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Husband/Wife LLC in Texas previously on 1065 - Want to File on Personal Return this Year

Forum|Forum|1 year ago
January 16, 2025
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Hello,

We live in Texas. Since the beginning of the formation of our Husband / Wife LLC - 50/50, our CPA has been filing a 1065.

1. What are the advantages of filing a 1065 in Texas since Texas is already a community property state? Some folks have told me "just for the fee of doing an extra return", but there must be other reasons.

2. Is there anything that I would need to do on a 1065 this year if I want to report on our personal return instead?

Thanks.

Best answer by PatriciaV

For your situation and filing history, the advantage of continuing to file Form 1065 is that the IRS considers your LLC to be a partnership. This assumption was made the first year you filed as a partnership on Form 1065.

You are correct that the activity of an LLC owned solely by a husband & wife in a community property state may be reported on a personal Form 1040 return. The activity is allocated between the spouses on two Schedules C as part of the jointly-filed return.

If you choose to report on Schedules C, you would not file Form 1065 for that tax year. You may receive a notice from the IRS asking for a Form 1065 for this tax year. If so, contact the toll-free number that is shown on the notice and advise the agent that you reported the income on your jointly-filed individual income tax return. This response can also be done in writing. Be prepared to reference Rev. Proc. 2002-69, 2002-2 C.B. 831.

Additional information:

Election for Married Couples Unincorporated Businesses
Rev. Proc. 2002-69, 2002-2 C.B. 831, which clarifies LLC reporting in community property states

PatriciaVAnswer

Employee

For your situation and filing history, the advantage of continuing to file Form 1065 is that the IRS considers your LLC to be a partnership. This assumption was made the first year you filed as a partnership on Form 1065.

You are correct that the activity of an LLC owned solely by a husband & wife in a community property state may be reported on a personal Form 1040 return. The activity is allocated between the spouses on two Schedules C as part of the jointly-filed return.

If you choose to report on Schedules C, you would not file Form 1065 for that tax year. You may receive a notice from the IRS asking for a Form 1065 for this tax year. If so, contact the toll-free number that is shown on the notice and advise the agent that you reported the income on your jointly-filed individual income tax return. This response can also be done in writing. Be prepared to reference Rev. Proc. 2002-69, 2002-2 C.B. 831.

Additional information: