Filing LLC taxes for previous years?

Question

Here's the deal:

I run an LLC that has been in existence since January 2002. It originally started with two members but the other members parted ways and we made an amendment to the operating agreement to give him 0% and myself (the only existing member 100% ownership). So effectively it's a one-man LLC.

From 2002 until present, taxes haven't been filed but the business also hasn't been making any money either for these years (it has been *rough* to say the least). We are primarily into outsourcing and our revenue/expenses always lined up (barely making it).

This year, we are (finally) going to make money and I'd like to start this process of paying year-end and quarterly taxes like I should have been for the past few years.

The question I have is: how do you indicate on your tax return that you are in this position and get "cleaned up"? My intention is to stay regular from here on out but the challenge is to get started in the first place after creating such a mess.

Answer 1

If you had losses in prior years, it may be worth filing past returns. The losses would then be carried forward and potentially offset future gains. Also, the IRS allows for single member LLC's, the income and expenses get reported on the schedule C. Hope this helps.

Answer 2

Depending on your state, you may have more urgent problems than tax. If you have not filed annual reports with your state (and paid them a fee - in NC $200 per year) your LLC may already have been administratively dissolved. Certainly here in NC, this is not a difficult problem to solve (unless paying out $200 for each unfiled year is a problem!)

After that, you have to resolve whether or not you have bought the other partner out (it sounds as if that is what you did, even if he walked away with nothing) and, if so, when. Once you know that, you will have more idea of what sort of return you have to file. Perhaps a partnership return until you got 100% then on your own 1040.

So here's what you do. Get your paperwork in order. Make sure you have accounting records since 2002. Get a few referrals for CPAs and meet with a few - three should be enough. Tell them everything. Paint them an accurate picture of your business - past and present. The point of that is two-fold. Firstly, you will get an honest assessment of their likely charges. Secondly, it will help them to help you as they can give you advice on record-keeping from now onwards.

Of course, CPAs are in the middle of tax season right now. It may be hard to give this job the attention it deserves until after April 17th so do not be surprised if all you get at a small CPA firm right now is something as simple as filing extensions for current year returns and estimating your fist quarterly payment for the current year. As a rule, CPAs will wish to prepare tax returns in sequence, if for no other reason than to keep ahead of the Statute of Limitations. Doing five years' returns and potential amendments to your personal return for those five years is a big investment in time during tax season.

Have you at least kept decent business records? If you have, any decent CPA will be happy to see you. In the grand scheme of things, you are not in such a big mess if you have kept your books up to date.

Answer 3

I don't see why you feel you have to indicate anything.
If you made no money, you owe no taxes, period.
Now that you're making money, you're paying taxes.
Just file the tax return normally for the past year it applies to. If IRS wants to know why you haven't filed before, just tell them you've not made any profits.