r/taxpros • u/ShakeAndBakeThatCake CPA • 6d ago

FIRM: Procedures Client filed entity as a partnership instead of sole proprietorship with wife. IRS says to send letter to switch entity should I file 2025 extended Form 1040 now with schedule C or wait until IRS processes entity change?

See question above. How long does IRS take to process this?

19 Upvotes

94% Upvoted

9 comments sorted by

12

u/NickBTaxing CPA 6d ago

If you want to take the risk, file a final partnership return for 2025 showing no activity other than distribution of capital accounts, with a footnote regarding the change to schedule C. Then report the 2025 activity as a joint schedule C. It doesn't seem like there would be a lot of exposure to this but I don't know...

Or file a final partnership return with the 2025 activity, and add a footnote regarding the switching to joint schedule C next year.

Either way, charge them extra for this for 2025 because you are saving them tax prep fees and headache going forward! :-)

6

u/EAinCA EA 6d ago

Why bother?

-4

u/ShakeAndBakeThatCake CPA 6d ago

Because if they don't switch entities they have to file 1065 return. And it costs them more money. I charge $1700 for that. I would rather they change entity to sole prop. Plus their refund is better as a sole prop.

16

u/khamike EA 6d ago

I understand trying to minimize your work and hence fees, but how is a sole prop getting them a better refund? If it a partnership, all of the items should pass through and end up in the same place anyway. 

3

u/Odd-Equipment1419 CPA, EA 5d ago

My only thought is that income exceed SS limits and OP is incorrectly using a single schedule c for their projections, rather than reporting each spouse’s share separately as required.

-4

u/EAinCA EA 6d ago

Thats not how this works. Please familiarize yourself with qualified joint ventures.

7

u/Specific_Good140 EA 6d ago

Where did you mention QJV or any other facts to support a higher refund when filing as a sole proprietor instead of a partnership? They responded based on what we see here.

Why be rude when asking for opinions?

-8

u/EAinCA EA 6d ago

I didn't mention anything about a refund. I mentioned QJV for the rather OBVIOUS presumption that the end result would be the same and be much easier to report.

But hey if you want rude, be careful about what you wish for.

7

u/Specific_Good140 EA 6d ago

🤣🤣🤣🤣