Originally Posted by ddss

#1;We had to amend our 2011 and 2012 LLC tax returns due to errors committed by our original CPA. Since I was listed as the TMP (Tax matters person) in the LLC operating agreement will I be responsible for these errors?


#2;My partner is mad at me because of this and am scared he may take any legal action against me. The errors were discovered when my partner sought a second opinion from another CPA. I immediately agreed to amend both 2011 and 2012 LLC tax returns to rectify these errors.
Amending of LLC tax returns triggered amending of our personal tax returns.
Since the difference in taxable income is huge (40K for 2011 and 80 K for 2012) we had to pay taxes, penalty and interest.
I just amended my personal tax return this week. My CPA (not the original CPA who did the LLC return or the CPA that amended the LLC tax returns) filed the amended return for me and requested for abatement of penalty and interest.
Would IRS accept this?


#3;Would IRS impose additional penalty due to the huge tax bill (about $18K for 2011 and $25K for 2012)?


#4;Will I be in trouble if my partner files a complaint with IRS or goes for litigation?

Originally Posted by Wnhough

#1;In general, LLCs are very flexible as to how the business is managed. This means that some partners can have more responsibilities than others. A partnership may only designate a general partner as its tax matters partner. LLCs with at least 10 members are subject to the unified audit procedure and must have "tax matters" partners in accordance with the TEFRA rules. A tax matters partner is designated by a partnership to represent the partnership before the IRS in all tax matters for a specific taxable year. some partnerships/ mmllc, must have a tax matters partner .you, as a general partner, are the person who among the LLC owners is the person responsible for tax matters of the LLC; having an LLC may shield you from some personal liability on creditors, but most states and the IRS have legal recourse to assess tax penalties against "responsible persons" if the LLC does not pay tax due. LLC partners, limited partnersm, are only responsible for the debt that they personally guarantee, and are not responsible for the debts held by the company. This means that if the company goes into debt, the partners do not have to pay for it with their personal money.On the contrary , a general partner in a partnership takes part in the daily operations of the partnership and is personally responsible for the liabilities of the partnership.


#2;I guess most taxpayers believe it is easy to get abatement of IRS penalties and interest however you should be aware that it is a very difficult process. Reviewers at the IRS are very picky and do not easily accept the requests to abate penalties;it is a lot easier for them to deny the penalty abatement than to accept it because of the hoops they must go through in the process to get your tax abated. To get your penalty request abated requires manager signatures. Therefore all abatement of penalty cases must be fully documented, well thought out and have substantial documentation to prove a reasonable cause abatement exists. I guess it makes sense if you want an IRS abatement of penalties to call former IRS agents and managers who know the system and the inside techniques used by the IRS. However, as long as you believe the IRS has charged penalties and interest in error based on the incorrect returns, or due to circumstances not your fault but your CPA’s fault, you may qualify for an abatement. With an abatement, you may be able to eliminate part or all of your penalties and interest, but not the initial base tax amount that caused the penalties and interest. Most of the time with an abatement, you will be able to eliminate the majority if not all of the penalties, but not the interest. Eliminating these penalties may lift a huge financial burden off of you, most of the time the penalties make up 25% of the total tax debt amount owed. A penalty abatement can be right for you if you can pay the tax liability owed, but you believe you should not be held liable for the penalties incurred. If you apply for an abatement and it is accepted, it is expected that you then pay your tax liability in full. In order to qualify, you must be very convincing that you should not be responsible for the penalties.
SO, even if the IRS grants your request, you will still have to pay the interest, penalties on taxes you owe. If the IRS does not grant your abatement request, the interest you owe will continue to accrue during the time they are considering your request.
Guidance for Amended Partnership Returns


#3;Possibly Unless you pay the penalties/interests accrued. You may contact experts in penalty abatement in your local area. Also, you may contact your former CPA; Give him a copy of the notice from the IRS. Since there are any penalties, it's highly likely that the CPA will get the IRS to waive them. If they don't and it was his error, his Errors & Omissions insurance should cover them, or he'll do it out of his own pocket. You could ask the former CPA to pay for the interest. If there is any penalty the CPA should definitely pay for that. Also, you might see if you can some of the tax prep fee you paid returned to you. If the CPA refuses to pay anything, then you could sue him, more than likely in small claims court, and also report him to your state's CPA society, aicpa.Anyway, you still will owe the tax to the IRS.


#4;I guess this is a legal issue. It is not your fault but the CPA’s. Perhaps you can get some professional help from a tax attorney. Most tax professionals will cover the penalties if the error is their fault. Some will even cover the interest as well. In reality, the IRS will often waive penalties (but never interest) when the taxpayer has good reason to request it and they generally consider errors by tax professionals as good enough reason to waive the penalty. Interest is never waived as you had use of the money. As said previously, the taxpayer alone is liable for any tax, regardless of who made the error. There's no way around that, nor will any tax professional cover that even if they were at fault themselves.

Originally Posted by Wnhough

#1;In general, LLCs are very flexible as to how the business is managed. This means that some partners can have more responsibilities than others. A partnership may only designate a general partner as its tax matters partner. LLCs with at least 10 members are subject to the unified audit procedure and must have "tax matters" partners in accordance with the TEFRA rules. A tax matters partner is designated by a partnership to represent the partnership before the IRS in all tax matters for a specific taxable year. some partnerships/ mmllc, must have a tax matters partner .you, as a general partner, are the person who among the LLC owners is the person responsible for tax matters of the LLC; having an LLC may shield you from some personal liability on creditors, but most states and the IRS have legal recourse to assess tax penalties against "responsible persons" if the LLC does not pay tax due. LLC partners, limited partnersm, are only responsible for the debt that they personally guarantee, and are not responsible for the debts held by the company. This means that if the company goes into debt, the partners do not have to pay for it with their personal money.On the contrary , a general partner in a partnership takes part in the daily operations of the partnership and is personally responsible for the liabilities of the partnership.


#2;I guess most taxpayers believe it is easy to get abatement of IRS penalties and interest however you should be aware that it is a very difficult process. Reviewers at the IRS are very picky and do not easily accept the requests to abate penalties;it is a lot easier for them to deny the penalty abatement than to accept it because of the hoops they must go through in the process to get your tax abated. To get your penalty request abated requires manager signatures. Therefore all abatement of penalty cases must be fully documented, well thought out and have substantial documentation to prove a reasonable cause abatement exists. I guess it makes sense if you want an IRS abatement of penalties to call former IRS agents and managers who know the system and the inside techniques used by the IRS. However, as long as you believe the IRS has charged penalties and interest in error based on the incorrect returns, or due to circumstances not your fault but your CPA’s fault, you may qualify for an abatement. With an abatement, you may be able to eliminate part or all of your penalties and interest, but not the initial base tax amount that caused the penalties and interest. Most of the time with an abatement, you will be able to eliminate the majority if not all of the penalties, but not the interest. Eliminating these penalties may lift a huge financial burden off of you, most of the time the penalties make up 25% of the total tax debt amount owed. A penalty abatement can be right for you if you can pay the tax liability owed, but you believe you should not be held liable for the penalties incurred. If you apply for an abatement and it is accepted, it is expected that you then pay your tax liability in full. In order to qualify, you must be very convincing that you should not be responsible for the penalties.
SO, even if the IRS grants your request, you will still have to pay the interest, penalties on taxes you owe. If the IRS does not grant your abatement request, the interest you owe will continue to accrue during the time they are considering your request.
Guidance for Amended Partnership Returns


#3;Possibly Unless you pay the penalties/interests accrued. You may contact experts in penalty abatement in your local area. Also, you may contact your former CPA; Give him a copy of the notice from the IRS. Since there are any penalties, it's highly likely that the CPA will get the IRS to waive them. If they don't and it was his error, his Errors & Omissions insurance should cover them, or he'll do it out of his own pocket. You could ask the former CPA to pay for the interest. If there is any penalty the CPA should definitely pay for that. Also, you might see if you can some of the tax prep fee you paid returned to you. If the CPA refuses to pay anything, then you could sue him, more than likely in small claims court, and also report him to your state's CPA society, .Anyway, you still will owe the tax to the IRS.


#4;I guess this is a legal issue. It is not your fault but the CPA’s. Perhaps you can get some professional help from a tax attorney. Most tax professionals will cover the penalties if the error is their fault. Some will even cover the interest as well. In reality, the IRS will often waive penalties (but never interest) when the taxpayer has good reason to request it and they generally consider errors by tax professionals as good enough reason to waive the penalty. Interest is never waived as you had use of the money. As said previously, the taxpayer alone is liable for any tax, regardless of who made the error. There's no way around that, nor will any tax professional cover that even if they were at fault themselves.

Originally Posted by ddss

#1;Since both LLC and personal tax returns were amended, will IRS investigate the original LLC return?

#2;Does amending my personal tax return have any impact on my future or prior tax returns? I have never received any notice from IRS or paid any penalties/interest - so I have a clean record.

#3;When I amended my personal tax returns I included a check for tax owed, interest on the tax, penalties and interest on penalties. If my abatement is rejected, I still don't have to pay anything.



#4;Do you know how long does it take for IRS to process the amended LLC return, personal returns?

Originally Posted by Wnhough

Majority partners owe a fiduciary duty to the minority partners in an LLC. This means that majority partners have the responsibility of managing the company in the best interest of that company, its shareholders and all partners. Majority partners, who do not exercise these responsibilities in good faith, may be accused of breaching their fiduciary duties owed to the minority partners. For example, a minority partner may sue a majority partner if the latter knowingly engaged in a transaction when he was duly advised that such a transaction would be detrimental to the financial viability of the company. A minority partner who brings a lawsuit against a majority partner must do so with a valid basis and an applicable law. Courts often refer to the operating partnership agreement to establish whether there is basis for the case. In the absence of such an agreement, the court applies state laws. Courts may issue an injunction against a majority partner to stop certain action. The defendant may also be ordered to pay for the damages caused to the plaintiff. In very adversarial litigation the P/S faces the risk of dissolution. However, a minority partner may face peculiar challenges in suing a majority partner. For example, the indemnification and advancement provisions in the operating agreement between the partners protect majority partners from the legal expenses of a lawsuit brought against them(an operating agreement is a standard form created when an LLC is formed. It outlines each partner's obligations, duties and responsibilities within the business. An operating agreement is written by the partners, outlining exactly what the partners agree upon regarding the operations of the business and the responsibilities of the members.) This means that a majority partner may be indemnified from expenses brought by the lawsuit, such as legal fees or damages claims. In the case of advancement, other partners are required, by the operating agreement, to contribute to the legal expenses of the lawsuit brought against the majority partner. Paradoxically, a minority partner may find herself contributing to the legal expenses of the person he is suing.

As mentioned previously, this is a legal issue; so you need to contact a business litigation lawyer in your local area for more accurate info in detail.