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To narrow down the question: wife and I have a 50-50 LLC partnership where only I work (she has a full-time job). So I reported my 1099s on our joint personal filing under my name, and the company's total profits are the sum of the 1099s. Then took to TurboTax business to complete the 1065, filed it to the best of my knowledge, and only checked the generated K-1 forms showing that her income from the company was the half of the profits (identically to my K-1).

My confusion is that when entering these K-1s on our personal return, there's a massive increase of taxes owed, yet I thought that all taxes have been deducted when I reported the 1099s employment income. Fairly positive that I will have to file an amended 1065, but it seems that I really don't understand why are we seemingly taxed twice (because otherwise I have no clue why would think about becoming self-employed...)

Trying to put my confusion into words another way: reporting the 1099s, I will owe self-employment taxes, and when we report our K-1s, we will owe more taxes on company profits - is this right?

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My confusion is that when entering these K-1s on our personal return, there's a massive increase of taxes owed, yet I thought that all taxes have been deducted when I reported the 1099s employment income.

You should see the taxes on that income about doubled. This is because you reported your income twice - once when you reported the 1099s in your own name, and the second time when you reported them again as "company's total profits".

If the 1099s were given to the LLC - report them on 1065. If the 1099s were given to you - report them on Schedule C. But only report them once.

I will owe self-employment taxes, and when we report our K-1s, we will owe more taxes on company profits - is this right?

No, you should still owe self-employment taxes either way. The LLC doesn't change how you're taxed, it only changes how you report the income.

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