I suspect that your busines has been open for at least 3 years, more likely longer. Generally, the IRS does not expect any new business to actually make a profit for at least the first 3 years. So if you continue to show a loss in year 4, that may get someone's attention at the IRS. If you still show a loss in year 5, that will definitely raise eyebrows and can result in a letter, just as has happened to you.
I this point I suggest you seek professional help for the main purpose of educating yourself so that you can make an "educated and informed" decision on weather to dissolve the LLC and continue as a hobby if you like, or figure out a way to actually make a taxable profit. There's two people I recommend you talk with.
First, someone experienced in the "business planning" field for whatever line of work your business does.
Second, a well educated tax professional. When it comes to "tax people" there are three very basic types. First, there's the EA (Enrolled Agent). An EA does not have to have any formal tax training like a CPA does. So I would not recommend you seek the services of an EA.
Next is a CPA (Certified Public Accountant). This person will be formally educated in accounting procedures, usually with an emphasis on business accounting. They are also educated on tax preparation for business taxes, and may or may not be educated on tax law.
Finally, there's the tax attorney. A tax attorney will have some type of credentialed degree in tax law.
While a tax attorney would be best for you, for your situation I would consider it to costly. Therefore I would go with a credentialed CPA. It should not be that difficult to find a CPA who is also experienced and well versed in the business planning field too. Then you can basically kill two birds with one stone.
