership, they have to pay self-employment taxes on those benefit payments unless the following three conditions are met: (i) the benefit payments were made pursuant to a written benefit plan which provides for retirement payments until the retired partner’s death; (ii) prior to the end of the tax year, the retired partner had been paid any and all partnership capital, in full, such that the other partners had no other payment obligation to the retired partner except for the continued payment of retirement benefits; and (iii) the retired partner did not perform any business services for the partnership during the tax year.