In this episode of Adam Talks, IRA Financial’s Adam Bergman Esq. discusses tax filing rules and deadlines for a Self-Directed IRA, whether you are a single member LLC, multiple member LLC (partnership) or a different entity.
Tax Filing Rules for your Self-Directed IRA
Tax attorney and founder of IRA Financial, Adam Bergman, discusses tax filing rules for Self-Directed IRA investors. Bergman begins by explaining that single-member LLCs are treated as disregarded entities for tax purposes and therefore do not require a tax return to be filed. LLC owners report income on their tax returns, as LLCs are flow-through entities, unlike corporations, which have a corporate-level tax. Bergman emphasizes that there are no tax filings for LLCs where an IRA owns 100% of the LLC.
Multiple-member LLCs, however, are treated as partnerships and require Form 1065 to be filed, along with respective state forms. Bergman emphasizes that no taxes are due, but the return needs to be filed since it is a requirement imposed by the IRS. While the filing deadline for Form 1065 is March 15, an extension of six months can be obtained by filing Form 7004. IRA Financial offers a $299 annual compliance service for clients, which includes the filing of Form 7004 and Form 1065.
Bergman explains that the K-1 form that accompanies the Form 1065 tells the IRS who the partners are, including their tax ID numbers and addresses. He stresses that clients need not worry about filing the Form 1065 themselves since IRA Financial will handle it for them. The tax attorney also notes that the 1065 applies to multiple-member LLCs with two or more members, not single-member LLCs.
Bergman advises clients to check their operating agreements and cap tables to determine the number of members in their LLCs. If the LLC has two or more members, whether individuals or IRAs, Form 1065 must be filed. Even if clients invest in a hedge fund or private equity fund, they do not have to file the Form 1065 since the fund files it instead. Bergman reminds clients that although LLCs may not be businesses, they are still treated as joint ventures, and as such, clients need to file.
In conclusion, Bergman stresses that March 15 is the deadline for filing Form 1065 for multiple-member LLCs. Bergman also highlights that a single-member LLC does not require a partnership return to be filed. Bergman advises clients to check their operating agreements and cap tables to determine the number of members in their LLCs and encourages them to join IRA Financial’s compliance service.
To learn more, listen to the podcast in its entirety.