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Old 02-21-2013, 01:51 AM   #1
OrdinaryAvgGuy
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Default LLC & Taxes

Just a shot in the dark here...

Any tax experts want to give their opinion here?

Set up an LLC last year for some rental property.

Wife and I are 50/50 partners, only members in LLC. Filing as partnership.

Do I have to fill out a 1065 and issue k-1's to both of us or can I get away with filing a schedule C. Would rather do the ladder cause I can fill one out with my eyes closed after 6 beers. Going the other route seems like a PITA but then again the govt loves extra unnecessary paperwork.

BTW, Please spare the Har har har - you gonna' take tax advice on a beer message board? I'm gonna call uncle Sam tomorrow to confirm but would really like to get started on this portion of my taxes tonight.

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Old 02-21-2013, 02:27 AM   #2
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Did you apply for an EIN? Did you retain the "disregarded entity" status?

Information on a "disregarded entity" via irs.gov..

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Single-Member-Limited-Liability-Companies



And a clip about spousal ownership...

Joint Ownership of LLC by Spouse in Community Property States
Rev. Proc. 2002-69 addressed the issue of classification for an entity that is solely owned by husband and wife as community property under laws of a state, a foreign country or possession of the United States.
If there is a qualified entity owned by a husband and wife as community property owners, and they treat the entity as a:
Disregarded entity for federal tax purposes, the Internal Revenue Service will accept the position that the entity is disregarded for federal tax purposes.
Partnership for federal tax purposes, the Internal Revenue Service will accept the position that the entity is partnership for federal tax purposes.
A change in the reporting position will be treated for federal tax purposes as a conversion of the entity.
A business entity is a qualified entity if
The business entity is wholly owned by a husband and wife as community property under the laws of a state, a foreign country, or possession of the United States;
No person other than one or both spouses would be considered an owner for federal tax purposes; and
The business entity is not treated as a corporation under IRC §310.7701-2.
Note: If an LLC is owned by husband and wife in a non-community property state, the LLC should file as a partnership. LLCs owned by a husband and wife are not eligible to be “qualified joint ventures” (which can elect not be treated as partnerships) because they are state law entities. For more information see Election for Husband and Wife Unincorporated Businesses.

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Old 02-21-2013, 03:02 AM   #3
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Quote:
Originally Posted by CAustin919 View Post
Did you apply for an EIN? Did you retain the "disregarded entity" status?

Information on a "disregarded entity" via irs.gov..

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Single-Member-Limited-Liability-Companies



And a clip about spousal ownership...

Joint Ownership of LLC by Spouse in Community Property States
Rev. Proc. 2002-69 addressed the issue of classification for an entity that is solely owned by husband and wife as community property under laws of a state, a foreign country or possession of the United States.
If there is a qualified entity owned by a husband and wife as community property owners, and they treat the entity as a:
Disregarded entity for federal tax purposes, the Internal Revenue Service will accept the position that the entity is disregarded for federal tax purposes.
Partnership for federal tax purposes, the Internal Revenue Service will accept the position that the entity is partnership for federal tax purposes.
A change in the reporting position will be treated for federal tax purposes as a conversion of the entity.
A business entity is a qualified entity if
The business entity is wholly owned by a husband and wife as community property under the laws of a state, a foreign country, or possession of the United States;
No person other than one or both spouses would be considered an owner for federal tax purposes; and
The business entity is not treated as a corporation under IRC §310.7701-2.
Note: If an LLC is owned by husband and wife in a non-community property state, the LLC should file as a partnership. LLCs owned by a husband and wife are not eligible to be “qualified joint ventures” (which can elect not be treated as partnerships) because they are state law entities. For more information see Election for Husband and Wife Unincorporated Businesses.
Yes, got an EIN. As for the disregarded entity I can't remember how I filled out the SS-4.

Does having an EIN automatically disqualify me from filing a schedule C?
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Old 02-21-2013, 06:06 PM   #4
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By default an LLC is considered a disregarded entity unless you file a change of classification.. in other words the IRS actually expects you to use your personal tax return to show business profit/loss.

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Old 02-21-2013, 06:40 PM   #5
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Quote:
Originally Posted by CAustin919 View Post
By default an LLC is considered a disregarded entity unless you file a change of classification.. in other words the IRS actually expects you to use your personal tax return to show business profit/loss.
Talked to uncle sam today. Since it is not a sole member LLC, for tax purposes its considered a partnership and I must fill out the 1065 and issue a K-1 to myself and wife.. Silliness. I would then report the P/L on a schedule E attached to my 1040. I hate taxes and will some day learn to hire an accountant.

But you are right, as a single member LLC, the default classification is a disregarded entity and not a corporation. This can only be changed if you fill out an 8832 I believe.
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Old 02-21-2013, 06:46 PM   #6
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Not meaning to start a political debate but dang man we need to change the tax laws and make it way simpler. Was easier and cheaper for me to send mine out to be done and who knows if they were done right

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Old 02-21-2013, 08:07 PM   #7
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Not meaning to start a political debate but dang man we need to change the tax laws and make it way simpler. Was easier and cheaper for me to send mine out to be done and who knows if they were done right
Yeah, current taxes disgust me.

Not to toot my own horn but I know that when I do my taxes they are done right. I doubt any accountant would take the time that I do to read everything, triple check and check again as I do.

You are able to deduct tax preparation services from the prior year if you pay someone to prepare your taxes.

It would be nice if I could deduct an hourly wage for myself since I probably spend over 20 hours a year preparing government forms that not even the government employees who create them can explain.

Then... I gotta pay those mother fockers! Err.
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