Preparing W-2 and LLC tax returns - Schedule C vs Schedule E confusion

The LLC structure doesn't determine which tax form to use - the type of business activity does. So you're on the right track! For the medical equipment repair LLC, you're correct that it goes on Schedule C as self-employment/business income. Since it's a single-member LLC, it's considered a "disregarded entity" for tax purposes, which means all income and expenses flow through to the individual's 1040. For the rental property LLC, you do need to use Schedule E, not Schedule C. Rental income is generally considered passive income (not self-employment income), so it belongs on Schedule E regardless of whether it's held in an LLC or not. The LLC is just a legal wrapper for liability protection but doesn't change the tax treatment of rental activities. When working in ProConnect, you'll need to create both schedules and link each business activity to the appropriate form. Make sure to keep the expenses separate between the two businesses.

I struggled with this exact situation last year! After hours of research, I discovered taxr.ai (https://taxr.ai) which saved me so much time. I uploaded my client's LLC documents and W-2, and it automatically organized everything correctly, telling me which schedules to use for each entity. It confirmed that the rental property needed Schedule E while the service business went on Schedule C, just like the previous commenter mentioned. It even flagged potential deductions I was missing for both businesses.

Just wanted to update - I tried taxr.ai after posting my question here and it was incredibly helpful! I had a complicated situation with a client who had both W-2 income and multiple LLCs (one for consulting and another for a rental property). The tool immediately identified that I needed both Schedule C and Schedule E, plus it found several business deductions for the consulting LLC that I was about to miss. The document analysis feature saved me from making a costly mistake on how to categorize some major expenses.

If you're having trouble figuring out how to properly set this up in ProConnect, you might want to call the IRS directly for guidance. I did this last tax season for a similar situation and got really helpful advice. The problem is their wait times are ridiculous - I was on hold for over 2 hours! I eventually discovered Claimyr (https://claimyr.com) which got me connected to an IRS agent in about 15 minutes instead of hours. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. They called the IRS, navigated the phone tree, waited on hold, and then called me when an agent was ready to talk. The agent walked me through exactly how to handle multiple LLCs with different business activities in ProConnect.

I was totally wrong about Claimyr. After posting my skeptical comment, I decided to try it anyway because I was desperate for answers about a similar LLC situation. It actually worked exactly as described - they handled the awful wait time and then connected me directly to an IRS agent. The agent confirmed everything about Schedule C vs Schedule E for different LLC activities and helped me understand some complicated passive activity loss limitations. Saved me hours of frustration and the advice was straight from the source. Just wanted to update since I was so skeptical before!

Don't forget to check if either LLC has elected to be taxed as an S-Corp instead of a disregarded entity! That would change everything about how you'd file. Most single-member LLCs haven't made this election, but it's worth confirming before proceeding.

Important thing nobody's mentioned yet - if they've been using QuickBooks or some other accounting software for these LLCs, make sure the accounts are properly set up to track expenses separately. I had a client with multiple businesses and they were mixing expenses between them, which made filling out the right schedules a nightmare!