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Turbo Tax Filing of Federal LLC Dissolution

Hi,

Background:  I'm a single member LLC. I just sent in my Certificate of Dissolution to my state to close in tax year 2023.  Since the business' formation, I have always filed business taxes through my personal taxes using Turbo Tax.  For the federal dissolution, I read that I need to file Forms 966 and 11-20-S along with Schedule K-1 potentially form 4797 for auto mileage depreciation but not form 8594.  There will be no income or loss in the 2023 tax year.

Question:  Will Turbo Tax prompt me in my 2023 filing to ask if I've closed the business and if so, will it automatically ask questions to populate the federal dissolution forms above in my personal 2023 filing, or is the completion of these forms a separate activity?  If automatically, will it attempt to file them for me or not since a letter is required to then close the IRS business account (applicable if not designated as a separate entity?) and cancel EIN (reading mixed IRS instructions on this, one says cancel and another says an EIN is permanent)?

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8 Replies

Turbo Tax Filing of Federal LLC Dissolution

I am going to page @Rick19744, but you would need to file Form 8594 if you sold the company and goodwill or going concern value attached, or could have attached, to assets sold.

 

Otherwise, the program will ask you some basic questions during the interview but you will have to use Forms Mode for certain forms such as Form 966 (and Form 8594, if necessary).

Turbo Tax Filing of Federal LLC Dissolution

I think we need some clarification and additional information before responding:

  • You indicate that you made an entity classification to be taxed as an S corporation.
  • You then indicate that "...you have filed business taxes through my personal taxes..."
  • What business return have you been filing each year for the S corporation?
  • When was the S corporation formed?
  • What state was the LLC formed in?
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.

Turbo Tax Filing of Federal LLC Dissolution

Thank you for your clarification request,

Clarification:  I realized after posting that I may have mixed up the information:  I'm a single member/owner LLC in Michigan.  I filed an entity classification election form 8832 in February 2003 (Form Rev September 2002) I selected option C. A domestic entity with a single owner electing to be disregarded as a separate entity and have paid business income taxes via a schedule C on my personal tax return.  The business does have a separate EIN for the purpose of paying Michigan business transaction Sales Taxes, which are filed separately.   In reading about dissolution, I read federal step one as paying your final taxes using forms 996 and 1120-S + schedule K-1 and checking final return, which I suspect is not correct for me as a disregarded LLC since I never filed business taxes on these forms in the past and only filed via Schedule C on my personal taxes.

Question:  Would the following be accurate steps and in the correct order? 1. State of Michigan Certificate of Dissolution and receive confirmation of processing, 2. File final 2023 Michigan business sales tax, which will be $0, 3. File personal 2023 taxes along with a final schedule C business income/loss form.  4.  Cancel EIN and close business by sending a letter to the IRS:  I'm reading mixed IRS instructions on this step:  ...does the business need to be closed with the IRS if it's not filing corporate tax returns and not regarded as a separate entity from the owner? ...also reading that you can't cancel an EIN so these instructions are confusing.

Thank you,

Turbo Tax Filing of Federal LLC Dissolution

Problem: If you only filed Form 8832, the entity is not an S corporation.

 

In order to elect S corporation status, you have to file Form 2553.

Turbo Tax Filing of Federal LLC Dissolution

Thank you and yes I got this mixed up.

Turbo Tax Filing of Federal LLC Dissolution

Comments as a result of your clarification:

  • Filing form 8832 was not necessary or required.  A single member LLC is by default a sole proprietorship (disregarded entity).
  • File your Schedule C as you have done in the past.  There is no place to indicate it is a final Schedule C.  So going forward you will just not prepare it for this business activity.
  • No form 966 necessary
  • Depending on whether you sold the business or the business assets, will dictate whether additional forms may need to be filed; form 4797, Schedule D or form 8594.  If this is the case, I would recommend you consult with a tax professional for guidance.
  • The EIN assigned to your business will be permanently associated with that business; hence you can't cancel it, nor do you need to notify the IRS.
  • The key for you is making sure all your Michigan tax accounts get closed appropriately; Certificate of dissolution (CSCL/ CD 731) and a final sales tax report.  I would call each department to make sure you understand the necessary steps involved.  Don't assume anything.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.

Turbo Tax Filing of Federal LLC Dissolution

Thank you I appreciate your help.

Turbo Tax Filing of Federal LLC Dissolution

Welcome

*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
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