Two FIN #'s now required for disregarded entity LLC

[John of PA]

New IRS rule that takes effect for 2009. A disregarded entity LLC (single member) now must have a separate Fed Tax ID# for payroll than the one they use for filing thier tax returns (the one put on the Sch C.). This does not sound like fun, so I'm keeping my eye out as details develope.

[Golden Rocket]

Disregarded Entity Status

The LLC disregarded entity status may be in jeopardy.

In particular is a new entity, the so-called "Delaware series LLC."

This allows a number of entities in different locations to be owned by a single consolidated entity filing a consolidated return. The various subsidiaries are limited to just those assets at their location and the parent is left intact as far as liability is concerned.

These subsidiaries can sell assets to each other for no taxable gain, and this is starting to irk the IRS. Keep in mind there is no taxable gain for a corporation who has distinct divisions either, but all of the assets are up for grabs. If these separate locations enjoy liability limited to only that location, then IRS is gearing up to tax certain transactions. Not a matter of right or wrong but just a revenue grab.

[jimmcg]

New IRS rule that takes effect for 2009. A disregarded entity LLC (single member) now must have a separate Fed Tax ID# for payroll than the one they use for filing thier tax returns (the one put on the Sch C.). This does not sound like fun, so I'm keeping my eye out as details develope.

Was not aware of this one. Do you have a cite ref ?

[John of PA]

Source of 2 ID#'s required

Yes,
www.IRS.GOV // Click on the left side "Online EIN Application" // It's the 3ed paragraph down "Important Information for Single Member.................."

[JoshinNC]

Wow!

Yes,
www.IRS.GOV // Click on the left side "Online EIN Application" // It's the 3ed paragraph down "Important Information for Single Member.................."

The site just says "IRS regulations require" two EIN's. Has anyone been able to determine which particular regulation requires this?

[Luis Mopeo]

So much for "disregarded entity" status.

[John of PA]

Don't know

I do not know which Reg # it is.

[Joe Btfsplk]

Disregarded Entity

So much for "disregarded entity" status.

The only SMLLCs for which I do tax returns have no employees. One client has two LLCs and two airplanes in which he and he alone gives flying lessons
Another client has some rent houses and no employees.
All other LLCs that I deal with have more than just one LLC member.

[sea-tax]

I may be way off base hear so I apologize ahead of time, but maybe the IRS in their IRS speak is saying that a SMLLC must now have a EIN # and can't simply use the owners social security number to file tax returns.

For example I have some SMLLC's that have no payroll and simply put the soc # on the sch c. Maybe the IRS wants all business to apply for an EIN number instead of using the soc# even if they have no payroll.

Either way I am sure this will be a topic in the upcoming year end tax seminars.

[Golden Rocket]

State Taxes

I have an $8MM C Corp with operations in nine states. I've noticed some of the states who used to honor disregarded entity status so long as the parent filed an apportioned state return have changed. They are now requiring LLCs to be individually filed, no matter what. Kentucky has even designed a separate form (#725) for entities who are disregarded for federal purposes.

I do look for changes to occur. The revenue-enhancement moguls from these various taxing authorities will have to get enough nickels from these LLCs to offset the processing costs of thousands of extra business returns.

Look at it positively -- this creates a demand for tax expertise. GR

[Gretel]

Just recently I read (don't ask me where but it was some kind of IRS material) that a SMLLC which doesn't have employees should apply for an FEIN but NOT use it on Sch. C (disregarded entity). A FEIN should be used only if they do have employees. I have no clue why they need to have a FEIN if it is not used??

[John of PA]

All will get hashed out

Well.....we will hash this all out as time goes on...is anyone finds out anything here let us know.

[abby]

Here's a link

http://www.irs.gov/businesses/small/article/0,,id=158625,00.html

The reference to the final regulation is listed toward the bottom in the section titled Recent Changes

TD 9356:

Final regulations under section 7701 of the Code explain that certain disregarded entities (qualified subchapter S subsidiaries and single-owner eligible entities) are to be treated as entities separate from their owners for purposes of paying and reporting federal employment and certain excise taxes. Notice 99-6 obsoleted as of January 1, 2009.