I found out because we did a 1031 exchange and had to fill out the W9 as a partnership. I argued with the 1031 company and realized my mistake. We have never filed under the LLC but have paid all the taxes under our joint tax return.
What state are you in? A husband and wife LLC in a community property state can be treated as a disregarded entity, which is what you have been doing. If you are not in a community property state, a husband and wife LLC has to be treated as a partnership, and has to file a Form 1065 partnership tax return.
A pass-through entity is not the same as a disregarded entity. (That might be what confused you.) A partnership is a pass-through entity, not a disregarded entity.
Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
@bboggess76 wrote:
I found out because we did a 1031 exchange and had to fill out the W9 as a partnership.
Everything posted by @rjs is 100% accurate, but did you ever apply for an EIN for the LLC, @bboggess76?
If not, the IRS was almost certainly never expecting an income tax return (Form 1065) from the LLC and exactly what tax ID number did you enter on the W-9?
Regardless, if you did not hold the interest as community property in a community property state, you might want to consult with a tax professional, in person.