K1..Earned Income vs Interest Income when filing unemployment?

Question

I lost my full time day job, but I'm one of three partners in a small S-corp. I receive a monthly dividend check from the company and get a K1 at the end of year. I can't survive off the little dividends, so I had to file for unemployment for the time being. Is this Income something I need to claim to unemployment? I wasn't sure if it was considered earned or interest income, or if it even matters which it is when pertaining to unemployment. Any advice would be appreciated. Ty

Answer 1

If you are calling it a dividend, it probably falls in the interest/dividend category.

Do you do any work for this dividend? Do you receive a W-2 from this company? If you just get this check, it is not earned income. If you earn it as an owner on any but a W-2 form, they may classify you as self-employed, and that may eliminate you for unemployment.

So-

interest/dividend OK but needs to be reported.

W-2 OK but needs to be reported.

1099/self employment income Bad

K-1 (it is classified on the line of the K-1)

Unemployment offices are interested in all the income you receive, explain it to them and its source.  

Answer 2

Actually the Unemployment offices are very helpful on this as you don't want to pay penalties for receiving benefits now due you.  Let them know that you receive a monthly check and how much it is for (if it's the same amount each month).  Usually, if the check isn't even half of what the unemployment check is, they let you receive your benefits without penalty, but if the check is over half the benefits, they reduce the benefits by the difference in the amount over the 50% cutoff.

Hope this helps.

Answer 3

Get out your K-1 from last year.  Where were all of last years "dividends" reported?  Box 1 or Box 5?  

What does the S-corp do?  Invest or do you perform services?  If it's services, the IRS says the money should have flowed to you via a W-2 and yes, unemployment wants to know the amount.