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WagnerFamilyPTR
Level 1

Partnership Disregarded Entity

I have a partnership, in which the partners are disregarded entities, but use their SSN for the DE. On the K-1, Line H2, I checked the box, and put the SSN and the individual's name that owns the DE. Turbo tax is not allowing me to file the tax return, because it says the tax ID # is invalid. What do I need to do to get Turbo Tax to accept this?

9 Replies
MaryK1101
Expert Alumni

Partnership Disregarded Entity

For partners who are disregarded entities, you must report both the Beneficial owner and the Disregarded Entity (DE).  See Part II. Information About the Partner

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martinmarks1919
Level 9

Partnership Disregarded Entity

If you're checking H2 you need to enter the TIN which would be an EIN probably or leave it blank.

iitzen
Returning Member

Partnership Disregarded Entity

For partners who are disregarded entities, you must report both the Beneficial owner and the Disregarded Entity (DE).  See Part II. Information About the Partner

Into which fields do you report the Beneficial Owner and the DE?  Into which fields are the SSNs reported?  I cannot get TurboTax to accept the information.

CompConfidence
Level 2

Partnership Disregarded Entity

You should be able to complete the TIN with "None" based on the IRS information.  TurboTax only accepts "APPLD FOR", which is an error on their part.

WagnerFamilyPTR
Level 1

Partnership Disregarded Entity

Per research we have done, a single member LLC that is classified as a Disregarded Entity can use the SSN of the beneficial owner.  How do we get Turbo Tax to accept this as the TIN in box H2 on the Schedule K-1 of Form 1065? 

ReneeM7122
Level 8

Partnership Disregarded Entity

You are correct, you may use either your SSN or the EIN of your SMLLC on your K-1.  Please go back to the place where you entered the information about your LLC and check to see whether you may have used your EIN anywhere.  If you are using a Schedule C or any other forms in connection with your business, please double check.  If you did use the EIN, TurboTax is trying to map that EIN with your K-1, and creating an error.

 

Here is more information supporting the use of an SSN by a SMLLC.

@WagnerFamilyPTR

NCCG
Returning Member

Partnership Disregarded Entity

I'm experiencing the same error. The problem is caused by several programming errors in TurboTax Business. Luckily, there is a workaround for it. At least it worked for me. Hope it works for you!

 

The short answer: if you're comfortable entering data in Forms view, and know how to get a Schedule K-1 the way it is supposed to look, do it there. Enter the partners' information right on Sch K-1 Wks which should then get their Schedule K-1s right.

 

If you must use Step-by-Step, first understand that it's just plain wrong. It gets disregarded entities and their beneficial owners all mixed up. And second, understand that you can to fix most of the errors in Step-by-Step, but not all of them. You must go to Forms view to fix at least one problem. 

 

If you must use Step-by-Step, the data-entry for it is found in the tab Business Info > Partner/Member Information. Here under "Member Information," it asks for a Name and a Social Security Number. Obviously, a disregarded entity will not have an SSN, so that's your first clue things are messed-up in the programming. Yet the data entered here will correctly populate Sch K-1 Wks and then Line E and F of Schedule K-1.  For disregarded entities, enter the name and SSN of the beneficial owner (e.g., for us, it's the person owning the single-member LLC which is the partner/member).

 

Yet you must still tell TTB that the member is a disregarded entity and not a person. So you *must* check the box "This member is not a person. It is an LLC or other business entity."

 

That will bring you to the next screen which asks you to enter the name and ID number of the beneficial owner of the disregarded entity. Don't. Here enter the name of the disregarded entity and its EIN. (It will format as an SSN, but don't worry, we'll fix it later.) The reason why you're entering the DE name and its TIN here is this data correctly populates Sch K-1 Wks and then Line H2 of Schedule K-1.

 

So now check Forms view, and you should see your data is in all the right places. But you may have a data validation error (if like me, it won't show until at the last moment when you try to efile). TTB will claim you have entered an invalid TIN for the disregarded entity which, of course, is just plain wrong.

 

To fix TTB's data validation error, to get the TIN of the disregarded entity correctly entered on Schedule K-1 H2, you've got to use Forms view. (If there's a way to fix it in Step-by-Step, neither I nor four TTB support representatives have found it.)

 

While in Forms view, open the Sch K-1 Wks and enter the correct EIN (in the correct XX-XXXXXXX format) for the DE for each partner there. It will then correctly populate to the Schedule K-1 line H2. 

 

In sum, there are a number of problems here. First, in the Step-by-Step, TTB has gotten all mixed-up between the disregarded entity and its beneficial owner. Second, for line H2, TTB has what I'm presuming is an incorrect data validation format on the DE's TIN data field. It invalidates EINs and anything that doesn't comport with an SSN format. 

 

These are huge and blatant programming errors. As one of the several TT support representatives I spoke with said, it appears these errors will effect a whole lot of TTB users. It seems that anyone using TTB to file a form 1065 with partners that are disregarded entities is going to experience this problem, whether they know it or not. 

CompConfidence
Level 2

Partnership Disregarded Entity

Not meaning to be disrespectful of the many contributors to this problem, but I must add that some of the postings contain incorrect information.  First, to clarify, disregarded entities owned by an individual are by definition to use the SSN of the sole individual owner (for Form Schedule C filings) unless an EIN is applied for.  EIN's are not required for disregarded entities, and are only necessary for when the disregarded entity has employees.  Otherwise, for purposes of the Form 1065 K-1, the TIN of beneficial owner of a disregarded entity is not the SSN or EIN.  The correct TIN is "NONE."  Here is an excerpt from the Form 1065 instructions: 

"Item H2. Disregarded Entity (DE)

If the partner is a DE, check the box and provide the name and TIN of the DE partner. The partnership should make reasonable attempts to obtain the DE’s TIN. If after making reasonable attempts to obtain the DE’s TIN such TIN is unavailable or unknown to the partnership, the partnership may report the DE’s TIN as unknown. If the DE does not have a TIN, enter “None” in the space for the DE’s TIN. "

 

So, yes, you can go into forms view and force changes, but in this specific situation the change needs to be "NONE".  TTB will not allow you to file electronically unless you use "APPLD FOR" as the TIN, which you should not do unless you have actually applied for a EIN.  So, as of today (I just checked it) TTB is still wrong and your only recourse is to file on paper.

 

What's the point of TTB if you can't file electronically.  I wish TTB would read these chats and realize the mistake and fix it, TODAY!!

CDA_Arch
New Member

Partnership Disregarded Entity

Thank you for your step by step.  These are severe programming errors with no acknowledgement by Intuit.  I have not been able to have the forms accepted and resorted to mailing in the return.   I wish Intuit had to pay for their mistakes, the way that we have to! 

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