Advice on restructuring into an LLC(s)

[Johann Jells]

My wife and I are looking to put our RE holdings on an "active" business footing, form an LCC (or one per held property?) and file taxes as a business rather than filing a form E. We have several reasons for doing this, from protecting our assets to establishing me as a RE professional as a way to exclude our RE business from financial aid assets. I do spend 750 hrs a year in RE and have no W2 income, though my wife does. But even so, we don't currently have passive losses so presumably the IRS will not take undue interest in us if there's no avoided taxes to be recovered.

As I understand it we can form an LLC and then declare to be a sole proprietorship and file a form C rather than be an S with more complex taxes. Is my assumption correct that marrieds filing together are a single entity and not a partnership?

Seeking out a professional to help with this incorporation, is a CPA good enough, or should we seek an EA or a tax attorney? Will I need to continue to have a CPA? I have filed my own taxes for many years using Turbotax after finding that we were paying our CPA/EA top dollar for one of his flunkies to simply do data entry in an equivalent software, and not getting the expertise we thought we were paying for. They made mistakes caught by the IRS, something that has not happened in 15 years of Turbotax. What i'd really like is to continue to prepare my own taxes and to consult with an EA occasionally, but I don't know if that's realistic.

Thanks for any advice on any of these issues.

[Steven Hamilton II]

Originally posted by Johann Jells:

My wife and I are looking to put our RE holdings on an "active" business footing, form an LCC (or one per held property?) and file taxes as a business rather than filing a form E. We have several reasons for doing this, from protecting our assets to establishing me as a RE professional as a way to exclude our RE business from financial aid assets. I do spend 750 hrs a year in RE and have no W2 income, though my wife does. But even so, we don't currently have passive losses so presumably the IRS will not take undue interest in us if there's no avoided taxes to be recovered.
As I understand it we can form an LLC and then declare to be a sole proprietorship and file a form C rather than be an S with more complex taxes. Is my assumption correct that marrieds filing together are a single entity and not a partnership?

Seeking out a professional to help with this incorporation, is a CPA good enough, or should we seek an EA or a tax attorney? Will I need to continue to have a CPA? I have filed my own taxes for many years using Turbotax after finding that we were paying our CPA/EA top dollar for one of his flunkies to simply do data entry in an equivalent software, and not getting the expertise we thought we were paying for. They made mistakes caught by the IRS, something that has not happened in 15 years of Turbotax. What i'd really like is to continue to prepare my own taxes and to consult with an EA occasionally, but I don't know if that's realistic.

Thanks for any advice on any of these issues.

@Johann Jells ,

I'm sorry to hear you were not using that great of an accountant. I also don't know what software they were using, but I will tell you I strongly doubt it is below TurboTax.

What do you think the savings would be?

What is your other job and how many hours do you spend in it?

Not having losses makes the RE professional designation irrelevant.

A single member LLC defaults to a sole proprietorship (Filing Schedule C or Schedule E) Schedule C is filed if it is active income which rental real estate is never classified. Schedule E is used for royalties and rental income.

For any type of rental income to be treated as a schedule C, you must provide services such as housekeeping/meals.

As I understand it we can form an LLC and then declare to be a sole proprietorship and file a form C rather than be an S with more complex taxes. Is my assumption correct that marrieds filing together are a single entity and not a partnership?

A two member LLC defaults to a partnership (Filing Form 1065 required) UNLESS the two reside in a community property state.

Seeking out a professional to help with this incorporation, is a CPA good enough, or should we seek an EA or a tax attorney?

I would strongly recommend an EA. EAs are the only ones required to take continuing education in taxation.

Will I need to continue to have a CPA?

CPA simply means accountant.

I have filed my own taxes for many years using Turbotax after finding that we were paying our CPA/EA top dollar for one of his flunkies to simply do data entry in an equivalent software, and not getting the expertise we thought we were paying for. They made mistakes caught by the IRS, something that has not happened in 15 years of Turbotax. What i'd really like is to continue to prepare my own taxes and to consult with an EA occasionally, but I don't know if that's realistic.

That is very possible. I can tell you that I do quite a bit of consulting work and review tax returns regularly. So there is a definite possibility to find someone you are comfortable working with.