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socrateaser
socrateaser, Lawyer
Category: Legal
Satisfied Customers: 33494
Experience:  Retired (mostly)
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Hi Merlo -I saw that you answered some questions several

Resolved Question:

Hi Merlo -

I saw that you answered some questions several years ago at this link, which is similar to my situation:

http://www.justanswer.com/tax/1hayg-checks-made-payable-instead-corporate-name.html

I have an LLC filed in Texas under a "disregarded entity" status. I entered into a subcontractor agreement under my own name, and have been depositing checks made out to me into my LLC account for well over a year.

Last week the bank said they couldn't deposit the check as it is made out to me, not the LLC. So I deposited it into my personal account.

I received a 1099 from this company for last year's work, and filed for an extension on my taxes last April. Now I'm trying to figure out how to work the taxes for this income. Can I still claim the income under this subcontractor's agreement under my own name through my LLC or do I need to file for a dba under my name? And if I need to file for a dba, can I even use that for last year's taxes?

I am not worried about anyone piercing the corporate veil, just trying to figure out how do the taxes for this income.
Submitted: 1 year ago.
Category: Legal
Expert:  socrateaser replied 1 year ago.
Hello,

Sorry for any confusion, however Merlo passed away several years ago. Please permit me to assist. You asked:

I received a 1099 from this company for last year's work, and filed for an extension on my taxes last April. Now I'm trying to figure out how to work the taxes for this income. Can I still claim the income under this subcontractor's agreement under my own name through my LLC or do I need to file for a dba under my name?

A: You can report it on your Schedule C that you use for the LLC. It's de minimis (trivial). If the IRS were to ask why it's not being reported under the EIN for your LLC, you can simply state that the check was made out to you personally in error. That will close the audit.

If you have been using your own SSN for the LLC, rather than a separate EIN, that just makes things easier, because it's all showing up under your SSN in the IRS records. In which case, Uncle Sam will not inquire further.

And if I need to file for a dba, can I even use that for last year's taxes?

A: You don't need a DBA, so the question is inapplicable.

Hope this helps.

Customer: replied 1 year ago.

Sorry to hear about Merlo, he seemed like a good guy.


 


Just to clarify, this is not a one-time service, but an ongoing service agreement that may go on for years. In addition, it's the only source of income I have for this LLC since the beginning of 2012. Does that change anything?


 


IF it does, I would like you to answer that last question. If I file a dba now, could I use it for that year's taxes? Or even, my 2013 return for the work I've done up to this point.


 


Thanks in advance,


Pete

Expert:  socrateaser replied 1 year ago.

Just to clarify, this is not a one-time service, but an ongoing service agreement that may go on for years. In addition, it's the only source of income I have for this LLC since the beginning of 2012. Does that change anything?

 

A: For legal purposes, you need to have the client change the checks to the name of your LLC. Otherwise, you are effectively nullfying the existence of the LLC by treating it as your alter ego -- so if you ever need protection from creditors, you won't have it, because the LLC will appear to be a sham.

 

IF it does, I would like you to answer that last question. If I file a dba now, could I use it for that year's taxes? Or even, my 2013 return for the work I've done up to this point.

A: Your LLC name is XXXXX XXXXX business name. You just need to open a bank account and show the bank your registration certificate from the State. You would only need a DBA if you intend to change the name of your business when dealing with clients.

Re using your LLC for a previous tax year, you can only use it if it existed during that tax year. Re using a DBA, there would be no reason to use it for any purpose, because the legal name of your business for tax purposes is the name of the LLC. The DBA is just an "alias."

If this is confusing, feel free to clarify your question, and I'll try to help you understand the situation better.

Hope this helps.
Expert:  socrateaser replied 1 year ago.
I'm not sure why you rated my service as poor. I'm trying to answer your question, but if I'm missing the mark, then ask for clarification and I will try to straighten out any confusion.

I'm really trying to help you here, so please tell me what more you need or do not understand.
Customer: replied 1 year ago.
Relist: Other.
1) My expert is missing key parts of what I have said, and so the answers given either are not applicable to my situation, or may not be applicable to my situation. At this point, I can't tell.

2) The answers given are not providing the level of detail I expected when I clicked on the "high level" of detail prompt. At the least, I need an expert who has read and understood what I originally posted and I'm not getting that.

3) I tried responding a second time and repeatedly received an error message, which is preventing me from getting any additional information.

Considering the difficulties that I'm having I would either like a different expert, or to just discontinue this with no fee incurred.

Well, tell you what, I'll give $15 for this for his time. But I'm still in the dark as to what I need to do with my tax situation, and basically think I'll just have to hire someone in person.
Expert:  socrateaser replied 1 year ago.
Hello again,

You're making me feel bad, and I already have the flu. Please just tell me what you don't understand, and I will continue trying to help. If you need some sort of specific detail, then tell me what that is, and I will provide it.

Thanks in advance.
Expert:  socrateaser replied 1 year ago.
I'm going to go back and try to answer your questions again, exactly as you asked them (just in case I missed something). You asked:


I have an LLC filed in Texas under a "disregarded entity" status. I entered into a subcontractor agreement under my own name, and have been depositing checks made out to me into my LLC account for well over a year.

Last week the bank said they couldn't deposit the check as it is made out to me, not the LLC. So I deposited it into my personal account.

I received a 1099 from this company for last year's work, and filed for an extension on my taxes last April. Now I'm trying to figure out how to work the taxes for this income. Can I still claim the income under this subcontractor's agreement under my own name through my LLC or do I need to file for a dba under my name?

A: Your LLC is the only business name you need. If you received a 1099-Misc in your personal name, then report the money on your Schedule C as if it were paid to the LLC. If you are sent an audit letter by the IRS, write back and explain that the 1099 was issued to the wrong name in error. The IRS wants the income reported. Since the LLC is a disregarded entity, your tax return is identical regardless of how you report the self-employment income.

And if I need to file for a dba, can I even use that for last year's taxes?

A: You don't need a DBA, because you already have an LLC name. What you really need to do is have your client sign a new contract with the LLC as the service provider, rather than you as an individual. Then, the client can pay your LLC and there won't be an issue with the check deposits.

If you create a DBA for last year's taxes, it won't mean anything to the IRS. The IRS only cares about the name on the 1099-Misc -- anything else will confuse their computer system and it will spit out an audit letter.

Does this make sense now? Please let me know. Thanks.
socrateaser, Lawyer
Category: Legal
Satisfied Customers: 33494
Experience: Retired (mostly)
socrateaser and 5 other Legal Specialists are ready to help you
Customer: replied 1 year ago.
Relist: Incomplete answer.
I'm still not getting an answer for my situation! And you are missing key parts of my original message.

The situation is that I have a subcontractor agreement in my name, not the LLC. My client is unwilling to issue one to the LLC, I think his liability insurance prohibits him from that doing that. Or it's something else, either way he won't issue one in the name of my LLC. So I'm stuck with getting checks written out to me. I am also stuck with trying to pay taxes for both my 2012 and 2013 returns for income derived under a 1099 that is made out to me, not my LLC, and for which I have no dba in my name (other than the LLC).

In your last response, you said:
For legal purposes, you need to have the client change the checks to the name of your LLC. Otherwise, you are effectively nullfying the existence of the LLC by treating it as your alter ego -- so if you ever need protection from creditors, you won't have it, because the LLC will appear to be a sham.

Per my first message, I am not concerned with protection from creditors or any other form of piercing the corporate veil. I just want to make sure the IRS won't have a problem with me using this income going through the LLC. I think you've already answered that but want to make sure, would it still be considered de minimis if all the income for the year is coming from this one 1099, which is under my name, and doesn't include any mention of my LLC? It does contain my name and SSN, both of which match the LLC information.

Also, per my first message, I do have a bank account for the LLC, hence the statement that I "have been depositing checks made out to me into my LLC account for well over a year"

What is causing all of this is the bank suddenly deciding that I can't deposit these checks into my LLC. I'm not sure they have the situation right, as it seems to be a problem only when it's the other way around - depositing checks made out to LLC into my personal account. But if they decide I can't deposit checks in my name to my LLC account, then I'm stuck either shutting the LLC down or finding a bank that will do this. Or, I suppose, convincing them that there is nothing wrong with depositing checks made out to me, into my LLC account.

All the same, all I really need to know is 1) if the IRS would have a problem with my LLC income coming solely from a 1099 that isn't made out to my LLC, but rather to me (has my name and SSN, but not the LLC name)

And now, 2) if I file for a sole proprietor dba now, can I use that for my income under this 1099 made out to my name, for the entire year? (the 1099 for this year's work won't be issued until after the first of the new year)

Sorry about your flu, working sick is tough I know. And this website isn't helping, when I try to respond through the normal route it tells me "access denied", which is why I'm having to go through this menu. :(
Expert:  socrateaser replied 1 year ago.
Per my first message, I am not concerned with protection from creditors or any other form of piercing the corporate veil. I just want to make sure the IRS won't have a problem with me using this income going through the LLC. I think you've already answered that but want to make sure, would it still be considered de minimis if all the income for the year is coming from this one 1099, which is under my name, and doesn't include any mention of my LLC? It does contain my name and SSN, both of which match the LLC information.

A: From the IRS perspective, it's all just income, and it's taxed identically, whether it was paid to the LLC or to you as an individual. So if you continue to receive the money in your personal name and you report it on your LLC Schedule C, the IRS won't care, because the SSN is the same.

The only time this would become an issue is if a creditor were to sue you, because it could use the fact that you were receiving the money personally to show a court that your LLC is not the party to the independent contractor agreement. That would give the creditor a means of piercing the corporate veil. But, if you don't care about this, then it won't be a problem for the IRS.

Also, per my first message, I do have a bank account for the LLC, hence the statement that I "have been depositing checks made out to me into my LLC account for well over a year"

What is causing all of this is the bank suddenly deciding that I can't deposit these checks into my LLC. I'm not sure they have the situation right, as it seems to be a problem only when it's the other way around - depositing checks made out to LLC into my personal account. But if they decide I can't deposit checks in my name to my LLC account, then I'm stuck either shutting the LLC down or finding a bank that will do this. Or, I suppose, convincing them that there is nothing wrong with depositing checks made out to me, into my LLC account.

All the same, all I really need to know is 1) if the IRS would have a problem with my LLC income coming solely from a 1099 that isn't made out to my LLC, but rather to me (has my name and SSN, but not the LLC name)

A: No. See above.

And now, 2) if I file for a sole proprietor dba now, can I use that for my income under this 1099 made out to my name, for the entire year? (the 1099 for this year's work won't be issued until after the first of the new year)

A: A sole proprietorship DBA is simply an alias for you. If you ar reporting everything under your SSN on Schedule C, you don't actually even have to name the business on the form at all (even though it asks for a name). The IRS doesn't care about the name. The computers match 1099s to tax returns. When a taxpayer number doesn't show income from a 1099 on that taxpayer's tax return, the IRS computer spits out an audit letter, i.e., "Show us de money!" In your case, all of your income is being reported against your SSN, so there won't be anything for the IRS computer to mismatch and you won't get an audit letter.

So, whether or not you use a DBA for this year or some previous year, the IRS will not care. It cares about the taxpayer identifier, which in your case is your SSN for everything.

Make sense?

Sorry about your flu, working sick is tough I know. And this website isn't helping, when I try to respond through the normal route it tells me "access denied", which is why I'm having to go through this menu. :(

A: Yeah, it sucks. Don't get old, friend -- that's all I can say!

Let me know if I still don't have it -- because, I'll jump off a cliff!!!

Thanks for your patience.

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