Husband and Wife LLC

[jasdlm]

Which, of course, they didn't tell me they started.  I just noticed that the 1099s are issued to an LLC and it appears to be for both of their businesses.

Do you file a 1065 (which would now be late with no extension), or do you split on a Schedule C as QJV?

My inclination is the 1065 (NOT a community property state).  I know there is disagreement/lack of clarity over this issue.  Some argue LLC does not qualify as QJV; some argue that it does but only in a community property state.  Curious what others do.  

It seems even IRS information is conflicting, although this paragraph that I just read on the irs.gov site seems pretty clear.

A Business Owned and Operated by the Spouses through a Limited Liability Company Does Not Qualify for the Election

Only businesses that are owned and operated by spouses as co-owners (and not in the name of a state law entity) qualify for the election. See Rev. Proc. 2002-69, 2002-2 C.B. 831, for special rules applicable to married couple state law entities in community property states.

 

I would appreciate any input.  These peeps are not going to be happy to hear what I have to say at this point.

Thanks much.

 

[BHoffman]

Don't they need to file a 1065 anyway?  I think there is a Rev. Proc. that works every time to abate the late filing penalty.  

I agree that QJV looks like it's only valid in community property states.  

[Lion EA]

ABC qualifies for an exception to the penalty you charged under IRC Section 6698(a)(1), because all two (2) partners, XZ, 222-22-2222, and YZ, 333-33-3333, reported all their shares of income and deductions timely on their joint 2008 income tax return Form 1040.  Therefore, the partnership meets the criteria specified in Rev. Proc. 84-35, which says in part:  “A domestic partnership composed of 10 or fewer partners and coming within the exception outlined in section 6231(a)(1)(B) of the Code will be considered to have met the reasonable cause test and will not be subject to the penalty imposed by section 6698 for the failure to file a complete or timely partnership return, provided that the partnership, or any of the partners, establishes, if so required by the Internal Revenue Service, that all partners have fully reported their shares of the income, deductions, and credits of the partnership on their timely filed income tax returns.”

We trust that you will remove the penalty due to reasonable cause for small companies.