Single member LLC for rental properties - do I need a federal tax ID? Will it affect W2 income offset?

Thanks for the explanation! So if I understand correctly, getting an EIN won't change how my taxes work - I'll still report everything on my personal tax return using Schedule E? And can you explain a bit more about those "passive activity loss limitations"? I'm hoping to deduct quite a bit from some major plumbing and roof work I'm doing on the properties.

Exactly right - getting an EIN won't change how your taxes work. You'll still report everything on Schedule E of your personal return. Regarding passive activity loss limitations, rental real estate is generally considered a passive activity. This means losses can only offset passive income, not your W2 income, with two important exceptions: 1) If your modified adjusted gross income is less than $100,000, you can deduct up to $25,000 in rental losses against non-passive income. This phases out as your income rises and disappears completely at $150,000. 2) If you qualify as a Real Estate Professional for tax purposes (750+ hours working in real estate businesses), the passive activity limitations don't apply, allowing unlimited offset of W2 income. These are simplified explanations - definitely consult with a tax professional about your specific situation.

Did you actually find it useful for rental property questions? I've tried other tax programs but they always seem to fall short on specific rental property scenarios. How detailed does it get with explaining the passive activity rules?

I'm skeptical about these AI tax tools. How does it handle state-specific LLC rules? Each state has different requirements for LLCs and tax treatment can vary. Does it account for that or is it just general advice?

I found it extremely useful for rental properties. It helped me identify several deductions I was missing like partial home office expenses for managing my rentals and travel costs to check on properties. The passive activity explanations were comprehensive - it broke down exactly how much of my losses could offset W2 income based on my specific income level and participation. It definitely handles state-specific rules. I have properties in two different states, and it highlighted the different LLC requirements and tax treatments for each. It even pointed out that my state has a specific rental property tax that wasn't being properly calculated on my previous returns. The advice was tailored to my situation, not just generic guidelines.

How does this service actually work? Sounds too good to be true. Does it just automate the call process or something? I've literally spent hours on hold with the IRS only to get disconnected.

This has to be a scam. There's no way to "skip the line" with the IRS. They're notoriously understaffed and everyone has to wait. I'm not buying that some service can magically get you through faster than everyone else.

The service works by using an automated system that calls the IRS and waits on hold for you. When an agent finally picks up, you get a call connecting you directly to that agent. It basically handles the hold time so you don't have to sit there listening to the hold music for hours. It's definitely not a scam. I was skeptical too until I tried it. It doesn't "skip" any lines - it just waits in the same line everyone else is in, but you don't have to be on the phone during that time. The IRS doesn't know or care that a service waited on hold instead of you personally. They just answer the call when it reaches the front of the queue. It saved me from wasting an entire workday waiting on hold.

That's a really good point about the 1099s I hadn't considered. I'll definitely be paying contractors well over $600 for the renovations. If everything still goes on Schedule E, do you know what the process is like for tracking expenses between multiple properties? Do you separate them by property or just lump all rental expenses together?

You'll want to track expenses separately for each property. Schedule E has separate columns for each rental property, and you'll need to report the income and expenses for each one individually. This is really important for keeping clear records in case of an audit. I use a simple spreadsheet with separate tabs for each property, tracking all income and categorizing expenses (repairs, maintenance, insurance, property tax, etc.). Makes it much easier at tax time. And yes, definitely get an EIN for those 1099s. Contractors much prefer getting a 1099 with a business EIN rather than your personal SSN.

I switched from TurboTax to H&R Block's premium version last year and found it handled my rental properties much better. It has a specific rental property section that walks you through Schedule E and clearly separates the business entity question from how the tax treatment works. Didn't get confused about my single-member LLC status at all.

Thanks for the recommendation! I'll check out H&R Block's premium version. I was getting so frustrated with the corporate filing questions when I just need everything on my personal return.

That's a great point! I should look into Missouri's specific requirements. Do you know if these state fees or filings would show up in tax software, or is that something I need to research separately?

Most tax software should alert you to state-specific filings, but I'd definitely do your own research too. In my experience, the standard tax programs don't always catch everything, especially for LLCs. Missouri might have annual reports or fees that aren't technically "taxes" but are still required filings. Your Secretary of State website should have this info. Better to know ahead of time than get surprised by penalties later!