I have a rental property and have previously used Premier. We started an LLC this year and it looks like the home & business product is the one we should use for that. Does the home & business have the rental property stuff in that as well?
If this is your first year dealing with "something new" (such as your single member LLC) then I HIGHLY suggest you use the desktop version of Home & Biz that you physically install on your computer. It's much easier to navigate, and as a first time business owner you'll find the online version to be an absolute nightmare to navigate.
Also, you specifically and explicitely said "We have an LLC". That indicates more than one owner. If that's the case, then you really don't need to get the more expensive Home & Biz version. That's because you can't use any of the personal versions of TurboTax for any kind of business that has more than one owner.
Your jointly owned business will need to file IRS Form 1065 - Partnership Return which is totally and completely separate from your personal return. The partnership will issue each owner a K-1 which each owner will need for completing their personal 1040 tax return. IT does not matter that the owners are married to each other and filing joint. Note also that the partnership return is due by March 15th. Late fees after that dare are $200 per month, per owner. So submit it on the 16th, and you're automatically assessed a $400 late filing fee.
For a partnership/multi-member LLC I would ***HIGHLY*** recommend you seek professional help for the first year of business so that things are set up right in that first tax year. Do it wrong, and when it catches up to you the cost in the form of back taxes, interest and late fees can (and probably will) easily bankrupt your business before it even gets off the ground. I've also provided the below just to start the learning process for you, on all this stuff.
Sole Proprietorship – This is a business with one owner, and only own owner. There are no other investors or share holders. This type of business is considered a “disregarded entity” by the IRS. All income and expenses for the business are reported on SCH C as a physical part of the owner’s personal tax return. Again, a sole proprietorship has only own owner. Depending on what state the business is in, registration is not required at the state level. But it may be required at the county, town, or other level of government below the state. For example, your county may require you to register and obtain a county issued Occupational License, which authorizes you to conduct business only within the jurisdiction of the authority that issued the Occupational License. This is most often required when the county, city or other authority below the state taxes personal income or imposes a tangible property tax on business assets utilized to produce business income.
Single Member LLC - This is a business with one owner, and only own owner. There are no other investors or share holders. This type of business is considered a “disregarded entity” by the IRS. All income and expenses for the business are reported on SCH C as a physical part of the owner’s personal tax return. Again, a single member LLC has only own owner. This type of business is required to be registered at the state level, weather that state taxes personal income or not. Additionally, this type of business may also be required to obtain an Occupational License for the county(s), city(s) or other more localized jurisdictions within that state, in which the business will be operating in.
Multi-Member LLC – This is a business with more than one owner. It’s also the exact same as a Partnership (for tax purposes) This type of business also has to register at the state level, and may also be required to obtain an Occupational License from more localized jurisdictions within the state, in which that business will operate. This type of business will file its own physically separate tax return with the IRS (and state if applicable) referred to as a Partnership Return, on IRS Form 1065. When completing the 1065 (using TurboTax) the business will issue each individual owner a K-1 reporting the income (or loss) of each owner. Each owner will use this K-1 to complete their personal return. So an owner can’t even start their personal return, until after the 1065 Partnership Return has been complete, filed, and all K-1’s issued to all owners.
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, 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 a tax hell, not to mention the problems that can arise with the “new” owner or owners.
LLC “Like an S-Corp” – For tax purposes only (and I reiterate: FOR TAX PURPOSES ONLY!!!!!) one can elect to have the IRS treat their single member LLC or multi-member LLC “like an S-Corp” ****FOR TAX PURPOSES ONLY!!!!!**** This means your business is treated like and considered to be a physically separate taxable entity. This is accomplished by filing IRS Form 8332 – Entity Classification Election. This allows you to act as if your single member LLC or multi-member LLC is an S-Corp. But understand that if you want the IRS to treat your LLC like an S-Corp, then the business “must” act like an S-Corp, and follow all the laws, rules and regulations required of an S-Corp by whichever state your LLC is registered in. All business income and expenses is reported on IRS Form 1120-S – Income Tax Return For An S-Corporation. The S-Corp will then issue each owner, investor and/or shareholder a K-1 which they will need before they can even start their personal tax return. Unlike a single member LLC which is considered a disregarded entity for tax purposes, an LLC that has filed form 8332 – Entity Classification Election “is” considered and treated like a separately taxable entity.
S-Corp – This type of business is registered at the state level and must conform to the laws, rules, regulations and ordinances of that state which apply to an S-Corp. All business income and expenses is reported on IRS Form 1120-S – Income Tax Return For An S-Corp. The S-Corp will then issue each owner, investor and/or shareholder a K-1 which they will need before they can even start their personal tax return. Unlike an LLC which is considered a disregarded entity for tax purposes, an S-Corp “is” a separately taxable entity, and therefore files its own physically separate tax return and issues K-1’s to all owners, officers, investors and shareholders.
C-Corp - This type of business is registered at the state level and must conform to the laws, rules, regulations and ordinances of that state which apply to a C-Corp. All business income and expenses is reported on IRS Form 1120 – Income Tax Return For A C-Corp. The C-Corp will then issue each owner, investor and/or shareholder a K-1 which they will need before they can even start their personal tax return. A C-Corp “is” a separately taxable entity, and therefore files its own physically separate tax return and issues K-1’s to all owners, officers, investors and shareholders.
Additional Information For Rental Property Owners
Occasionally a rental property owner will be “convinced” they need to put their rental property into an LLC (be it single owner or multi-owner LLC) as a means of protecting themselves and their personal assets from legal litigation should they ever be sued by a tenant. The property owner is told the LLC gives them and their personal assets a “veil of protection” from any legal litigation that may arise as the result of legal actions perpetrated by a rental tenant. Nothing could be farther from the truth. If you check court records (even in your local area) you’ll probably find numerous cases where a tenant sued their landlord and the LLC provided practically no protection of the property owner’s assets. That “veil of protection” supposedly offered by an LLC is so thin, even a new first time lawyer has no problem piercing that veil and attacking the personal assets of the property owner on behalf of the tenant. There are other problems and issues with this too.
In order to legally transfer ownership of rental property to an LLC, the owner must have the permission of the mortgage holder. No lender in their right mind will give this permission either. Even if you think you can refinance the property or “sell” it to your LLC, unless your LLC has the cash on hand to pay for it in full, your LLC will never qualify for the mortgage loan. The lender doesn’t want to risk your LLC going under (by filing bankruptcy for example), and they lose money because of it. So I’m confident in telling you, that’s not going to happen.
When you create an LLC for your rental property, it’s generally understood that business income gets reported on SCH C as a part of your personal tax return. However, a SCH C business produces “earned” income, and a rental property produces “passive” income. What’s the difference?
Earned income is income which you have to do out and “do something” in order to earn it. This income is subject to regular income tax, and also an additional 12.6% self-employment tax. The SE tax is basically the employer side of your social security and Medicare. But rental income is not “earned” income, and therefore is not reported on SCH C. So if you create an LLC for your rental property, then absolutely nothing concerning that rental property will be reported on SCH C. Not one penny of rental income and not one penny of rental expenses.
Rental income is “passive”. That’s because all you do with rental property on a recurring basis is just “sit there” and collect the rent every month. You are not “doing anything” to “earn” it on a recurring basis. That’s why rental income is reported on SCH E. Rental income is subject to regular tax, but is NOT subject to the additional self-employment tax. This means that rental income DOES NOT COUNT for your social security account or Medicare contributions.
SO if you create an LLC for your rental property, there are
two things that will NOT happen.
- You will not be able to “legally”
transfer ownership of the property from you, to the LLC unless you have a
really dumb lender.
- You will not report one penny of
rental income or one penny of rental expense on SCH C.
So in the end, you will be filing a zero income/expense SCH C with your personal tax return.
Now let’s say you decide to file the 8832 to treat your LLC like an S-Corp, and then you transfer ownership of the property to your LLC. You can and will report your rental income on SCH E as a part of the 1120-S Corporate Return, and you will also report the K-1 on SCH E as a part of your personal tax return. But keep in mind that this is for ***TAX PURPOSES ONLY!!!****. So if a tenant sues you, I seriously doubt the courts will recognize your S-Corp, and I seriously doubt the court will recognize the S-Corp as a physically separate owner of the property. Remember, that 8832 Entity Classification Election is for “TAX PURPOSES ONY”. It has no weight at all for any and all other legal purposes – such as you being sued by a tenant.
SO if you want to do this (and it still makes no financial sense) then form an actual S-Corp and transfer ownership of the property to the S-Corp. More than likely the lender won’t allow the transfer. But you can sell the property to the S-Corp if the S-Corp can qualify for a mortgage loan. Overall though, it’s still financially dumb to do this. Here’s why I say that.
When you move out of your primary residence and convert it to residential rental real estate, you have to convert your homeowner’s insurance policy to a rental dwelling policy. Or if you buy the real estate as rental property outright, then you have to obtain a rental dwelling policy at that time. A rental dwelling policy will, at a minimum, include $300,000 of liability coverage. For most that will suffice. But if the property is in certain areas of the country you may want more liability coverage. I have three rentals myself and have a total of $1,000,000 of liability on each. It cost me less than an additional $100 a year on the insurance for each property. So for me, it’s worth it. It’s also significantly cheaper not only in money, but in time spent dealing with corporate taxes and all that other additional paperwork crap.
One mistake I see quite often is that when an owner converts their primary residence or 2nd home to rental property, and they fail to update their insurance policy. This can bite when you have a claim. If the property is insured as your primary residence, but you are using it as rental property (which is other than it’s insured use) don’t be surprised when the insurance company denies your claim, and you can’t find any lawyers that will take your case. If it’s a case of you being sued by a tenant, then to be honest and put it bluntly, you’re screwed.
Thanks for the quick responses. I guess I need to clarify my initial question.
The LLC is a Single Member LLC in my wife's name (it is for a small side business that she has). I used "We" because we will be filing jointly on our return.
The rental property is owned by my wife and I outside of the LLC.
From reading through the comments, it sounds like we still need to move up from the "Premier" version to the "Home and Business"version?
The Desktop version of Premier has all the same forms and capabilities as the desktop version of Home & Biz. The H&B version just offers more in -program help is all.
If "we" is a partnership, you will need to use TurboTax Business (Not Home and Business) to file a 1065 partnership return that will generate K-1's to enter into your personal return. This also applies if "we" is a married couple in a state that is not a community property state.
If you are a married couple in a community property state, then Premier would still work if you are not considered Real Estate Professionals. If you are considered Real Estate Professionals, then you would need Home and Business which covers rental as well as Self-Employment taxes.
You would need Premier to enter your K-1's then.
Question...
I own an LLC and my condo is in the LLC name. Do I file this under a schedule c for rental income or a k-1 for business income?
I own an LLC and my condo is in the LLC name. Do I file this under a schedule c for rental income or a k-1 for business income?
Residential Rental income is reported on SCH E *no* *matter* *what*. There are no exceptions.
If your rental activity is reported on a K-1 from some type of other business entity that files it's own physically separate tax return, then when you enter the K-1 on your personal tax return everything will show on on page 2 of the SCH E.
If the LLC is owned by an individual, single member LLC or sole propietorship, then everything is reported on page 1 of your SCH E. Under no circumstances and with no exceptions is one penny of residential rental income or expense reported on SCH C. There are no exceptions.
So if rental property is the only thing your SCH C business owns, you have no need to even bother filling out the SCH C.
Did you not read the above maybe, that pertains to "additional information for rental property owners" in this thread?
Very thorough reply! Does the below choice of TT Home & Business (v Business) seem correct?
For a single owner LLC, therefore, the Home & Business version of TT is sufficient? I also file 3-4 other returns for my mother/brother/son - so I want one that does both - allows personal returns but also anything special for an LLC.
I originally was going to purchase
Intuit - TurboTax Business Federal + Efile 2020 (1-User) - Windows
But it sounds like the below is sufficient?
Intuit - TurboTax Home & Business Federal + Efile + State 2020 (1-User) - Mac, Windows
Yes. TurboTax Home & Business will handle a single member LLC (SMLCC) since it is filed on Schedule C. You will also be able to returns for others.
The TurboTax CD\Download versions include up to five (5) free federal e-files and one state download. You could e-file more than five (5) federal income tax returns but there is an e-file fee.
You could purchase additional states as needed. The e-file fee for the state is not included.
You can do as many paper income tax returns and as like but once again, after the five free e-files, you will have to pay for e-filing or mail the additional ones. More information can be found here.
I was a bit tempted to buy the pure business version - but see that it's more for multi-member LLC's and other corporate structures. Thanks!
That is correct. Turbo Tax Business will not handle any personal tax returns so you made the right choice. @AMMunson00
one final somewhat related question... I see TT/Home&Business at Sam's and Office Depot with a different list and net price - confused on whether or not these are the same product? Any insight?
https://www.samsclub.com/p/turbo-tax-home-and-business-2020/prod24960528?xid=plp_product_2
sells for $64.88
https://www.officedepot.com/a/products/4908927/TurboTax-Desktop-Home-Business-Federal-E/
sells for $84.90
The products are identical. Sam's Club is a discount warehouse and Office Depot is retail.
Also, the price difference may be due to a state return being included in one but not the other. If you need a state return, look for a product that includes state. The cheaper one probably says ''state additional''. Keep the state in mind when shopping! @AMMunson00
They do appear to be identical packaging, slight different product number - but I do know that Sam's does that to avoid comparison shopping.
The list price and discount seem off - but if they are identical that's all I need. Thanks.
Thanks, they both have identical packaging and don't mention your comment - I will look closer. thanks.
I have a Partnership ( 3 members) with just 1099 Investment Income that I need to file a return for with the associated 3 K-1s. My tax account retired and was hoping to do on my own.....what is the best product for me to purchase to complete along with my personal returns??
Thoughts Suggestions??
Mark 257
Please visit our product comparison page where you will see a description for each TurboTax product offered online and for desktop along with the pricing. If you are unsure which product is right for you, click: Help me choose. From there you can tell us about your situation and we'll recommend the right tax solution.
Can turbo tax business be used to file 1040 as well
what is the person is having W2, 1099misc and 1065 (from rental multimember llc) ?
TurboTax Business does not handle the preparation and filing of personal returns. You would need TurboTax Home & Business or any other version of TurboTax, in order to prepare and file your individual tax return Form 1040.
Thank you for the great information..very helpful.
I do want to clarify for my situation:
I have a LLC with a full paid property (paid cash, no lender) as a rental property. I understand that I must report the rental income on the Sch E and the rental expenses.
However, for all the improvements, furniture, etc., that I purchased for the property to get it 'rental ready', I was reporting on Sch C.
Is that correct? Or do I list everything as rental expeses?
An LLC with only one member is a disregarded entity and you would file everything on the Sch E unless you are providing substantial services, then you use Sch C. Schedule C is also used for renting personal items as a business, like your car or boat.
An LLC with more than one member is a different story. If you are married and in a community property state, you can still file the sch E. Otherwise, you are in a partnership.
See:
IRS LLC - classifications
Can I use the Sch C to list depreciating business assets, i.e., everything that I purchased for the property (Funiture, appliances, etc.)
Also, list utilities, repairs, improvements, etc..
Assuming you are a single-member LLC and filing on Schedule E, all those items are indicated on Schedule E and in the Rental topic in TurboTax as an expense/asset.
List each of the appliances/furnishings separately as an asset with the cost for each that you paid. You will be asked the date you acquired each and you will be asked the date you put them into service. The date you put them in service can be no earlier than the date the property was offered/available for rent. On the other hand the date acquired could be before the date available for rent.
Once you put them into service and assuming you did not use the property for something else after that date in 2023, be sure you indicate that the business use was 100%.
The other asset you will need to list is the property itself/with improvements. Your tax/purchase paperwork should have a breakdown of the cost for building and the land. You will be asked to separate out the two costs; the land cost is not depreciable.
Any improvements to the property like an add-on room/new roof, prior to putting it into service (available for rent), you add to the cost of the property. Again you will be asked the date you acquired and the date in service (available for rent). If, for example, you gutted the property and remodeled, then the whole project is a cost that is added to the cost of the building and acquired prior to the in service date.
Any improvements made after the date in service are listed as a separate asset.
Also, once you put them into service and assuming you didn't use the property for anything else after that in 2023, be sure you indicate that the business use was 100%.