LLC-Partnership Election

[S T]

I have a LLC-with Partnership Election - that was created in 2007 and has filed "NO" tax returns.

There is no Income - all returns generate a "Loss"

I am presuming that the LLC will receive the "dreaded" late filing penalty notice for all years 2007 - 2011.

Does anyone know if it is possible to "abate" those penalties on a year by year basis under Rev Proc 84-35 - Less than 10 Partners? (We have only 3 partners)

I have successfully abated these penalties on "one year" but not "5 years"

Would be interested in any experiences relating to the Abatement of Partnership Penalty Late Filing for multiple years

Sandy

[BHoffman]

Rev Proc 84-35

If Rev Proc 84-35 applies to each year, then perhaps the same letter can be sent in response to each of the CP letters you receive. I'd give that a try.

[DaveinTexas]

I have

Succesfully had the late file penalties removed for three years at a time for a partnership with four partners. My situation was a bit odd though. Two of the partners were not my clients so I had no idea if they filed their personal returns timely (I have a strong feeling they didn't file timely for at least two of the years that were abated) which as I recall is a provision of the procedure.

I wrote the letters anyway because, if you don't ask you won't get it, and the letters worked. A $2000 penalty (approx.) for each year abated. Maybe the IRS employee thinks the existence of the letter is cause for automatic abatement, maybe they don't even review the individual partner's returns; I'll have to check the IRM on that one.

If the letter doesn't work for all three years, it may work for at least the first year due to ignorance of filing requirements (the client's ignorance). Also, if the activity is a passive one for the partners, a loss would have zero effect on their personal returns anyway (more ammunition to write in your letter possibly).

It is worth a shot but I would respond to each letter separately when and if they come, as suggested earlier. Good luck and let us know the outcome.

[DaveinTexas]

Just read this section in the IRM

This is a little startling but I have not had any repercussions and it has been at least two years since the penalties were abated:

From the IRM section 20.1.2.3.3.1 under number 5:

When abating the penalty under the provisions of Rev. Proc. 84-35, advise the taxpayer that the penalty will be reassessed if it is later determined that any of the criteria outlined in Rev. Proc. 84-35 have not been met: Specifically, if it is found that any partner was not a qualifying partner; or, if any partner filed late; or, if any partner failed to report their share of partnership income on their return, then the penalty will be reassessed.

It does go on to state that if the partnership does not qualify under the rev proc that the penalty can still be abated if there is reasonable cause. Use your imagination at this point.

[S T]

Thanks for the posts -
I will have to do year by year using Rev Proc 84-35 - and hope that it works!

Dave In Texas - I have a similar situation - I am only preparing two partners returns - so not sure about what the 3rd partner filed or did not file.

Will hope for the best - fortunately all years 2007 - 2011 are all losses on the K-1 forms

Many Thanks

Sandy

[DaveinTexas]

Keep us posted

And I will let you guys know if the IRS changes their mind on my case.