Transferred rental properties under LLC. Where do I record income when income was reported with LLC Tax ID?

[jbpratt]

My wife and I started a single member LLC and placed our rental properties underneath the LLC in 2016. Our property manager sent us a 1099-MISC reporting rental property income under the LLC's Tax ID. Under Schedule E, I am unable to report income under the LLC's Tax ID. Do I still report income under Schedule E? Or do I need to report rental reported under the LLC's Tax ID under schedule C?

[Carl]

"My wife and I started a single member LLC" Not possible. If two of you are listed as owners of the business, that's a multi-member LLC that files an IRS Form 1065 partnership return. So before we can be *sure* of providing you a definitive response, we need to know without a doubt, what you have here.

[jbpratt]

To clarify, we live in a community property state. When we formed the LLC and submitting the paperwork for the LLC Tax ID to the IRS, we selected to be treated as a disregarded entity - sole proprietorship.

[Carl]

The fact that you live in a community property state still doesn't matter "at this point" in our discussion. (It might later, but not right now.). Are both of your names listed as the registered owners of the business?  If only one is listed, this it's a single-member LLC owned by one person, and one person only. If that one person is married in a community property state, it's "still" community property of course. But "how" you file this with the IRS on the federal side is directly dependent on if it's solely owned by one person, or if jointly owned by two people married to each other.
So, I you were to tell me your state and the name of your business, and I were to look it up on your state's Division of Corporation's website, who's name or names will I see listed on your public filing? Yours only? Or both of you?

[jbpratt]

We are both listed as the owners of the LLC.

[Carl]

Great! You'll need to report all your rental income & expenses on a 1065 Partnership Return. For this, you need a different program that is not available as an online product, or for MACs. It's for windows only. The partnership will then issue each partner a K-1 which will then be used when you complete your person (joint) 1040 tax return. You have to complete the Partnership return, before you can even start your personal joint return.
For the partnership return you need  the TurboTax Business program, which is different from Home & Business. Get it at https://turbotax.intuit.com/small-business-taxes/  As a side note on this, I've seen it cheaper (around $109) at local stores like Wal-Mart, Target and the such, if you want to go that route.
TurboTax Business is for preparing a tax return for a non-breathing, non-living taxable entity such as a multi-member LLC like you have, as well as Partnerships, C-Corps, S-Corps, Estates, Trusts, and a few others. TurboTax Business can not be used to file any type of 1040 personal tax return.

[gjstan0071]

Hello, I came across this response and I have the same original question but in my case I am a single member LLC. Our property manager sent us a 1099-MISC reporting rental property income under the LLC's Tax ID. Under Schedule E, I am unable to report income under the LLC's Tax ID. Do I still report income under Schedule E? Or do I need to report rental income reported under the LLC's Tax ID under schedule C?

[AliciaP1]

Yes, if you are operating a single-member LLC that is providing rental services, you need to complete a Schedule C.

See How do I report income from self-employment? and What self-employed expenses can I deduct? to help you report your self-employed income.

[Tchelo]

Hi:

Similar issue here. Me and the wife own a rental property LLC, and we are both listed as members.

- The LLC is formed where the property is: WV (a non community property state). But we live in TX (a community property state.

Turbo Tax is prompting me to report revenue and expenses on Schedule E, but I am hearing that we probably need to file form 1065 instead?

Thanks for your help!

Marc

[Carl]

@Tchelo you got two choices here. You can complete a 1065, which for 2021 is late. The late filing fee is $205 per owner, per month. So that's $410 so far. After April 15th that rises to $820. If the only thing owned by the LLC is the rental income, then you can just report it on SCH E as a part of your personal JOINT tax return.

Take note that with the 1065, the rental income/expenses gets reported on form 8825. Then the partnership/multimember-LLC issues each member a K-1. When the information from each K-1 is entered into your personal 1040 tax return, the information ends up on page 2 of the SCH E.

Basically, with long term residential rental property, it gets reported on SCH E no matter what.

[Tchelo]

@Champ: Thanks much, that is music to my ears. I suspected I had a choice, but wasn't sure which triggered the community property clause and disregarded entity filing option: The residency state or the state in which the LLC is formed. I suspect the former, not the latter? 

Meaning, if I lived in WV, I'd have to file 1065? Just so I understand and can articulate if the IRS comes after me looking for a 1065 filing.

Thanks again,

M.

[Carl]

but wasn't sure which triggered the community property clause and disregarded entity filing option:

Your state of residence determines that. Nothing to do with where the property may be located.

If the property is located in a state outside of your resident state and taxes personal income, then you'll need to file a non-resident tax return for that state.

In such a case, it's important to complete your resident state tax return *LAST*. That's the only way the program will "Know" to give you credit in your resident state, for any taxes paid to a non-resident state - assuming your resident state taxes your personal income also.