Un filed taxes

[jimzim12]

I have a LLC client that did not file taxes from 2007 – 2011, taxes were filed beginning in 2012. Secy. Of state records show company suspended . Client would like to reinstate company by filing back state taxes, however this might trigger an IRS filing which could result in huge penalties. Also there is a late filing penalty for 2014 of $595.00.
The late filing has reasonable cause however if I request abatement of penalty will that trigger a look at past filings.
Or pay late penalty and let “sleeping dogs lie” and do not file back taxes and form new company
What do you think?

[ATSMAN]

I have a LLC client that did not file taxes from 2007 – 2011, taxes were filed beginning in 2012. Secy. Of state records show company suspended . Client would like to reinstate company by filing back state taxes, however this might trigger an IRS filing which could result in huge penalties. Also there is a late filing penalty for 2014 of $595.00.
The late filing has reasonable cause however if I request abatement of penalty will that trigger a look at past filings.
Or pay late penalty and let “sleeping dogs lie” and do not file back taxes and form new company
What do you think?

Is this a SMLLC?

Was there any income 2007 to 2011? Were any K1s generated?

There is a Rev Proc that may help if K1 was reflected in the member's 1040 for the years 1065 was not filed. Need more facts to see if it even applies.

[rkhan71]

My take...

If client is wishing to file only for state, and wishes a "restart" if you will of the LLC, you do need to come clean with the state and the SOS. That is, having filed all of the returns and formalizing that aspect of it. If any monies are owed as a result, that needs to be cleared before reinstating with the SOS. But bottomline, all taxes, penalties, and interest have to be paid.

You can theoretically abate penalties, but this is on a case by case basis. As far as the IRS, if they are not bothering the client at this point, there may not be a filing requirement. As was asked, is this a SMLLC, a partner LLC, or a corp LLC? This will determine the IRS' role in whether a partnership return or corp return has to be filed. And there will be penalties for having not filed. But if returns were filed, under what entity situation?

The first stage is done, filing of taxes (but as what?). Now the workout; but what kind of entity as an LLC? You then have to work it out once you identify the entity it is. Can't tell you anything else until we know the type of entity. If a person has not taken care of the past company, the client has not "cleared" his circumstances, so opening a new company is not necessarily a good idea. Maybe opening under another person's name, but you still have the previous circumstance to clear going forward (just a thought not necessarily a suggestion). But it depends.

Ray

[jimzim12]

Additional info

This is a 3 member LLC, there was income in 2007-2011 that was reported on the members individual returns as if the entity was disregarded, still concerned about the late filing penalty with the fed, ask for an abatement of pay penalty to avoid raising an inquiry?

[ATSMAN]

This is a 3 member LLC, there was income in 2007-2011 that was reported on the members individual returns as if the entity was disregarded, still concerned about the late filing penalty with the fed, ask for an abatement of pay penalty to avoid raising an inquiry?

Please review Rev Proc 84-35. It may help you.

If these conditions are met, then you can ask for abatement of any late filing penalty:


Is this a domestic partnership?
Are there 10 or fewer partners?
Are all partners a natural person (other than a nonresident alien) or an estate?
Is each partner’s share of each partnership item the same as his share of every other item (a husband and wife and their estate shall be treated as one partner)?
Have all the partners fully reported their share of the income, deductions and credits of the partnership on their timely filed income tax returns?