LLC closing, owing the IRS

[Openfire]

I have a client that received a CP162 from the IRS, charging them a penalty for not filing an extension. $7020.00 for late filing (6 members, 6 months late, $195. each per month) . They are trying to close the LLC, and have been slow distributing Letters to all members, although all members agree that the corp. is no longer viable. I am attempting to wrap things up for them. Has anyone had any experience working with the IRS on this? Any great ideas to get this dismissed? I am considering amending last years return to reflect a final return. Is that a good approach? There are no assets, only debts left in the Company.

[Gretel]

I have a client that received a CP162 from the IRS, charging them a penalty for not filing an extension. $7020.00 for late filing (6 members, 6 months late, $195. each per month) . They are trying to close the LLC, and have been slow distributing Letters to all members, although all members agree that the corp. is no longer viable. I am attempting to wrap things up for them. Has anyone had any experience working with the IRS on this? Any great ideas to get this dismissed? I am considering amending last years return to reflect a final return. Is that a good approach? There are no assets, only debts left in the Company.

If there was no business activity other than closing down the LLC I do not see anything wrong with your approach, if they are taxed as partnership. You mention "corp" in your post but I am not sure you really mean corp. If indeed corporation they need to file certain documents with the State. A LLC has this requirement too but it will depend on the state if they really need to do this. In my state (MT), LLC's don't.

[Burke]

You might get it abated, if there were no items of income to flow-through to the members for which taxes might have been due. I did it once for a partnership, but it was a long time ago. Be sure to specify that fact. And argue a second time if necessary.

[Openfire]

Thank you both!

[BOB W]

LLC's and CORPORATION's are the liable entity for its debts. No personal libility to members or shareholders unless it is trust fund monies. Since no money is due by the members it should be easy to approach this issue. 1- do nothing and close the entity. 2- Tell IRS the entity is closed with no assets. 3- request abatement for reasonable cause or first time error.

In the end, as long as there were no assets distributed to members, there is no liability to members for this issue regardless any other action taken or not taken.