Can I still report income/expense under LLC (that my wife and I own) even if I used personal account for the most of transfers last year?

[tugisuwon]

We were not smart managing our business and personal account last year :( Please help us to file the tax correctly while potentially receiving some benefits with business expenses.

[Bsch4477]

While it is good business practice to keep your business and personal accounts separate you report income and expenses as usual on Sch C. 

[BillM223]

Yes, you can report business income and expenses, even if made from your personal account.

However, you should immediately create a business account and do all business transactions through it instead, because doing business from your personal account will lead to all sorts of confusion and possible difficulties in an audit (i.e., "was that really a business expense?").

It may be that you report your business using Schedule C on your joint 1040 tax return. If you have specific questions, come back to us with the questions, or look into TurboTax's offers of expert assistance or we even do the return for you.

Hover over "File with expert help" near the top at TurboTax offerings to see the descriptions of expert help.

[Mike9241]

sorry to bring this up but if both you and your wife were engaged in the business and did not live in a community property state and did not elect to be treated as a Corporation, you have a partnership that requires filing form 1065 which for 2022 is now about 10 months late. With two partners that's about $4,000 in penalties. you may want to use a pro to properly prepare the return and later then can request that the penalties be waived which the IRS usually does for first-time late filers.  you need the partnership K-1s to report the business income/loss on your 1040.

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if you elected C-Corp status then an 1120 (not 1065) was required to be filed by 3/15/2023. this will not affect your 1040. 

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if you properly elected S-Corp status then an 1120s (not 1065) was required to be filed by 3/15/2023. the penalties for late filing are about the same and again you need the k-1s to properly report profit or loss on your 1040.

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i strongly recommend you consult with a pro to get advice on business record keeping and other things yo ned to do 

[tugisuwon]

First of all, thank you so much for your reply. I have some follow up questions if it is ok with you.

It was my wife making all the money last year while we both own the LLC. Does it still consider to be partnership? I will definitely take advice from experts from turbotax when completing the tax return. Thank you again for your detailed response.

[InibeheA]

It depends, if your LLC is in a community property state you can choose to file as one entity (on a schedule C) or file as a Partnership return. If the LLC is not in a community property state then you will file a Partnership return.
 

There are nine community property states which are, Wisconsin, Washington, Texas, New Mexico, Nevada, Louisiana, Idaho, California, and Arizona.

For more information, please see Joint Ownership of LLC by Spouse in Community Property States

@tugisuwon

[Opus 17]

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@tugisuwon wrote:

First of all, thank you so much for your reply. I have some follow up questions if it is ok with you.

It was my wife making all the money last year while we both own the LLC. Does it still consider to be partnership? I will definitely take advice from experts from turbotax when completing the tax return. Thank you again for your detailed response.

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If "we own an LLC" means you registered the LLC in both your names, then you are bound by the laws that apply to multi-member partnerships, no matter who did the actual work.

If you live in a community property state, a 2-member LLC where the only members are spouses will file as 2 schedule C companies, one in each spouse's name, and each spouse reports half the income and half the expenses, regardless of who did the actual work.

If you do not live in a community property state, the LLC must file a form 1065 partnership tax return.  This is due March 15, not April 15, and the penalty for late filing is $200 per month per partner (unless you request an extension).  To file a 1065 with Turbotax, you need Turbotax Business.  This is a separate program from the personal versions of Turbotax (Deluxe, Premier, Self-Employed) and Turbotax Business is only available on a CD or download to install on a PC, there is no Mac or online version.

When you prepare the partnership 1065, you will also prepare a K-1 statement for each partner that is reported on the partner's personal tax return.  (If you file married filing jointly, both K-1s will go on your joint personal return, along with any other income, personal deductions, dependents and credits.)  The partnership allocates the income and expenses of the partnership to the partners on the K-1s.  I don't know if you can use something other than a 50/50 allocation, it depends on the partnership agreement and may possibly also depend on tax laws that I am not familiar with.  

You may want to see an accountant this year.  They can teach you how to do it correctly going forward.