Husband/Wife LLC

[THS982]

New client has husband/wife rental property LLC with equal ownership in New York state. Prior accountant has always filed as a disregarded entity and filed one schedule E(10+ years). Would you switch the filing now or continue filing on schedule E. The other issue is that as a disregarded entity they have been paying $25 IT-204-LL minimum filing fee as a disregarded entity. Based on income they should have been paying $1500. They stated that prior preparer told them since it was equal ownership it would be considered community property under NYS law. I am not an attorney and was wondering what others thought of this.

[Roland Slugg]

They stated that prior preparer told them since it was equal ownership it would be considered community property under NYS law. I am not an attorney and was wondering what others thought of this.

Well, I'll tell you what I think: Tax preparers shouldn't give legal advice ... and especially THAT particular tax preparer. New York is NOT a community property state.

A H&W LLC in a non-community property state is required to file a partnership return ... quite a burden for a couple who owns rental property. I think they should be asking themselves WHY they set up an LLC in the first place. Maybe on advice from that same prior tax preparer?