We used a CPA to file our returns for 2011 and 2012 for our LLC.
Our CPA had deducted costs (instead of capitalizing). The amounts were really huge - $40K/member for 2011 and $80K/member for 2012.
Since our LLC is a partnership (flow through entity) this reduced our taxable income
on our personal tax
This year, my co owner checked the tax returns
with another CPA who said the original returns were not correct and he should have capitalized them instead of deducting.
I then asked my co owner to amend the LLC returns for both the years and we filed the amended tax returns in July 2013.
IRS didn't audit or send any notices for these LLC tax returns.
We then amended our individual tax returns which resulted in a huge tax
bill (due to the amended K1s which showed far less losses). I paid the tax owed and also penalties and interest. I used another CPA (3rd CPA) to amend my personal tax returns. He requested for abatement since the errors were caused by the CPA who prepared our original LLC tax returns. IRS didnt' audit or send any notices for my personal tax returns.
My questions are:
1. Will IRS accept my abatement request and refund the penalties paid?
2. Will IRS audit the original LLC return or my personal tax returns?
3. Will IRS audit the amended LLC return or my amended personal tax returns?