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  • Solo401k LLC – annual tax filing requirements

    Mark Nolan replied 5 months, 2 weeks ago 2 Members · 2 Posts
  • 1 Reply
  • Heriberto A.

    Top SubjectReal Estate Investments,Transfers/Rollovers
    Top ForumsReal Estate Investments, Transfers/Rollovers

    Heriberto A.

    Heriberto A.

    Top SubjectReal Estate Investments,Transfers/Rollovers

    January 27, 2024 at 2:04 am

    Hi, the LLC that is owned by my Solo401k purchased a property in 2023. The property is titled to this LLC (Therefore an asset of the Solo401k). The property was subsequently renovated by a contractor in 2023. Does the LLC now have to prepare and issue this contractor a 1099-NEC for the amount that the LLC paid them? And assuming that the LLC has to file a tax return (partnership between my wife’s Solo401k and my Solo401k) , how would I report income so that it is clear to the IRS and the state that this is a qualified tax deferred account (assuming a 1065, curious as to how to show the tax exemption on the filing?

    Thank you in advance for any guidance that is provided.

    Heriberto A.
  • Mark Nolan

    Top SubjectSolo 401k,Solo 401k Contributions
    Top ForumsSolo 401k, Solo 401k Contributions

    Mark Nolan

    Mark Nolan

    Top SubjectSolo 401k,Solo 401k Contributions

    January 29, 2024 at 3:15 pm

    Yes, for an LLC with multiple members (e.g., 2 or more IRAs), a federal tax return Form 1065 will be required to be filed every year. The Form 1065 is filed with the IRS and is for informational purposes only; meaning, taxes are not due at the LLC level since the only members are the self-directed IRAs.

    Check with your cpa to determine if a 1099-NEC needs to be issued and see the following IRS publication. https://www.irs.gov/pub/irs-pdf/i1099mec.pdf

    If you do issue one, the LLC will be the payer and you will use the LLC EIN as well on the form.

    The publication references some exceptions:

    Exceptions

    Some payments do not have to be reported on Form 1099-MISC, although they may be taxable to the recipient. Payments for which a Form 1099-MISC is not required include all of the following.

    • Generally, payments to a corporation (including a limited liability company (LLC) that is treated as a C or S corporation). However, see Reportable payments to corporations , earlier.

    • Payments for merchandise, telegrams, telephone, freight, storage, and similar items.

    • Payments of rent to real estate agents or property managers. However, the real estate agent or property manager must use Form 1099-MISC to report the rent paid over to the property owner. See Regulations section 1.6041-3(d); Regulations section 1.6041-1(e)(5), Example 5; and the instructions for box 1.

    • Wages paid to employees (report on Form W-2).

    • Military differential wage payments made to employees while they are on active duty in the U.S. Armed Forces or other uniformed services (report on Form W-2).

    • Business travel allowances paid to employees (may be reportable on Form W-2).

    • Cost of current life insurance protection (report on Form W-2 or Form 1099-R).

    • Payments to a tax-exempt organization including tax-exempt trusts (IRAs, HSAs, Archer MSAs, Coverdell ESAs, and ABLE (529A) accounts), the United States, a state, the District of Columbia, a U.S. territory, or a foreign government.

    • Payments made to or for homeowners from the HFA Hardest Hit Fund or similar state program (report on Form 1098-MA).

    • Compensation for injuries or sickness by the Department of Justice as a public safety officer (PSO) disability or survivor’s benefit, or under a state program that provides benefits for surviving dependents of a PSO who has died as the direct and proximate result of a personal injury sustained in the line of duty.

    • Compensation for wrongful incarceration for any criminal offense for which there was a conviction under federal or state law. See section 139F, Certain amounts received by wrongfully incarcerated individuals.

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