Got a penalty from the IRS for late filing of business taxes of $1,950 for a 2-man LLC. We dissolved the company back in July Were we supposed to file immediately?

[jonnyrocketti]

They've charged us $195.00 per month, implying that we were 5 months late.

We only made $2,000 that whole year, so I'm very reluctant to shell out that much for a late penalty. Anyone know why this happened, and is there anything I can do? We filed during tax season for two prior years with no problems.

[hbbcpa]

Yes, that's a hefty charge for filing late; seems like they're basing it on short tax year ending in July, which would require a return to be filed 3 and half months thereafter.  How did the IRS know that the LLC dissolved; typically that's a state-related matter?

[jonnyrocketti]

We put the date down when we filed our federal return. The dissolve date doesn't hinge on a specific event. So I have no problem filing an amended return showing our dissolve date at end-of-year, if that's all it takes to solve the problem. Think that'll do it?

[hbbcpa]

I'm not sure what you're referring to about putting down a date.  Did you already file a 2015 Form 1065 for a short year ending in July 2015?

[jonnyrocketti]

I'm not sure which form the info is in since I used TurboTax. At some point during my 2015 return (which I filed last month), it asked me if we closed business this year, and I put down "Yes" along with a date in July. I did not file a 1065 unless that was included with my annual return filed via TT.

[jonnyrocketti]

Oh, and thanks for your help. Much appreciated.

[hbbcpa]

I'm assuming since it was a two-member LLC that it was a partnership return (Form 1065).  Either go to forms view or print preview a copy of the return; I'm guessing if you look at page 1 of the 1065, it says tax year ending July 2015 on top.

[jonnyrocketti]

I will check it out. If that's the case, what do you suggest we do to mitigate this late fee? THANKS!

[hbbcpa]

I don't want to decide whether you should amend, but something should be done - see answer.  Best

[rclassen]

See the following sources:

[hbbcpa · Accepted solution]

It seems that the Final Return box was checked and that it was for a short period ending July 2015 (see page 1 of the return on top to verify).  That's why a late filing penalty was assessed.  If you decide to amend and show it as terminating at the end of the calendar year, that would be your call.

If you don't want to amend, you should definitely try to contest the penalty, particularly since the late filing does not affect the filing of the two members' individual returns since they are due by mid-April regardless of when your business return should have been filed.  See the following link which is a good resource for the same situation.

[jonnyrocketti]

Thanks again. This is essential info for us to have.

[jonnyrocketti]

I just called the IRS and they had the penalty voided. I just had to explain the situation and ask politely!

[hbbcpa]

I'm very glad to hear the good news.  Thank you for letting me know outcome.