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Partnership should be Sole Proprietor

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    #1

    Partnership should be Sole Proprietor

    Long time customer brings paperwork recently for his personal tax return (extension was filed) and says he has started a new business and gives me
    P and L and Balance Sheet. After some questions he lets me know he applied for an EIN and sends me letter from IRS which says he needs to file a 1065 by Mar 15. Apparently he never read this letter. Not sure how he got things so mixed up. And from best I can determine he has no need of an EIN. When I asked why he applied for one, his answer was to make my business official. So what should I advise him? Yes, he should have talked to me first but do they ever. How can this be fixed or do I just need to file a 1065 late for 2017 and issue the K-1 and then prepare his personal return. The business really should be a Sch C from what he has told me. Not sure what he put on application for EIN that caused this to happen. Thanks for any help or advice
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    #2
    Originally posted by Bonnie View Post
    Long time customer brings paperwork recently for his personal tax return (extension was filed) and says he has started a new business and gives me
    P and L and Balance Sheet. After some questions he lets me know he applied for an EIN and sends me letter from IRS which says he needs to file a 1065 by Mar 15. Apparently he never read this letter. Not sure how he got things so mixed up. And from best I can determine he has no need of an EIN. When I asked why he applied for one, his answer was to make my business official. So what should I advise him? Yes, he should have talked to me first but do they ever. How can this be fixed or do I just need to file a 1065 late for 2017 and issue the K-1 and then prepare his personal return. The business really should be a Sch C from what he has told me. Not sure what he put on application for EIN that caused this to happen. Thanks for any help or advice
    Do not file a 1065 if the business is a sole prop. When taxpayer gets that letter from IRS for 1065 let them know it is a Sch C that is or will be filed because it is a sole prop.

    This happens a lot in my opinion when folks use those online lawyers to start up a business. I ran into such a situation in 2011 and because of the conflicting information given to me filed a LLC 1065 and then had to amend that and file Sch C. The junior member was really an employee and did not have any ownership. What a mess it was.
    Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR

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      #3
      Did he start a LLC? If husband/wife in not community property state 1065 is the correct form.

      Was the EIN issued to his name or business name?

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        #4
        Or a qualified Joint venture (2 Sch C)!
        Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR

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          #5
          Originally posted by ATSMAN View Post
          Or a qualified Joint venture (2 Sch C)!
          You can't use a QJV if it's a LLC in a non community property state.

          " A qualified joint venture, for purposes of this provision, includes only businesses that are owned and operated by spouses as co-owners, and not in the name of a state law entity (including a limited partnership or limited liability company)" https://www.irs.gov/businesses/small...ted-businesses

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            #6
            Originally posted by ATSMAN View Post
            Do not file a 1065 if the business is a sole prop. When taxpayer gets that letter from IRS for 1065 let them know it is a Sch C that is or will be filed because it is a sole prop..
            Agree. Tell IRS to cancel EIN as it is unnecessary, as TP organized as a SMLLC. If that is actually what he did, he should have the paperwork from the state. (If he did nothing but apply for an EIN and did not organize an entity through the state authorities, then just tell IRS that.)

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