Can IRS 1065 for multi member LLC be a DIY ?

[V Krishna]

Hello All,

I have set up multiple member LLC's for my SFH rental's and would like to know your thoughts on filing IRS form 1065 and obtain K1's yourself. Is it mandatory to go through a CPA ? Please share your experiences.

[Michael Plaks]

@V Krishna

Almost anything could be DIY-ed today. It comes down to two questions.

1. Do you have time to invest in learning how to do it? With some effort, you can learn how to half-a$$ it. To be honest, many tax preparers will do likewise. As my colleagues mentioned, the technical complexity of doing it correctly is pretty high, and not everybody bothers, even the professionals. Those who do it right will usually charge accordingly.

2. What are the consequences of messing it up? As long as your operation is fairly straightforward and everything is truly split 50/50, you will usually arrive to the same bottom line result with a shortcut/incomplete partnership tax return as with the one done professionally. (Assuming you learned the basics correctly.) It will likely be missing some pieces and have some of them completed incorrectly, but it will unlikely to be challenged by the IRS and cause real trouble. 

However, if you close the partnership or if you and your partner(s) are contributing differently and pulling money out differently - then you will likely have incorrect tax results for each for you. It may result in paying less tax than you're supposed to or more tax than you're supposed to. And, if you hire a CPA later on to fix the mess, it will cost you significantly more than if you were doing it right from day one.

Bottom line: many investors DIY these returns, get them wrong and get away with it. Your call which way you want to go.