How should a husband-wife LLC file?

[Gabby75]

I just filed my taxes with turbo tax.  I have never had this tax before that is on schedule 2 line 10.  What is it?

[Gabby75]

What is the tax on schedule 2 line 10 for.  Please explain.  I just went thru my print out and there is no explanation for this tax.  I have been using turbo tax for years and am considering not to use it again if I can't get an explanation for this tax.

[Gabby75]

What is this tax for and is it new?

[Gabby75]

What is this tax for on schedule 2 line 10?  Is it new?

[LeonardS]

The tax amount on line 10 Schedule 2 is the total of the taxes listed on lines 4 - 9.  These are not new taxes.

[gonelillc]

tborstad

New Member

posted

‎May 31, 2019 4:48 PM

last updated ‎June 26, 2019 3:52 PM

How should a husband-wife LLC file?

 Thanks, ScruffyCurmudge for all information about this subject. It has been the most complete information I have found on the web.

Unfortunately, I am still with some unanswered doubts. I started an LLC with my wife for Rental Real Estate purposes, and we both are foreigns from Mexico. To start the LLC we needed to get the EIN for a  Married Couple SMLLC and we got the name from Texas State and a bank account, but we do not have SSN or ITIN and it seems that we need to get one of these to file. Do you have any advice in our case?   Best Regards

[gonelillc]

 Thanks, ScruffyCurmudge for all information about this subject. It has been the most complete information I have found on the web.

Unfortunately, I am still with some unanswered doubts. I started an LLC with my wife for Rental Real Estate purposes, and we both are foreigns from Mexico. To start the LLC we needed to get the EIN for a  Married Couple SMLLC and we got the name from Texas State and a bank account, but we do not have SSN or ITIN and it seems that we need to get one of these to file. Do you have any advice in our case?   Best Regards

[KrisD15]

You can apply for an ITIN with your tax return through the IRS, but I understand that they are not processing paper returns until further notice. 

I would suggest you contact an "Acceptance Agent" who is authorized to validate your information.

IRS ITIN Link

Acceptance Agent list

[waterdog12az]

I'm sorry but the answer provided is utter nonsense.  We live in AZ and have a LLC.  Turbo Tax tells me to select the Back button and create a schedule C for me, but doesn't tell me HOW to create a new schedule C for my wife. I'm sorry but your over a 1000 word response is NOT helpful for a NON-Tax person.  The software should walk you through the entire process with clear and simple instructions.  As  you can tell, I'm very frustrated with this software and complete lack of support from the company.  They should have a toll-free number for 24 hour support.

[DawnC]

Type sch c in the search bar and use the Jump to link to get to your self/employment business summary.   You should see the Schedule C you already created.  Underneath that, click on Add Another Business or Add another line of work.   @waterdog12az

[waterdog12az]

Thanks for the reply and sorry for the attitude in my initial comments.  🙂

I had to call TT Support since I found a phone number for them and they told me how to do it by creating another company with a different description.  It looks like it works, but seems strange that TT needs you to create a duplicate company.  It would make more sense if TT just asked you what percentages of the ONE company is distributed to husband and wife.  All  you would have to do is enter the total numbers for the expenses and income and let TT do the math on the entered percentages.  It doesn't make any sense whatsoever to have to create a new schedule C and enter all the same information all over again in the 20 or so screens of questions that have already been asked and answered. 

[tbolden2021]

Well said.  You did a remarkable job of explaining this!  

[Taxathrone]

@ScruffyCurmudgeon -- feeling a bit lost here, and was hoping you could provide input on this post of mine: Do I Combine or Split Schedule C & SE? Married Couple LLC in Community Property State.

TurboTax indicates an unincorporated LLC wholly owned by spouses in a community property state is treated like how you mentioned in your post in this thread (income split on Schedule Cs and Schedule SEs if treated as a disregarded entity), but IRS Publication 541, Partnerships says (under "Community Property") that "Spouses who own a qualified entity (defined below) can choose to classify the entity as a partnership for federal tax purposes by filing the appropriate partnership tax returns. They can choose to classify the entity as a sole proprietorship by filing a Schedule C (Form 1040) listing one spouse as the sole proprietor."

...Nowhere else (that I can find) does the IRS mention this, and they still don't clarify how Schedule SE would be treated (one Schedule SE in the name of the spouse listed on the Schedule C or is income still split between spouses on Schedule SEs), but nowhere can I find that the IRS says to split Schedule Cs and Schedule SEs, either, as in your answer or how TurboTax indicates, which is so frustrating!

Also, a note that LLCs can't be treated as a Qualified Joint Venture. The qualifications regarding "Joint Ownership of LLC by Spouse in Community Property States" is a completely separate exception, at least as treated by the IRS, it seems.

[chiduc2]

Thank you so much.  What is about: we live in CA (Community State) and open a LLC in WY (common State), can we still file the LLC as disregard because we "live" in CA? Thanks,

[Gravel_Girl]

Hi Carl, 

I had a question pertaining to your comment stating:

"In the community property states of Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin if you have a multi-member LLC where there are only two owners, those two owners are legally married to each other, and those two owners will be filing a joint 1040 tax return, they have the option of splitting all business income and expenses down the middle and each partner reporting their share of the business income/expenses on a separate SCH C for each tax filer on the joint return. That means your joint 1040 return will have two SCH C’s included with it – one for each owner. But this can present its own problems in the event of divorce, or separation. The issues can become even more compounded upon the death of one of the owners. If that deceased owner’s will does not pass all assets to the surviving partner, then that surviving partner can find themselves in tax hell, not to mention the problems that can arise with the “new” owner or owners."

I am in Texas, and I have a family member that owns a multi-member LLC, with their spouse.  However, their spouse has passed away, and she is the one designated to inherit his shares of the company. My question is will she need to obtain a new EIN for the LLC or can she just change the way she files the taxes?

Secondary to that I was wondering what happens in the following scenario:  "A", LLC is a business operating in Texas, it is a partnership between "B", LLC and "C", LLC.  "C", LLC has decided to turn over it's shares in "A", LLC to "B", LLC. There is no exchange of money, its more of an assumption of shares and "C", LLC leaves the business.  Now,  "A", LLC is now owned solely by "B", LLC, is "A" required to get a new EIN number or can "A", LLC continue to operate with its existing EIN, and just change its tax filing from a 1065 to 1120 since it is owned by an LLC and not by an individual?

I hope those weren't too difficult to follow. Any knowledge you wish to share would be great. TIA!

[nstillwell]

@ScruffyCurmudgeon Thanks for the very detailed explanation.    Now that I know where I went wrong, can you tell me how to get it right?  First I live in Virginia (non community property state).  In 2019, my husband and I formed an LLC with the intent of purchasing a commercial rental building.  For 2019 and 2020, we had only license and start up fees.  Following the leadership of Turbo and (and my own interpretations),  in 2019, I filed 2 separate schedule C's splitting the startup costs.  In 2020, we only had license fees ($50) and I filed 1 schedule C under my husband's name.  In 2021, we bought a building and I filed 1 schedule C with all expenses under my name, and finally, in 2022 (again interpretating TT differently), I filed 2 separate Schedule C's, splitting the expenses.   Now, for the first time, I am seeing this Community Property State clause!  Can I start this year filing a LLC 1065 and move forward? or should I keep doing separate Schedule C's like I did last year (which by the way did not get kicked back)? or (please say no), do I have to go back and file corrected forms for 2020, 2021, and 2022?