LLC no income, didn't file

[Penelope]

A client didn't want to file a 1065, because there was no income and negligible expense. They didn't want to pay my fee to prepare the return, since they might close the business. The IRS sent them a notice asking why they didn't file. Is it ok that they didn't, and can they simply respond by indicating there was no income and they haven't decided whether to close the business.

Thanks for any help.

[Bees Knees]

I will make an assumption that your LLC has 10 or fewer partners.

If that is the case, respond to the IRS letter and say the partnership did not file Form 1065 because there was no activity, the partnership has 10 or fewer partners, and the failure to file penalty does not apply because the partnership meets the reasonable clause exception under Rev. Proc. 84-35.

Rev. Proc. 84-35 is the revenue procedure that says there is no penalty for failure to file a 1065 if there are 10 or fewer partners.

[jainen]

Don't forget to charge them

>>They didn't want to pay my fee to prepare the return<<

Don't forget to charge them for the tax advice -- probably about the same as a minimal return. In fact, filing the return now is the simplest way to handle this. The state might require one anyway.