2 Partner LLC now Single LLC California

[Jay687]

My ex-partner left the company at year end 2021.  I missed filing as “Final” for him on Schedule K1 for 2021 and also didn’t file any forms that the business is now a single LLC.  My questions are:

1. Do I need to amend previous taxes? Or file any other forms to state that the business is now a single LLC?

2. File my taxes using TurboTax Business to get a Schedule K1 for myself only or..

3. File my business taxes along with my W2 taxes for Schedule C (single LLC) using (TT home & business)?

Thank you in advance.

[DavidD66]

As a single member LLC, it is considered a "disregarded entity" by the IRS for tax purposes.  This means you will file your business income and expenses on Schedule C as part of your personal tax return.  According to the IRS, for the year the partnership ceases to exist, you must:

• Check the “final return” box (it’s near the top of the front page of the return, below the name and address).
• Check the “final K-1” box on Schedule K-1.

I recommend you file an amended Form 1065 with the appropriate boxes checked on the return and the K-1s. 

[jay209outreach]

Hi David.  Thanks for your response.  I have a few other questions.

1.  If I used TurboTax Business to e-file the 2021 taxes, should I also reuse the 2021 software to amend as well?  Is there a TurboTax document with steps on how to process an amendment?

2.  How do I know if the amended 1065 and K1 has been accepted so that I can file my 2022 taxes?

Thank you,

Jay

[RobertB4444]

You can use the same TurboTax account to amend the 2021 return.  Log back in and tell the system that you want to 'amend a previously filed return'.  Then go through the 2021 return and add a K-1 for you and for your ex-partner.  When you are entering the partner information into the system it will ask about beginning partnership share and ending partnership share.  Yours and his would begin with whatever percentage you had worked out in your partnership agreement and end with 0% for him and 100% for you.  You will have to enter the date that that change was made, as well.

This is going to result in a K-1 from the partnership that will change both of your personal returns as well.  So after you have amended the business return you will need to go in and amend your personal return to change the numbers from the partnership.  Then you will file the amended personal.

Once you have received notice from the IRS that they have accepted your amended personal return then you can file your business and personal returns for 2022.  Since for 2022 you are no longer a partnership and have become a schedule C business your tax return is not due until April 18th.

@jay209outreach 

[jay209outreach]

Thank you for the reply, Robert.

1. We tried to make the transition as clean as possible (obviously it didn't work) and the ex-partner stayed until 12/31/2021 with 50% him and 50% me for the entire 2021.  So, 1/1/2022 was when I was 100%. 
   • Do I still need to amend/change the 2021 beginning and end percentages as you mentioned or do I just need to amend and change the Partnership and Schedule K1 to "Final' and submit?

Thanks.

[RobertB4444]

Afraid so.  The amended 2021 return will just have 'final return' checked with no other changes.

If he was not a partner for all of 2022 then you were not a partnership.  If you can get everything together and file by tomorrow (March 15th) you can file as a single member LLC and file as an S-Corp with form 2553 attached (which requests status as an S-Corp).

Otherwise, you will file a schedule C with your regular tax return and pay self-employment tax on any earnings.

@jay209outreach 

[jay209outreach]

I'll amend my 2021 as "Final" with no other changes.

I've mailed an extension form last week for 2022 so that I can have time to amend 2021 and file 2022.  I will try your method of filing as a Single member LLC as S-Corp.

Thank you for your reply and suggestions.