How to report 1099-INT interest income received by an LLC taxed as a disregarded entity?

[DDT1345]

For the benefit of the group. Here is a scan of the letter I received (Form CP2005).

[pnored]

@DDT1345  Glad things worked out for you! I reported on Sch C and probably shouldn't have since I don't loan money.  Im planning to report on Sch B this year and get this corrected for the future. If it takes 3 years for them to find, Im looking forward to my IRS letter. NOT!  My interest was next to nothing (like $10) so maybe that will not trigger anything. I can be hopeful!!! 🙂

Parrish

[ML1000]

Confused by your answer.  We have this situation.  1099-int was issued to the LLC TIN.  Which schedule on the 1040 should we enter the 1009-INT amount? B or C? Rental property.  No where to enter on Schedule E.  Thanks

[PatriciaV]

If you are reporting the LLC Rental Activity on your personal Form 1040 tax return, you have two options:

1. If the amount of interest is not significant, report the Form 1099-INT under the interest topic without any adjustment.

2. If your rental property qualifies as a trade or business, and the amount is significant to your net rental income, then you can include the interest income on your rental Schedule E. Your best option is to include the interest from Form 1099-INT as additional Rental Income.

For the second option, to show that you are reporting Form 1099-INT, enter the information under 1099-INT topic. 

1. Look for the screen "Tell us if any of these uncommon situations apply." 
2. Choose "I need to adjust the taxable amount". 
3. Show the entire amount as the adjustment (positive number) and choose "other reasons."
4. Both the 1099-INT income and adjustment will show on Schedule B (net $0 on Sch B), satisfying the IRS requirements.

However, if the LLC is filing a separate business return (corporation or partnership), enter the 1099-INT under the interest income topic for the business return.

@ML1000