Nonfiler since 1998

[Jesse]

This pertains to a friend of my Mothers, so I probably will never be compensated the top dollar this deserves! And please don't tell me to walk, no run from this one because it's just not that easy, and I'd like to help I'm just perplexed as where to start! Any suggestions?

This persons husband passed away last month and the last time a tax return was filed is 1998 and it involves a partnership between the the husband(95%) and one of their children(5%). Regarding the P-ship form 1065 I have bank statements w/ cancelled checks that I can try to figure the income and expenses but beyond that how in the world can I even begin to construct a balance sheet? Husband took care (or should I say didn't) of everything so Wife is at a loss and the child was given a weekly check and thought Dad was taking charge as well.

Who should sign the Form 1065 the 5% partner or the wife? The kid has not filed either so also has SE and income tax to pay on this income from 1998 to present.

[BOB W]

You have no way of being a winner with this project. A balance sheet may not even be required, so just do your best ( income and expenses ) let the chips fall where they may.

The tax matters partner is the one to sign, wife. that is if she inherited his 95% share. Otherwise the 5% owner is now a 100% owner and is now a sole proprietor after the death of the father or the business is out of business.

[dsi]

Jesse, you should track down of the 1998 P/S return (the last one filed). This will give you the ending/beginning B/S numbers. This is where I would start, assuming of course I already knew the nature of the business's activities.

If they existed, I would also review any payroll returns, sales tax returns, etc. Then I would set them up with a COA using my write-up software, and enter one check at a time.

[Jesse]

Thanks for your comments. I would just like to help these people get a fresh start, I think it is a no win situation.

I entered checks and deposits through 12/2005 so have somewhat of a picture of income and expenses, there are personal checks written out of the business account and it's messy.

The P-ship total receipts are less than $250,000, assets less than $600,000, but obviously, schedules K-1 are not filed or furnished to the partners on or before the due date, including extensions for the P-ship return. Therefore, form 1065 Schedules L (Balance Sheet), M-1 (Reconciliation of Income), and M-2 (Analysis of Partners' Capital Accounts) are required.

1998's Form 1065 met all requirements, therefore none of these schedules were required. What will happen if I leave these blank?

There are extensions filed for each and every year, but to tax returns, no compilation of any income/expense. Former CPA had all check stubs through 2005 in his file but did not appear to do anything with them. He passed away late last fall so all files were given to taxpayers just as he had left them.

No payroll or sales tax involved - Thank goodness!