I am a permanent resident of US (Not a Citizen). I am a partner in multi-member LLC. Am I a "domestic partner" or "Foreign partner" in schedule K-1, part II, item H?

[de-navar]

I am a permanent resident of US (Not a Citizen). I am a partner in multi-member LLC. Am I a "domestic partner" or "Foreign partner"  in schedule K-1, part II, item H? 

[CarolynM · Accepted solution]

You are a domestic partner since you reside in the US.

[MOD5]

The input for this has to be corrected in TurboTax Business.  The question asks if the partner a US Citizen.  This is not correct.  It should be a US "person", which is citizen or permanent resident.  This created an incorrect filing and I have to correct with the IRS - please clarify this in the program.

[user42303090]

YOU are right

[inviktor]

Hi MOD5,

Would you mind explaining to us how did you correct this issue? I have the same problem. Due to the wrong question in Turbotax business, the IRS sent us a letter saying that our LLC have a foreign partner, and we don't.

Thanks a lot in advance 🙂

[Piquiri2]

Hi, I made the same mistake. I am not a citizen but I am a US person, living in US for the complete year. How did you fix it with IRS? Thanks!

[sachinjkulkarni]

I also faced the same situation in 2023 filing. I mistakenly marked one of members from my LLC as a Foreign Partner who has been residing in the USA as an LPR (Green Card) but not yet US Citizen.

This obviously happened due to wrong TurboTax Business software (downloaded version) question that specifically asks whether "A member who is not a US-Citizen" and I checked it (this question appears in Business Info > Partner / Member Information" tab. Ideally TurboTax shold update this Question to "A member who is not a US-Resident" and it should stop misguiding users.

I received a notice from IRS informing my LLC has a Foreign Partner and I "may" need additional filings.

To fix this with IRS, I amended the tax return in TurboTax Business SW (Note - Amendment adds a form 1065X)  and unchecked the box for my member "A member who is not a US-Citizen." This helped in updating the K1 Schedule for this member from "Foreign Partner" to "Domestic Partner." You also need to add the Explaination of Amendment in IRS form 1065X. I saved and reprinted amended Fed Tax Return (You can't efile amendment it seems) and mailed it with "the copy of the IRS notice" plus a "cover letter to IRS" explaining the change.

Hope this helps.

[ChristoThomas]

Thank you Sachin for the timely message, I was in the same situation and didn't know what to do. Glad you provided the step-by-step instructions. I made the changes and going to file it today. 

Thanks again.