I’m facing a dilemma on how to report oil royalty income. Attorney set up a single member LLC with an EIN owned by a revocable living trust. Royalties greater than 200k have been reported under the LLC EIN. This is a non-working interest and not subject to SE Tax.
My first thought was to report on Schedule E as normal and wait for a matching letter and explain the situation. Will a matching letter arrive?
My second thought was to report on Schedule E with an offsetting deduction pointing to Schedule C. Schedule C would use the EIN and report income and deductions and override self employment tax. Maybe this way the IRS will connect the income to the EIN? Would this solve the matching problem? Or, just raise flags to explain?
Any thoughts will be greatly appreciated. .
My first thought was to report on Schedule E as normal and wait for a matching letter and explain the situation. Will a matching letter arrive?
My second thought was to report on Schedule E with an offsetting deduction pointing to Schedule C. Schedule C would use the EIN and report income and deductions and override self employment tax. Maybe this way the IRS will connect the income to the EIN? Would this solve the matching problem? Or, just raise flags to explain?
Any thoughts will be greatly appreciated. .