S Corp as a Partner

An individual taxpayer has an LLC and has chosen to be treated as an S Corp. They receive a K-1 from a partnership they are involved with and that K-1 is in the LLC's name and shows roughly $80k in box 1 ordinary income, and that $80k is also shown in box 14A as self-employment earnings. In addition to that K-1, the S Corp has other net income from operations of about $20k, so that brings the total net income reported on the 1120S to about $100k. If they paid themselves a salary of $60k from the S Corp, are there any issues/red flags created due to the fact the K-1 that was received for the S Corp as a partner is showing a higher amount ($80k) that should be subject to self-employment taxes than what the shareholder paid themselves? In other words, they have paid themselves $60k on their W2 from the S Corp and passed through $40k not subject to SE tax, while the K-1 from the partnership says $80k is self-employment earnings.

With an s-corp as a partner, you can ignore Box14.
No issues here on its face. All the same reasonable compensation concepts apply.

This is a common structure used to evade SE tax. It is an abusive structure when done for purposes of evading such tax. The IRS has these on its radar and they are currently ramping up attacks on these structures. In your scenario, assuming that it is the S corp’s sole shareholder who performs activities that generate income for the partnership, then the IRS will treat this scenario in one of two ways: they will reassign the S corp’s allocable share of partnership income to the shareholder under the assignment of income doctrine; or they will reclassify all distributions from the partnership to the S corp as wages paid to the S corp’s shareholder. The IRS might also raise IRC 269 to disallow the SE tax savings. That one is far less common, but I have seen it before.

OP, take Chuck's heavy handed description of a potential IRS approach with a large grain of salt. There's a great discussion here (viewtopic.php?f=8&t=30753&start=20) where JeffOhio pokes giant holes in the fictions that would be necessary for the IRS to create and sustain for such consequences to hold true.

Thanks to both of you for the reply and related discussion link.