Not sure that @TTDavid fully addressed your question.
As noted in TTDavid's response, the general rule is that a husband and wife owned LLC would require the filing of a partnership tax return form 1065; which is how you handled it previously.
There is an exception to the general rule for husband and wife owned LLC's in community property states. If you are the only owners, then you are able to report the activity on your 1040 Schedule C.
The question is now, how to make the change. Do you:
- Just file a Schedule C this year and move forward, or
- Do you file a form 1065 this year and mark it final and use the Schedule C next year
There are pros and cons for using a 1065 vs Schedule C. Using a 1065 provides for SS (earned income) to be allocated to both taxpayers. This could increase the SS tax paid, but could provide more SS income at a later date.
Should you decide to file the Sch C, some commentators believe a final form 1065 is not required based on the discussion in the form 1065 instructions regarding qualified joint ventures. Not filing a final 1065 could generate a notice from the IRS; which could be addressed in a response letter but not positive where the IRS will land on this question.
So bottom line, to be conservative, you may want to consider filing the 1065 this year and mark it final and close the loop with the IRS.
And finally, do not file the form 8832.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
