Hi Last year Jan we switched from a C corp to a multi member LLC. How do I convey that to Turbo tax?
They imported 2019 corp info.
you did NOT CONVERT a C-corp to a multimember LLC in 2020 (a partnership/or S-Corp ). You liquidated the C-Corp and used its assets to form the LLC. you should file 2 returns one for the C corp as final and one for the LLC - 1065 or 1120S. There can be significant tax consequences of liquidating the C-corp. there are tax issues if the net worth of the LLC was negative when the assets/liabilities from the C corp were contributed to the LLC.
that's why Turbotax may be starting out with a C Corp return. if you did not do things properly in 2020 see a tax pro. things may need to be corrected.
there is always the possibility that nothing changes (unlikely) but if you are not filing 2 returns for 2020 you may be doing something wrong. the rare exception would be conversion 1 second after midnight on 12/31/2019 but then the 2019 C corp should have been marked final. it should have been liquidated on12/31 and the tax consequences of the liquidation should have been reported on the stockholders' returns if the C-corp conducted activity in 2020 including liquidating it needs to file its 2020 own return
I agree with @Mike9241 in that you have a number of tax issues that need to be addressed:
- As noted, you needed to liquidate the C corporation.
- As also noted, you may need two separate returns depending on the timing of the C corporation liquidation.
- When liquidating a C corporation, any assets distributed in the liquidation will be deemed sold at FMV and any gain recognized by the C corporation; note there could be ordinary income recapture as a result of any prior depreciation taken on the assets.
- Form 1099-DIV needs to be filed for each shareholder receiving liquidating distributions.
- There are rules that need to be addressed if there is debt associated with any property distributions.
- Technically a form 966 should have been filed, but not fatal.
- The shareholder's will also need to determine the tax implications of the liquidation at the individual level.
- Shareholder's are required to attach a statement to their individual tax return in accordance with regulation section 1.331-1(d).
- You will then contribute the property to the newly formed LLC.
- All property contributed will begin with new depreciable lives.
- Since the LLC is newly formed, the beginning balance sheet will be blank.
You may want to consider consulting with a tax professional to make sure that the liquidation is handled appropriately and then the LLC starts out correctly.