Hello. I'm hoping someone can help answer my questions. I'm running into conflicting information. My husband and I have run a partnership since 2000 and have always filed a 1065 with corresponding K1. I'm tired of doing the 1065. The IRS keeps separating our K-1 and sending nasty notices about late info filing. They have always been attached. I'm fighting them now over $4K in penalties because of this and had to appeal a denial. I've read about just reporting the income/expense on our jointly filed 1040 with 2 Sch. Cs allocating the share of ownership (90/10). My husband does materially participate.
I filed an extension for our 2022 1065 and have just now read about doing this QJV. Our 1065 is due the 15th. Is it possible to just amend our 2021 1065 as a final return and then file all of the 2022 partnership information on our 2022 1040 using the schedule Cs?
I've read we can just elect to do the QJV on our 1040 and if we get a letter from the IRS saying we failed to file our 1065 that we just need to call or mail them a letter stating the income is reported on our joint 1040.
Is it really this simple or am I missing something? We are in Texas. We do have one employee that we pay wages to and report with our partnership EIN. I've read that I need to get a new EIN for one of us to continue reporting taxes and link it some how to our partnership EIN.
Any feedback greatly appreciated.
@6racerd9 My husband and I have run a partnership since 2000 and have always filed a 1065 with corresponding K-1. The IRS keeps separating our K-1. this sounds like you filed a partnership return with one joint k-1 which is wrong. each partner needs to receive a separate k-1 splitting the items 90/10
sort of like H 90% W 10% or even H&W 90% and W&H 10%
as for amending 2021 i would say no - since you filed an extension for 2022 telling the IRS the partnership existed and its assets are evidently still held in the partnership name. I would also say you need to file a1065 2022 and then for 2023 unless you meet the test to be a QJV and distribute the assets out of the partnership. a final return would then be due for 2023 3-1/2 months after the end of the month in which all the assets were distributed.
as to converting to a QJV this requirement among others must be met but it seems that you meet the other requirements because you two are the only members/partners
(2) both spouses materially participate in the trade or business
there are seven tests for this, both spouses need to satisfy one of these tests but they don't have to be the same
- Test one: Participation for more than 500 hours.
- Test two: Activity that constituted all participation substantially.
- Test three: Involvement for more than 100 hours and no less than the participation of any other individual.
- Test four: Which is a significant participation activity, combined with all significant participation activities, for more than 500 hours. A significant participation activity is a business in which the taxpayer participates, without qualifying for any of the other six tests, for more than 100 hours.
- Test five: Participation during any five of the preceding ten taxable years.
- Test six: Which is a personal service activity for any three prior taxable years. Personal service activities are activities in which capital is not a material income-producing factor, such as health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting.
- Test seven: Partaking for more than 100 hours and based on all the facts and circumstances, on a regular, continuous, and substantial basis.
I am not a lawyer so you may want to see one regarding dissolution of the partnership and converting to a QJV if it is done. your state may have certain requirements that must be met.
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