Sponsor Has Not Issued 2020 K-1 - What To Do?

[Curious One]

I hold an interest in an LLC in IL.  The sponsor has always been late in issuing the K-1, but has ultimately done so.  The investment has not gone to plan and the sponsor has been entirely uncommunicative throughout the hold period.  I understand that the asset is in distress, and possibly foreclosure.  For these reasons and more, I'm concerned that the sponsor won't be issue the K-1 at all.  Regardless of any consequences the sponsor may face for failing to do so, I'm most interested in knowing what I'm supposed to do to deal with this scenario.  What entries do I make in the K-1 for this entity, if any?  What commentary to I provide to the IRS or state revenue office?  How do I enter them in Turbo Tax?  Etc.

[Critter-3]

File without it now and amend later if or when you eventually get one. 

[Mike9241]

per the IRS

Use Form 8082 to notify the IRS of any inconsistency between your tax treatment of an item and the way the pass-through entity treated and reported the same item on its return. Also use the form to notify the IRS if you did not receive Schedule K-1

If you don't notify the IRS that you are reporting an item (Part I, line 1, box a) inconsistently, any
deficiency (including any late filing or late payment penalties applicable to the deficiency) that results from an adjustment to make your amount or other treatment of the item consistent with the amount or treatment of the item on the pass-through entity's return, may be assessed immediately. 

[Curious One]

I see on Form 8082 that I have to make an election as to what form of entity I'm involved with.  It seems only two options are potentially applicable, either a TEFRA partnership or a BBA partnership.  BBA seems to follow TEFRA in time, but what is the correct measurement point - date of formation, commencement of activity, tax filing year, other?  How do I determine which one applies to my circumstances?  Also, can 8082 be filed through Turbo Tax?

[tagteam]

No version of TurboTax supports Form 8082; you will have to print and mail the form.

[tagteam]

BBA unless the partnership can, and does, elect out.

[Curious One]

What do you mean by elect out?  And in any event I have almost no visibility into what the partnership has done since the venture began.  Is there a way to get details about this issue through channels other than the sponsor or its advisors?

[tagteam]

See https://www.irs.gov/instructions/i8082#idm140168378701952

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@Curious One wrote:

Is there a way to get details about this issue through channels other than the sponsor or its advisors?

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Not unless the entity is publicly traded.

[Rick19744]

I don't believe a form 8082 is necessary.  This form is to report to the IRS that you are treating items reported on the K-1 in a manner differently than that reflected on the K-1.

You don't have any K-1, so there is no way that you are reporting anything inconsistently.

I understand that the instructions indicate to file if no K-1 received, but I don't recommend doing so at this point.  I doubt many, if any taxpayers do this.  This will definitely generate IRS scrutiny.

A couple of comments:

• You indicate that the LLC may be in distress.  This tells me that the LLC most likely passed through losses.
• Do you have any tax basis to take any further losses or is your tax basis zero?
• Without any additional information, if you have not received the K-1by your filing deadline, I would just leave it blank.
• Should you receive a K-1 after filing your tax return, you then just amend your 1040 with the updated information.  Make sure that you keep the envelope that the K-1 came in so as to validate the post mark and approximate date you received the information.  This may come in handy at some point.  Burden of proof is always on the taxpayer initially, so you need to have this information.

Addendum

• If you feel the need to file form 8082, keep in mind you will need to paper file your tax return.
• There are a number of items on this form that have no applicability to your situation.
• You most likely have no idea of the service center for the LLC filing
• If you do file, I would only complete Part I lines 3,4,6 and 7 and then the explanation in Part III indicating that no K-1 has been received by the due date for filing your tax return.
• As noted previously, this will certainly bring IRS scrutiny.   

[Curious One]

Helpful and definitely addressed a concern I was considering about drawing unnecessary scrutiny to my return.  It's already complicated enough.  I do suspect the entity is loss-making and I do have basis to absorb it unless extreme relative to my original investment, which seems unlikely.  If so, then as I wouldn't have any incremental tax liability arising from this investment, then any later amendment shouldn't be problematic.  As for evidence, the K-1 if/when delivered, will likely come via email or portal, but I will receive  notification of its availability, which in itself will be date stamped so that should suffice.  Just in case I have sent an email to the accountants for the entity asking for missing details on the 8082 as well as basic statement of tax performance in 2020 without any details, assuming K-1 is not to be issued, or issued timely.  If they respond, at least this way I should know whether loss-making or not and can show bona fides at attempts to obtain information.  

[Rick19744]

@Curious One see my addendum to my original post.

If you do have tax basis and losses are expected, then this is really no problem.  Adding a K-1 later will only provide you with a refund.

If this entity was generating significant income, and you didn't have the K-1 to report, then I would probably suggest filing form 8082 to mitigate any potential penalty.

If the K-1 will reflect losses, then there is no penalty issue.