NJ: Married Filing Jointly With New Rental Properties (split between Sch E and 1065/K-1?)

[TMOBV]

Hello,

My wife and I are filling jointly with TT Home & Business in NJ. We created 2 partnership LLCs in NJ. We obtained 2 rental properties in NJ last year.

• Unit 1: ownership starting Jan 2021; deed transferred to our partnership LLC #1 in June 2021.
  • Should the Unit 1 rental income be split between personal/Schedule E (Jan-June) and 1065/K-1 (July-Dec)?
• Unit 2: ownership starting June 2021; deed not yet transferred to our partnership LLC #2.
  • So, no need to file 1065/K-1 for Unit 2 yet, correct? (just report via perosnal/Schedule E?)

Thanks in advance for your advice and help.

[RobertB4444]

You are exactly correct on how to enter all of this.

[TMOBV]

Thank you for confirming!

From a quick search, it seems we can file the federal 1065 manually and mail in by 3/15, and file the NJ 1065 in the same way (or on their website I think). Are there any drawbacks to this?

(We have to review the forms in detail, and then may circle back for additional guidance if we run into trouble interpreting any fields.)

[DaveF1006]

No. I don't see any drawbacks to this other than the processing times for the returns may be slow. Do reach out to us anytime if you have additional questions or concerns.

[Rick19744]

Last statistic I saw it indicated that the IRS has 10 million tax returns in backlog for paper filed returns.

And this does not include any of the returns send in for 2021.

I would not recommend filing a paper return.

If you do, make sure it is sent certified mail return receipt requested.

A snippet from BNA:

The influx of attention on the backlog comes as the IRS began this filing season with a close to 10 million unprocessed returns from previous years, compared to fewer than 1 million in normal years.

[TMOBV]

Thanks for the flag and statistics regarding slower (much slower) processing by IRS.

Follow-up queries:

1) If we only  file the 1065 (federal and NJ) by paper/mail, will that subsequently impact the processing of our personal tax filing which will be electronically filed.

2) If we do opt to e-file the federal and NJ 1065s, what are our best options (website[s] or software[s]) for each?

[TMOBV]

Hello, just checking if anyone has any insights/guidance for my follow-up queries?

[RobertB4444]

@TMOBV  To follow up:

1) It could.  If you have numbers on your electronically filed personal return that derive from the paper filed 1065 then there could be a delay while the IRS figures all that out.  Or your personal could just whiz through.  The current processing year is a little bananas.

2) TurboTax, of course!

[TMOBV]

Many thanks, @RobertB4444!

And thanks for all of the insights and advice, everyone!

[TMOBV]

Follow-up question for Unit 1 (reminder: ownership starting Jan 2021; deed transferred to our partnership LLC #1 in June 2021), for which we have split the rental income between personal/Schedule E (Jan-June) and 1065/K-1 (July-Dec).

• We have filed our 1065 and have the K-1.
• In our personal filing Schedule E/personal assets, we've only entered the expenses pertaining to Jan-June
• But how do we input that the property was transferred to our LLC?
• ie, so that TT adjusts the scheduled depreciation for 2021?
• and stop accounting for depreciation in 1040-Sch E moving forward? (as we'll get that depreciation amount on the 1065/K-1)

Thank you!

[TMOBV]

Updated question to the above follow-up post above:

1. Under Assets/ Depreciation > Property Assets > Edit> "Did you stop using this asset in 2021?" > I selected Yes
2. Entered "Date of Sale/Disposition" as "June 2021"
3. Selected No for "Special handling required?"
4. Selected No for "Was this asset included in the sale of your main home?"
5. Did not enter any amount for "Sales Price" or "Sales Expense" fields
6. The depreciation amount for 2021 shows up now as half of what it was before.
7. The next page states "You have a loss of [near-original purchase price of unit] on your disposition of Residential."

Please confirm if the above steps are correct to adjust this year's depreciation amount? (it seems so)

Please confirm if step #5 (and resulting note in #7) are correct? ie, this asset will not carry over into the 2022 filing.

• (But should we enter the [near-original purchase price of unit] as the "Sales Price" to zero things out, even though this was not a sale?)

Thank you!