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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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I have a "checkbook" IRA with a single member LLC that has

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I have a "checkbook" IRA with a single member LLC that has purchased rental property. The Property Management company has requested a W-9 tax form for the rental income. Can you tell me how to fill out the W-9 form?

The LLC has its own EIN number and the property is titled in the name of the LLC.

Will the Management company be required to file a 1099 form for the income?

Will there be any required reporting to the IRS (like a Schedule C) for this other than the 5498 form that the Custodian files for the total value of the IRA at yearend?

LEV :

Hi and welcome to Just Answer!
The LLC is required to provide its tax information - such as name, EIN, address, etc. The form W9 is a convenient way for providing such information.
The LLC is owned by the Custodian account (which is actually treated as a trust).
Because the LLC is NOT owned by the individual - reporting payments on form 1099MISC is not required.
To prevent such reporting - you may provide to the Property Management company information about the ownership. But the Property Management company indeed decides to issue form 1099MISC - you will need to send that form to the Custodian of your IRA account.
If the LLC is properly registered and the EIN is issued to the LLC owned by the trust account - the IRS would not expect any reporting even if the form 1099MISC would be issued..
Nothing will be reported on your individual tax return - because you do not own the LLC and income received by the LLC is not considered your income.
The Custodian will issue form 5498 to you and if there will be any distribution - form 1099R.
In any case - keep all documents for your reference.

Customer:

So what do I enter on lines 1 and 2 of the form. Do I check the Trust box? Do I use the EIN number for the LLC?

LEV :

Are you filing W9 form?

Customer:

What names do I use for lines 1 and 2? The LLC name, the IRA custodial name, or my name? Do I check the Trust box? Do I use the EIN number for the LLC, my SS # XXXXX the Custodians TIN ? Note that the LLC has its own EIN number and the asset is titled in the name of the LLC.

Customer:

The W-9 goes to the property management company

LEV :

You do use EIN number for the LLC.
The LLC is NOT a trust - so you check the box "Limited liability company".
However - because the LLC is owned by the IRA - you also check a box "Exempt payee"
Because that LLC is Disregarded entity - enter the owner's name on the “Name” line. The
name of the entity entered on the “Name” line should never be a disregarded entity. The name on the “Name” line must be the name shown on the income tax return on which the income will be reported.
For example, if a LLC that is treated as a disregarded entity for U.S. federal tax purposes - the owner's name is XXXXX XXXXX be provided on the “Name” line. In your case - you need to use the name of your IRA account.

Customer:

Do I enter the LLC name on line 2? For the address do I use mine or the Custodian

LEV :

Do I enter the LLC name on line 2? For the address do I use mine or the Custodian
The name of the entity entered on the “Name” line should never be a disregarded entity.
Because that LLC is Disregarded entity - enter the owner's name on the “Name” line.
In your case - you need to use the name of the Custodian of your IRA account.
And check a box "Exempt payee"

Customer:

I understand that for line 1, but do I enter anything on line 2 - like the LLC name?

LEV :

Sorry - yes - on line 2 will be the name of the LLC. Sorry for confusion.

Customer:

For the address do I use mine or the Custodian?

LEV :

There is no limitation - you may use ANY address to which you want possible correspondence to come. It may be your address, LLC's address (if you have one), PO box, the Custodian address, address of a mail redirect service, etc - no limit.

Customer:

Thank you very much for the help LEV. I think you have answered all of my questions.

LEV :

I am glad to be helpful.

Lev and 3 other Tax Specialists are ready to help you
Customer: replied 4 years ago.


Lev:


 


On the W-9 Instruction Sheet it says to check the box for the federal tax classification of the person whose name is entered on the "Name" line.


 


The IRA Custodian is a Trust. If the IRA Custodian's name is entered on the name line, then wouldn't I check the Trust box and not the LLC box?


 


Thanks again

You made an interesting point.
In this case - a trust - means a separate legal entity.

The IRA Custodian doesn't own the LLC. The LLC is owned by your IRA account which is NOT a separate legal entity.

The IRA Custodian generally is NOT a Trust (while it might be a trust) - but is a financial organization which holds the IRA account in trust.

You would check the Trust box if for instance - you were having a trust which owns the LLC.
Customer: replied 4 years ago.

I guess I should have said that the IRA account that owns the LLC is a trust account.

That is correct - you may say this way - but there is NO trust in meaning of a separate legal entity which owns the LLC.
That is why the Trust box is not appropriate in this situation.
Customer: replied 4 years ago.


Thanks again LEV.