1065 Tax Return - Resident Alien as a partner

[vas9]

Hello,

We have filed taxes for our LLC using Turbo Tax Business 2021.

One of the partner in LLC is Resident Alien. When the details entered in TurboTax Business software, the software took Resident Alien as a foreign partner. 

We got a notice from IRS asking to file additional forms for foreign partner.

Is Resident Alien treated as domestic partner or foreign partner?

If Resident Alien treated as domestic partner, what steps need to take to address the IRS letter?

Thanks in advance for your help!

[DaveF1006 · Accepted solution]

According to the IRS in this webpage, if your partner is a resident alien, they are a US person and thus a domestic partner.  it may not specifically say so in this link but we can make a safe assumption is that he/she are domestic partners.

As far as answering your question on how the IRS forms are to be filled out, we cannot comment without viewing the forms, which is impossible in this forum. You just need to read each question and answer to the best of your ability. It may be necessary to seek advice from a CPA if the questions prove difficult. 

[vas9]

Thanks a lot Dave for quick response and clarification. You are awesome! 

[ddturner16]

This clarification helped me as well.  Turbotax should consider updating their question in the business software, as they take a non-citizen to mean a foreign partner, when perhaps the question should be if the partner is a non-resident.  I got the same notification from IRS as well so looking to do an amendment... 

[gblachm]

There are a few threads on this same topic and it sounds like there is a flaw in the TurboTax Business software (downloaded version) with respect to the question asking to check the box if "A member who is not a US-Citizen" is applicable.  (this question appears in Business Info > Partner / Member Information" tab.   TurboTax should update this Question to "A member who is not a US-Resident" so the form schedule b and k1 forms don’t mistakingly indicate there is a foreign partner when there isn’t.  

I received a notice from IRS informing my LLC has a Foreign Partner and I "may" need additional filings.  Specifically, it was form CP282.  At first I thought an amended return would be needed based on another thread I read on TurboTax community.  However after calling the IRS I learned an amended return was not needed or appropriate in this situation.  All I needed to do was write “not liable” on the CP282 notice I received and mail it back to the address on the top of the notice.  An amended return is only necessary if there is a change in tax liability, which in my case there was not.  Below is the link to the information on the IRS website about form CP282 and how to action it.  

https://www.irs.gov/individuals/understanding-your-cp282-notice