FILING 1065

[J K]

I HAVE A SMALL LLC WITH A EIN TO PROTECT OUR SS#s. THIS LLC IS A PARTNERSHIP OF MY WIFE AND I, FORMED IN 2018, KNOWING THAT WHEN I RETIRE I WOULD LIKE TO KEEP GOING IN SOME FORM. THE FIRST YEAR OF OPENING, I FILED THE 1065 AND K1 FOR BOTH MY WIFE AND I COMPLETED WITH 0'S AS NO BUSINESS WAS DONE. LAST YEAR THE IRSSENT A PENELTY NOTICE FOR FAILING TO FILE, BUT REMOVED THE PENELTY AS THEY SAW THAT I DID 0 BUSINESS. NOW I AM NOT SURE IF I AM NOW CONSIDERED "DISREGARDED ENTITY OR NOT, AS ALL PROFIT EARNED BECOMES OUR PERSONAL INCOME. CAN YOU ADVISE?

[JulieS]

Yes, the Limited Liability Company is always a disregarded entity for taxes. That just means there is not a specific tax form to file.

If you are a single member LLC, you can choose to file or not file a return if you have no income. An LLC with more than one member is considered a partnership and is expected to file a 1065 each year.

If you live in a community property state, you can choose to be a single member LLC and file on Schedule C, or not file at all, if no business is done.

The community property states are:
    • Arizona
    • California
    • Idaho
    • Louisiana
    • Nevada
    • New Mexico
    • Texas
    • Washington
    • Wisconsin

If you don't live in one of the states above, you will need to file a 1065 Partnership return, unless you elect to be a S-Corporation (1120-S) or a C-Corporation (1120). 
 

[Opus 17]

@JulieS 

@J K 

"If you live in a community property state, you can choose to be a single member LLC and file on Schedule C, or not file at all, if no business is done."

Not quite.  If an LLC has only two members who are spouses and you live in a community property state, you file 2 schedule Cs, one in the name of each spouse, each one listing half the income and half the expenses. 

Otherwise, you file a 1065 as you have been.

If you have no business activity, you don't need to file, but as you found out, the IRS may come knocking.