jschmidt10010[at]hotmail.com wrote:

- quote -

The beginning of the partnership is NOT arbitrary. You may
have arbitrarily decided on a date to convert - but once you
converted, you converted, and that's it.

You should have closed the sole-proprietor books and opened
partnership books at the same time. Choosing to continue
with the same set of books for the new entity as the old one
is your problem to sort out.

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Thanks everybody for taking the time to write -- I
appreciate all your ideas. If I took the Phil Marti / D
Stussy approach, what should I do with the expenses? The
beginning of the partnership EIN was arbitrary (an
accountant recommended it, so we did it), not related to any
particular change in our business. So basically it was the
same business before and after, the only thing that changed
is the number we put on the W-2 forms. Given that, it's hard
to figure out exactly which of the 2004 expenses to
attribute my SS number and which ones to the partnership.
Would it seem reasonable to do it on the percentage basis?
(i.e. if at the end of the year 40% of the income is
reported on my Schedule C via the 1099s I've received, then
40% of the expenses would be as well?)

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Phil Marti wrote:
- quote -

I agree with this answer and disagree with the other three
(so far) that have come through. The truth of the matter is
that your partnership started mid-year ... so
pre-partnership income is still going to be on a Schedule C
for you, not your 1065. The 1099's should correspond to the
treatment that applies to each of the two periods you have
that comprise the year.

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<jschmidt10010[at]hotmail.com> wrote:

- quote -

Joe,

If you have a partnership report everything on the
partnership.

On you personal report the 1099's and in the other expense
area of the Schedule C report all the income as an expense
with a caption similiar to "income reported on XYZ
partnership form 1065 # XX-XXXXXXX for FYE 12/31/04.

I do this all the time and never a question.

Next get the EIN's changed on those 1099s for 2005 to the
partnership.

--
Regards,

Mark Rigotti

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<jschmidt10010[at]hotmail.com> wrote:

- quote -

Report the pre-partnership income on your Schedule C and the
partnership income on the partnership return. Your returns
aren't going to match the 1099's. This goes in the "so
what?" file.

IRS will probably inquire about the "missing" 1099 income,
you'll provide copies of the Schedule A and the partnership
return, and that will be that.

--
Phil Marti
Clarksburg, MD

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"jschmidt10010[at]hotmail.com" <jschmidt10010[at]hotmail.com> wrote:

- quote -

Prepare what's called a "nominee" 1099. It's just a regular
1099 that you (the individual) "pay" to the partnership.
Then, on the IRS' records you show a net zero. Now, some of
your 1099 income probably should still go on the schedule C:
that which represents the income from before the date the
two of you decided to go into business together.

--
Tom Healy, CPA
Boulder, CO
Web: http://www.tomhealycpa.com

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jschmidt10010[at]hotmail.com wrote:

- quote -

The ONLY thing I might take issue with above is the
"adamant" attitude of the second accountant.

While the accepted and preferred method is for all issuers
to provide 1099's only in the name/number of the
partnership, rather than try to get corrections at this late
date, I would go along with the first accountant, in fact
this is what I have done, or I wouldn't be mentioning it.

And then when and if the IRS ever brings it to your
attention, about the 1099 to you only, just answer their
letter with proof that said amount(s) were aptly reported on
the 1065.

ChEAr$,
Harlan Lunsford, EA n LA

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My partner and I run a consulting business together. When we
first started, the business income was listed on a schedule
C on my tax return, and the expenses were also part of that
schedule. Ocassionally, he would do consulting work on his
own, and receive his own income and expeneses.

Midway through 2004, at the recommendation of an accountant,
we incorporated at partnership, with its own EIN. Now, the
question is what to do for our 2004 returns, given that half
the people paying us had my social security number as the
tax ID and half had the partnership number. At least one
accountant I've talked to gave me the impression that it
would be possible to count all the income through the
partnership, even if the company 1099-MISCed me on my social
security number. Is there a way to "reassign" income listed
on a 1099 so that it's considered partnership income instead
of personal income? (And, of course, the partnership is just
a pass through to our personal returns anyway, or so I
understand.)

Another accountant is adamant that that can't be done, that
the IRS would have no way of knowing that the 1099 had been
"reassigned" and that they would question why the income
didn't show up on my personal return. This accountant says I
would have needed to contact the issuing businesses and ask
them to re-issue the 1099-MISC to a different tax ID number.
Having not done that, I'm stuck (for 2004 at least) with
filing the partnership return, and a schedule C. Since they
are the same expenses, this accountant recommends dividing
the expenses proportionally between the Schedule C on my
personal return and the partnership.

Who's right? Obviously, I'd much rather have everything
through the partnership -- it seems much simpler. But will
it cause problems with the IRS?

Jen

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