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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 1052
Experience:  Tax Preparer for 16 years; 25+ years experience as a real estate/corporate paralegal.
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I have a 4 person Delaware LLC. We formed in late 2010 and

Customer Question

I have a 4 person Delaware LLC. We formed in late 2010 and had first income in 2011. We failed to file for 2011, and have an extension for 2012 (so we plan to file by the deadline tomorrow). My question is: what is the proper procedure for getting square with the IRS for 2011? I've heard we need to write a letter explaining why we failed to file...is this true? Is there a form that is filed? Do we still do our regular filing and distribute K-1's for 2011 and 2012? Do we attempt to estimate a late fee?

FYI, total income in 2011 was ~ $22,000. (split between 4 people). I know some of the people (myself) listed the llc income on my 1040 Sch. SE, even though the llc did not send out K-1s.

Thanks in advance for your help.
Submitted: 1 year ago.
Category: Tax
Expert:  Barbara replied 1 year ago.

Welcome. My name is XXXXX XXXXX it will be my pleasure to assist you with your tax question today.

 

The proper procedure is to file the 2011 tax return for 2011 as soon as possible, including issuing the K-1s to each member. Even though your question states that you have reported the income from the LLC, each of you will need to amend your 2011 tax returns to include the information from the K-1s in a proper manner.

 

As to 2012, the procedure will be the same as for 2011. Once these returns are filed and your personal returns are amended, you will be up to date on all tax returns.

 

As to the penalty involved for late filing of the 2011 return, my advice would be to file the return with a detailed letter of explanation respectfully XXXXX XXXXX of any penalties. You will want to be sure to include in your letter that late filing of the 2011 return was NOT willful neglect to do so, and you will also want to emphasize that you promise to file all future tax returns in a timely manner. I would not estimate any penalty payments when submitting the 2011 return with your letter. Give the IRS time to review the facts, and let them determine if they will abate any/all of the penalty involved.

 

By the way, even though your question did not address 2010, you will also need to file a tax return for 2010. Since your question states you had no income until 2011, you will still need to file a return and issue K-1s, even if all amounts are 0. In that case, there will be no need for each of you to file amended personal tax returns.

 

Please let me know if you require further assistance or clarification.

 

Thank you and best regards,

Barb

 

 

Expert:  Barbara replied 1 year ago.

I see your are now offline. Please let me know if you were able to view my answer to you and if you have any follow-up questions.

 

Thank you and best regards,

Barb

Customer: replied 1 year ago.

Barbara,


 


I was looking through my old notes and found a form 8832. I don't think we ever filed this. Should we file this as well along w/ our 2010 form?


 


I initially thought it was just for declaring classification as a partnership, but I also see it has a section for "Late Election Relief"...should put something here w/ regard to the explanation letter you mentioned?


 


Also, what is the form/basic process for an amended personal return?


 


Thanks for your help,


 


Brad

Expert:  Barbara replied 1 year ago.

Hi, Brad.

 

Sorry for the delay in responding.

 

As to the 8832, what was the election for? When you formed the LLC, was your intention to be a partnership, C corporation or S corporation? Since an LLC is a disregarded entity for tax purposes, in the case of multiple members, the default is a partnership. You would utilize Form 8832 to change that classification to a C corporation or S corporation. The "late election relief" pertains to if you actually wanted to be taxed as a corporation, but failed to timely file Form 8832 to do so.

 

In order to amend your personal return, you would utilize Form 1040X as well as any new schedules/forms (in your case, I believe it would require at least Schedule E) and send in the 1040X with the NEW schedules/forms. Do not include a copy of what was previously filed. Amended returns have to be mailed in as opposed to electronically filed.

 

The request for abatement letter has to do with late filing penalty and has nothing to do with Form 8832.

 

Please come back to me here with any further questions.

 

Thank you and best regards,

Barb

Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 1052
Experience: Tax Preparer for 16 years; 25+ years experience as a real estate/corporate paralegal.
Barbara and 3 other Tax Specialists are ready to help you
Expert:  Barbara replied 1 year ago.

Hello again, Brad.

 

Just a short note to thank you for the "excellent" rating. It is most appreciated. If you have any questions in the future, please feel free to request me specifically by putting "for bkb1956 or Barb" in the subject line, and I will be happy to assist you. Recommendations to family members and friends are also always appreciated.

 

Thanks again and have a great day,

Barb

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