Does a K1 or Owner Complete an I9 form?

According to USCIS, an employer must complete Form I-9 each time it hires any person to perform labor or services in the United States in return for wages or other remuneration. Remuneration is anything of value given in exchange for labor or services, including food and lodging. The requirement to complete Form I-9 applies to new employees hired in the United States after Nov. 6, 1986.

Form I9 is not completed for the following workers:

  • Independent contractors; or
  • Employee of a contractor providing contract services (such as employee leasing or temporary agencies) to your business (providing labor);

Are Schedule K1 and Owners considered employees? K-1 employees are the co-owners or partners in a business. These employees differ from W-2 and 1099 employees in several ways: (1) Partners annually file Schedule K-1 (Form 1065) to report income, deductions, gains, losses, and other business-relevant transactions from the operation of the business; and (2) Partners normally do not receive a Form W-2. Income reported on a K-1 is not subject to income tax. Partners and shareholders are not considered employees. However, on rare occasions, a partner may receive both non-taxable income to report on a K-1 and taxable income to report on a W-2. In this situation, the partner would receive taxable income and deductions using normal earning and deduction codes in the payroll system, and be considered an employee of the business.

Guidance in the Handbook for Employers M-274, states that someone that is self-employed would not need to complete Form I-9 on their own behalf unless the person is also an employee of a separate business entity, such as a corporation or partnership. In that case, the person and any other employees must complete Form I-9. So, company owners who are also employees of their own company need to complete the form. If a person is a business owner that actively performs services for a partnership or a corporation – both separate entities – and receives payment in return, an I9 form should be completed.

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