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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12648
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Tax Experts Property was purchased in LLC Name (two

Customer Question

Tax ExpertsProperty was purchased in LLC Name (two partners).
Partnership filed 1065 forms in 2014, 2015. In 2015 one partner bought interest of another and final partnership tax return has been filed because LLC bacame single member LLC.In 2016 we have one LLC owner (single member LLC-disregarded entity). Because we filed final tax return in 2015, do we need to apply for a new federal id or keep the old one (used for partnership filings). All rental activity will be reported on SCH E individual tax return.
Submitted: 1 month ago.
Category: Tax
Expert:  Lane replied 1 month ago.

Hi - No. This now needs simply to be reported under the single member's Social Security number. (SSN)

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That single member LLC's report with an EIN is one of the bigger misconceptions out there. The two reasons that a single member LLC needs an EIN are (1) to open a business account - Most banks' policy is that they will not open a business account with a social security number - and (2) to pay excise taxes such a payroll for employees.

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Because the single member LLC is a disregarded entity, IRS guidance is to use the Social Security number when providing w-9's to payors, and then use both Social Security number AND the EIN on the schedule C so that the SSN and the EIN can be linked for excise tax purposes.

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HERE, given that this is just passive activity, there may be NO need for an EIN at all.

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(HOWEVER, the best practice would still be to have a business account tied to the LLC, to help preserve the separate entity status and the liability protection that goes with it - so as not to commingle personal and business assets, so THAT would be one reason to get the new EIN.

Expert:  Lane replied 1 month ago.

From here: https://www.irs.gov/businesses/small-businesses-self-employed/single-member-limited-liability-companies

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"For federal income tax purposes, a single-member LLC classified as a disregarded entity generally must use the owner's social security number (SSN) or EIN for all information returns and reporting related to income tax. For example, if a disregarded entity LLC that is owned by an individual is required to provide a Form W-9, Request for Taxpayer Identification Number and Certification, the W-9 should provide the owner’s SSN or EIN, not the LLC’s EIN."

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Customer: replied 1 month ago.
What if 1099 was issued under old fein in 2016? He used old fein in 2016. I am assuming that account should be closed and open a new one with new LLC FEIN number because he wants to keep it separated.
Can we apply now for a new fein and use it on 2016 individual tax return?
Expert:  Lane replied 1 month ago.

The 1099 was issued TO your client or BY your client?

Expert:  Lane replied 1 month ago.

OK, still don't see you coming back in.

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No, I would file with the EIN so that everything matches up. In the IRS Q&A on getting EIN's they say that when a Multiple member becomes a single member, this is one of the situations where getting a NEW EIN is not required.

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I would simply do the schedule C showing both the SSN and the EIN on the Schedule C. But then going forward use the best practice of using the SSN for reporting to IRS, but then using the EIN for reporting to others, such as 1099's that the TAXPAYER issues).

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