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LLC and personal filing

In February 2006, I and my wife formed an LLC in Texas. We both are partner and started a business in September 2006. My wife manages this business while I work for another firm full time. Normally we file 1040 every year as married filing jointly. In the business she has not drawn any salary as we are still not breaking even in new business. Our payroll is done by payroll company and has already issues W2 for all employees.

We have not filed any forms such as 8832 with IRS so far.

The following are the questions:

1: What forms do I file for LLC? From turbo tax site, it appears that we need to file 1065 for LLC 2: Since we have lost money in year 2006. Probably there is no tax that we have to pay. However, can be use this loss as deduction for our personal tax filing (in 1040)? 3: If the LLC filing and personal filing (1040) are independent, where is the connection made? In other words, if there is a loss how is it carried to 1040? 4: If the loss is not carried to personal filing, is it offset by only future LLC profit? 5: Finally, what software would you recommend? For last five years, I have used Taxcut. I have used quickbooks for accounting for LLC. If Turbotax is recommended, would I need separate programs for LLC and personal filing or it comes in one package? Thanks. VBP

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Reply to
FSParmer
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Correct. 1065 is the default for an LLC.

Yes, to the extent you have basis (read "investment") in the LLC. This amount will show on the schedule K1 from the 1065.

Both are required, and see above re the K1.

If your basis is insufficient to allow any loss on the 1040, then yes.

software? The kind a tax accountant will use. In your particular case, I strongly urge you to avail yourself of the services of either a CPA (certified public accountant) or an EA (Enrolled Agent) for at least the first year's LLC return. If you need recommendations in your area, just let us know. ChEAr$, Harlan Lunsford, EA n LA

note for Benjamin: I try to alternate recommendations, mentioning EA first one time, then CPA first next time.

Reply to
Harlan Lunsford

Where does the at risk rules apply to a sole proprietorship (aka sch C or single member LLC.) Isn't a husband and wife only LLC effecticely the same as a single member LLC and thus has no tas consequences.

Reply to
Bernard S

There is no entity restriction on the at-risk rules. They apply to a sole proprietorship just as much as to a flowthrough entity. It's just less common for a sole proprietor not to be at risk. Doesn't mean it can't happen. Katie in San Diego

Reply to
Katie

You incurred a real losses. You covered such loss with your own funds or borrowed funds. Your borrowed , aren't you at risk ubtil repaid.

Reply to
Bernard S

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