Single-Member LLC and 2009 Payroll

[JCH]

Can anyone direct me to information about this new law? I'm very confused. I have a few clients who are disregarded entities, filing Schedule C as a single-member LLC. Does this mean that I now have to file quarterly 941's for them in 2009 and Schedule SE won't work? Thanks.

[John of PA]

No payroll required

Actually nothing changes, they still keep filing Federal Taxes exactly the way they always have using Sch C and SE, no payroll needed for the owner. State law may require a state franchise or corporate type tax be filed in additional to the State Sch C. In PA, a one person LLC files the Fed and State as a proprietor, then also a state PA Capital Stock Tax report.

[JCH]

Thank you. I'm not sure why this topic keeps hitting my radar screen, and everytime I read something about it confuses me. I'm wondering if there's something in TTB about this that I've missed.

[Bees Knees]

The only thing that has changed is that an LLC is not considered a disregarded entity for payroll tax purposes. What does that mean? It means an LLC is an entity for payroll tax purposes. Thus it is required to have a separate EIN from the sole proprietor. If you are a sole proprietor using an EIN, and then you change to a single member LLC, you need a new EIN for the LLC for payroll tax purposes, even though the LLC is still disregarded for federal income tax purposes.

The 2007 TTB page 1-11 said:

The IRS has announced that a single member limited liability
company that is owned by one individual and has or will have
employees within the next 12 months to have two EINs. One
EIN is assigned to the individual owner (as a sole proprietor),
and one is assigned to the LLC.

[nalawson]

So, if you started out as a single member LLC, do you still need another EIN?

[Jesse]

So, if you started out as a single member LLC, do you still need another EIN?

According to The Tax Book yes.


I ask this in a different thread:

Do any of you have LLC's with two Federal ID numbers? Actually it is one number for the LLC and the other was in the name of the disregarded entity for payroll.

I have a couple LLC's that were set up this way per IRS instruction. My question is do I now need to quit using the disregarded entity FEIN and in 2009 start using the LLC FEIN on the payroll reports?

Several years ago they issued two numbers for an LLC with payroll.

What if I've been using the wrong number for payroll? Is there a penalty?

If a person does not obtain a second FEIN what would be the penalty?

[Black Bart]

Jesse / 2 numbers

According to The Tax Book yes.


I ask this in a different thread:


Several years ago they issued two numbers for an LLC with payroll.

What if I've been using the wrong number for payroll? Is there a penalty?

If a person does not obtain a second FEIN what would be the penalty?

I applied for a FEIN on a new LLC (it had payroll) about three years ago. They assigned two numbers -- one for the single member owner and one for the LLC. The instructions with the number said to use the LLC number for the payroll. It didn't say what to use on the income tax, but I used the LLC number for both.

BUT...I wouldn't worry about it. I've seen it done both ways and, in fact, I know of a few people that have applied for (and received) a different number every time they opened a new sole prop business and none of them were ever fined anything. While a couple of them got notices that they already had a number and to use the old one, no penalties were assessed. While that's not the same situation you're talking about, I think the point is that a typical uninterested low-echelon IRS clerk would probably have to take an interest in what number's being used on which paper and that's a very long shot.

[Jesse]

Thanks Bart - to tell you the truth after all this time I'm not sure if I've been using the correct or incorrect FEIN that was suppose to be for the payroll. We have yet to receive any correspondence so I plan to continue using the same numbers that I have been for all payroll. Might as well leave well enough alone!

[Lion]

Me, too...

I got into the same situation. LLC EIN from ages ago was deactivated by the IRS. IRS decided it was easier for them to give me a new one (for THEM, I'm still trying to convince the state that it's the same business!), so by this time it was one for me and one for the LLC. Gal told me to use a certain one for EVERYTHING and never to use the one for me for anything at all, ever. So, I've been using the first one for payroll as well as everything else; even though my reading told me to use the personal one for payroll and the LLC one for everything else. Now, I'm finally correct under the new rules! No letters. Maybe I'll get one going forward. I have had a couple of businesses that received letters telling them to use a different EIN. Why can't they leave well enough alone?