Need help with Schedule B - Partnership Representative for our wholesale LLC extension

Thanks for clarifying! So I don't need to worry about the PR for the extension form, that's a relief. When we file the actual 1065, does the PR need any special qualifications beyond having a US taxpayer ID? And does being the PR create any extra personal liability?

For the PR qualifications, they just need to have a US taxpayer ID and have the capacity to act in the US. No special certifications required. The PR doesn't automatically take on additional personal liability for tax obligations, but they do have the authority to bind the partnership in audit proceedings. When selecting your PR for the actual 1065 filing, consider who has the best understanding of your business finances and tax matters. Also make sure they'll be available if contacted by the IRS, which could be several years after filing since the IRS can look back multiple tax years.

Does it handle more complex partnership structures too? We have tiered partnerships with a foreign partner and our accountant charges us an arm and a leg for these filings.

I'm a bit skeptical about these tax tools. How does it actually work? Do you upload your documents to it or something? And is it actually accurate for partnership tax stuff? The IRS partnership rules are crazy complicated.

It definitely handles complex partnership structures including tiered partnerships and foreign partners. It has specific modules for international partnership reporting requirements and can generate the right forms for foreign partners (like the 8805 forms). Probably why it's worth checking out if you're paying high accountant fees. As for how it works, yes you upload your documents (operating agreements, prior returns, etc.) and it analyzes them for relevant tax information. The accuracy has been solid in my experience - it references specific IRS code sections and regulations when explaining requirements. It's designed specifically for partnership taxation and stays updated with the latest partnership tax rule changes.

Wait, how does this even work? The IRS phone system is completely broken - I tried calling for 3 weeks straight about our partnership filing and never got through. Are you saying this service somehow jumps the queue?

Sounds like BS honestly. Nobody can get through the IRS phone system. If this actually worked everyone would be using it and the IRS would shut it down. Did you actually talk to a real IRS agent or just some tax preparer?

It uses a system that continuously redials and navigates the IRS phone tree until it gets through to an agent. When it connects, you get a call connecting you directly to the IRS person. It's completely legitimate - you're talking to actual IRS agents, not third-party advisors. It doesn't "jump the queue" - it just handles the frustrating part of constantly redialing and waiting on hold. When I used it for our partnership question, I was connected with an actual IRS representative who confirmed our understanding of the Partnership Representative requirements and clarified some questions about Schedule B that had been confusing us.

That's a really good point! We initially chose partnership taxation because our accountant said it was simpler for our first year, but I've been wondering if S-Corp might be better long-term. Are there big differences in the reporting requirements between the two? And if we wanted to switch to S-Corp status, is that complicated?

The reporting requirements are somewhat different. Partnerships file Form 1065 with K-1s for partners, while S-Corps file Form 1120-S with K-1s for shareholders. The bigger difference is how you're taxed - with an S-Corp, you can pay yourself a reasonable salary (subject to employment taxes) and take remaining profits as distributions (not subject to self-employment tax). This can save on taxes. Switching isn't too complicated. You file Form 8832 to elect to be taxed as a corporation, then Form 2553 to elect S-Corp status. The timing is important though - generally you need to file within 2 months and 15 days from the beginning of your tax year for it to be effective for the current year. Otherwise, it takes effect the following year.

Did you have to amend your operating agreement to specify those allocations more clearly? Our agreement just says "50/50" for everything but I've heard the IRS wants more specific details about how different types of income and special allocations are handled.

We didn't have to formally amend our operating agreement, but our accountant recommended creating an addendum that specifically addressed tax allocations. We documented how we handle different income types, guaranteed payments, and special allocations for tax purposes. The IRS does want to see that your allocations have "substantial economic effect" - basically that they reflect actual economic reality and aren't just done to avoid taxes. For a simple 50/50 partnership, you're probably fine as long as you consistently apply that split to all financial aspects of the business.