Partnership should be a Sch C

[joanmcq]

Prior preparer treated the small biz of one spouse as a partnership last year. The return doesn't have and FEIN; it just says 'Applied For'. I think it might have been because they are RDPs, and he couldn't figure out that if only one of them was running the biz, it should be a Sch C. They don't know why he filed as a partnership.

The biz is closed as of 3/31/12, and I think 2010 was the first year. I'm tempted to just file a zero income 1065 marked 'final' and put the biz on a Sch C. I just can't see applying for an FEIN just to close down a biz that shouldn't have been filed as a p'ship to begin with.

Does anyone see anything wrong with this? Or am I just tired and not wanting to deal with it?

[Gail in Virginia]

How are you going to file the zero return marked final for the partnership without an FEIN? Still mark it "applied for?"

[joanmcq]

Only thing I can think of. Sheesh.

[jainen]

>>They don't know why he filed as a partnership.<<

Perhaps he was trying to give the partner half the Social Security credit, or just make a clear record of how the community income was split on their separate federal returns. There was and still is a lot of confusion about the best way to file returns for Registered Domestic Partners in California.

By the way, getting an EIN only takes a few minutes. If he wrote "applied for," he was also supposed to show the date of the application.

[mcb39]

I have several domestic partners who do the split in order to share the SS credit, as Jainen says; and, in WI, we have a Married Couple Credit so both of them have to have income to get the credit which comes off of the tax they owe. Because we are a CC property state, we are still allowed to split the income on two Sch C, although there are a few who choose to file the Partnership return. If it still says "applied for" on the EIN, it was either never applied for or it was never changed on the form once they got it. Getting an EIN is one of the easiest things to do these days and it is free.

[joanmcq]

Yes, I know getting an EIN is easy; did it for myself online.

This is a loss for a biz that was a bust. He ignored every other aspect of community property: wages for the federal split, filed MFS for CA, and didn't do a CP split, just this damned partnership.

[kcjenkins]

Then clearly, Joan, the preparer was not very sharp, so following his lead just because he did it would not be a wise decision. Just follow your own wise instincts and file a Sch C this year, and zero out the partnership just to leave a paper trail.

[michaelmars]

don't forget the profit motive. he got to charge for an additional return.

[joanmcq]

He charged so little for these returns, I'm shocked. And in the Bay Area too. $89 for the p'ship and $65 each for the individual returns, even though one was itemized. Doesn't seem to have done much CA CPE recently, though he knew enough to check the box for CA, M/RDP filing separate rather than single on the CA returns.