RENTAL LICENSE renewal - BIRT / NPT taxes - "disregarded entity"

[Pat Hamilton]

My rental license renewal is stuck in tax revenue limbo...they won't renew until cleared...I've been on the phone with them (mostly on hold) forever.

Anyway, I purchased my 3 family home under and LLC but the City treats all my tax revenue info under my personal SS# and not the company's EIN. Is this normal? She keeps telling me that it isn't a sole proprietorship but a "disregarded entity". Is this how you guys do it when filing taxes? The L&I department and Tax Department in the City of Philadelphia really make me want to invest elsewhere. They have to make the process easier!!!!

[Paul S.]

I had this exact same problem several years ago except I wasn't able to complete a sheriff's sale purchase.  Right now, you are considered to be tax non-compliant and therefore you are not allowed to do any business with the city.

Exactly what you will have to do.

1: Find a CPA that understands Philadelphia's messed up tax system.

2: If you are a single member business entity, NEVER EVER set up a city BRT entity using that entity.  You do all your business with the city through your SSI# and a BRT# in your personal name.  It's a pass through entity so it doesn't matter anyway, but the city can't wrap their heads around it.

3: You or your CPA will have to shut down that business entity with the city.  Be prepared to follow up with them several times over the years because it usually doesn't take.

4: You will have to amend all your personal and business tax filings going back 10 years or to the beginning of your business.  Basically, filing your business income as zero, and moving all the earnings to your SSI#.  They will refund the business taxes paid and charge them to your personal so you break even in the end.

Hope this helps. I know all the books tell you to set up an LLC to own real estate. But if you dig into the legal and tax ramifications, it's really not worth it, unless you own a property with business partners. If you're worried about protecting yourself from liability, purchase more insurance. If you ever did get in hot water with your property and incurred a big liability, a judge could overturn your LLC protection anyway if it appears that the only reason you hold it in an LLC is for the legal protection.