I have observed that disregarded entities (sole prop) who file Sch C and use their EIN appear to be exempt from IRS income matching. It appears the IRS is not associating the EIN Income with the Sole Prop SSN . These Sole Prop fill out their W-9 as a disregarded entity and put down their EIN rather than their SSN.
The W-9 apparently is NOT reviewed by any taxing agency for accuracy. I would be interested in your observations.
Tom comments that the LLC should always use the owner's TIN, not its EIN, for income tax reporting. We all agree that is a true statement.
I offer that NO taxing authority sees the W-9 that our clients file. Many of them have figured out this is a way to avoid paying tax on ALL their income. Suggested Quick Fix is to require all Sole Props to send a COPY of their W-9s to the taxing authorities.
If an LLC registers with the state naming both the husband and wife as members, but then amends the registration to list just the wife (to avoid filing a partnership return) before the end of the first year, does only the Schedule C needs to be filed?
Or would a zero partnership return need to be filed also?
I have observed that disregarded entities (sole prop) who file Sch C and use their EIN appear to be exempt from IRS income matching. It appears the IRS is not associating the EIN Income with the Sole Prop SSN . These Sole Prop fill out their W-9 as a disregarded entity and put down their EIN rather than their SSN.
The W-9 apparently is NOT reviewed by any taxing agency for accuracy. I would be interested in your observations.
Tom comments that the LLC should always use the owner's TIN, not its EIN, for income tax reporting. We all agree that is a true statement.
I offer that NO taxing authority sees the W-9 that our clients file. Many of them have figured out this is a way to avoid paying tax on ALL their income. Suggested Quick Fix is to require all Sole Props to send a COPY of their W-9s to the taxing authorities.
If an LLC registers with the state naming both the husband and wife as members, but then amends the registration to list just the wife (to avoid filing a partnership return) before the end of the first year, does only the Schedule C needs to be filed?
Or would a zero partnership return need to be filed also?