Hello scotthomson1:
The correct answer to your question is something other than what you are probably hoping to hear; but it is the truth. If you ask any reputable CPA, Enrolled Agent, attorney, or experienced tax preparer, they will tell you essentially the same thing.
First of all, your multi-member LLC (which is multi-member because there are two of you), is generally regarded as Partnership for income tax purposes. Thus, you will need to file a Federal Form 1065 (Partnership) tax return. As you also do business in Oregon, you will need to file the companion state of Oregon (Partnership) tax return, which is known as Form OR-65.
No actual income tax is typically due with the filing of these Partnership tax returns; instead Partnership income, gains, losses, and other tax attributes become "flow-through" or "pass-through" items, taxable to the individual Partners (which in this case are the two LLC members, you and your son). The tax document used to identify these tax attributes to the Partners is known as a Schedule K-1 (for Form 1065).
The Schedule K-1 (for Form 1065) is thus how you would actually, mechanically, input your LLC's income, gains, losses, etc. into the tax return for an individual person, Form 1040. This Schedule K-1 will further indicate how much of your LLC's income is Oregon-source (i.e., taxable by Oregon), and how much is due to business activity in Washington (i.e., not taxable by Oregon). I believe that is what you mean by the phrase "file for the income we earned in Oregon."
Moreover, depending on where you worked in Oregon, there may be additional local taxes and forms to complete as well. Among others, these could include the City of Portland / Multnomah County business tax, the Lane County LTD tax, or the TriMet metropolitan area business tax.
There is no (legal) shortcut to this process and all of these several tax forms.
In the TurboTax family, to complete all of this properly, you would need to use at least Premier (or Self-Employed, which is also known as Home & Business) for your personal tax returns, as Premier (and above) are the only versions that can handle the input of Schedule K-1.
On the LLC (entity) side, you would need to use TurboTax Business, to generate the federal Form 1065 and two Schedules K-1. Unfortunately, Oregon Form OR-65 is not available at all in TurboTax, and so you would need to complete that tax form manually, outside of the program entirely.
Therefore, because of the significant level of tax preparation difficultly involved, and the potential government penalties for not doing things correctly, you are strongly encouraged to use a professional tax service of some kind for at least your LLC tax returns. Once you have the necessary Schedules K-1 in hand, then you (and your son, as well) should still be able to complete your personal tax returns in TurboTax, if you so desire.
Thank you for your attention; and again for asking this important question.
