is Self-employed LLC owned by joint living trust disregarded entity?

[kk603]

Hi, 

I do the consulting work through my LLC which is owned by our Family (jointly by me and wife) living trust. For the Federal tax filing purpose, can both me and my wife just report the income from LLC on 1040 schedule C? Asking this because Since LLC is only owned by Joint Family living trust, which is basically a single member LLC and is disregarded and since Living trusts are disregarded as well and all the income passed to trustors and reported by trustors while living. 

Should we just file 1040 with schedule C income for both me and wife or should we also need to file either 1045 or 1065 with k-1 issued to us?

Thank you!

[Anonymous_ · Accepted solution]

You can use an optional method of filing for the trust where you do not need to file a 1041. 

See https://www.irs.gov/instructions/i1041#en_US_2022_publink1000286020

There is no need to file a 1065 since the LLC is a single-member LLC.

[kk603]

@Anonymous_  - Thanks for the quick response and for that IRS site link. It really cleared my confusion.

I have one last question on this topic, during this year, only i participated/worked through LLC and generated income, when we file the taxes jointly, should we both me and wife report self employment income from LLC equally or can i assign full self employment income to myself and 0 for my wife?  

Thanks

[Anonymous_]

In that event, you could indicate that the LLC (disregarded and reported on Schedule C) income is your income only.

[kk603]

@Anonymous_  yes, that makes sense. Thanks for all the responses. 

[kk603]

Hi @Anonymous_ ,

Sorry to bring this old discussion back up again. Just wanted to get a suggestion on the same topic. 

This year in 2023, both myself and my wife worked actively and earned income from LLC (owned by our Family Trust as single member LLC)  in the 60/40 ratio respectively.  When we file joint return for 2023, can we both use separate schedule C forms with 60/40 split or do we have to file the LLC income as partnership income with k-1 forms?

Thank you!

[Anonymous_]

Yes, assuming the trust is a disregarded entity.

[kk603]

Hi @Anonymous_ ,

Thanks for the very quick reply. yes, trust is revocable trust and is disregarded entity. So basically we both jointly report any income from the trust on our taxes. Thanks for confirming that we can file two separate schedule C forms with our share income reported on our respective forms.

Thanks again.

[Siding2023]

I came across this thread and wanted to inquire about this as well. Our LLC was formed as a single member LLC with our revocable living trust as the sole member. My spouse and I are the two grantors/trustees of the RLT. I was advised that since we were 50/50 trustees, we had to file a partnership return. Is this not the case? 

[Siding2023]

@Anonymous_ 

[BillM223]

Are you in a community property state? Only spouses in a community property state who share in the operation of the LLC can treat it as a disregarded entity. Please see this IRS webpage.

@Siding2023