Guide library
IRS problems for pass-through entities
30 guides on how the IRS treats partnerships, LLCs and S corporations, organized by the kind of trouble you are in.
Entity Filing & Penalties
Late Form 1065 and 1120-S penalties, K-1 furnishing penalties, deadlines, and getting penalty relief.
First Time Abate for Late Partnership and S Corporation Returns
First Time Abate can erase a late filing penalty on a partnership or S corporation return without any excuse at all. Here is who qualifies and where entities get tripped up.
Read the guide →Partnership and S Corporation Filing Deadlines and Extensions: What the Code Actually Requires
Partnership and S corporation returns are due on the 15th day of the third month, not in April. Here is how the deadlines, Form 7004 extensions, and K-1 timing actually work.
Read the guide →Penalties for Failing to Furnish Schedule K-1s: How IRC 6722 Applies to Partnerships and S Corporations
Every late or incorrect Schedule K-1 is a separate payee statement failure under IRC 6722. Here is how the penalty is figured and what can reduce or remove it.
Read the guide →Reasonable Cause for Late Partnership and S Corporation Returns
Reasonable cause can remove a late filing penalty on a partnership or S corporation return, but only if the facts fit the IRS standard. Here is what that standard really requires.
Read the guide →Rev. Proc. 84-35: Small Partnership Relief From the Late Form 1065 Penalty
If your partnership has 10 or fewer partners, Rev. Proc. 84-35 may wipe out the late Form 1065 penalty. But every criterion has to fit, and one late partner return can sink it.
Read the guide →Several Years of Unfiled Form 1065 or 1120-S Returns: How to Catch Up Without Making It Worse
Unfiled entity returns do not go away with time. Here is how the penalties stack year by year, what the IRS can still do, and a sensible order for getting caught up.
Read the guide →The Form 1065 Late Filing Penalty: How IRC 6698 Works and How to Fight It
A partnership that owes no tax can still get hit with a five-figure penalty for filing Form 1065 late. Here is how IRC 6698 is calculated and how relief works.
Read the guide →The Form 1120-S Late Filing Penalty: What IRC 6699 Costs Your S Corporation
Your S corporation may not pay income tax, but a late Form 1120-S still carries a penalty for every shareholder, every month. Here is how IRC 6699 works.
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BBA Partnership Audits
The centralized partnership audit regime: the partnership representative, imputed underpayments, push-outs, and AARs.
BBA Partnership Audit Notices: The NAP, NOPPA, FPA and the Deadlines Behind Them
A BBA partnership audit runs on a fixed sequence of notices, and each one starts a clock. Here is what arrives, in what order, and which deadlines cannot be missed.
Read the guide →Consistent Reporting Under IRC 6222: When Your Return Must Match the Partnership Return
If your return does not match what the partnership filed, the IRS can fix it as a math error, with no deficiency notice. Form 8082 is how you report a disagreement the right way.
Read the guide →Electing Out of the BBA Partnership Audit Regime Under IRC 6221(b)
Small partnerships can elect out of the BBA centralized audit rules each year, but one ineligible partner or a missed deadline can quietly void the election.
Read the guide →Reducing a BBA Imputed Underpayment: How Modification Under IRC 6225(c) Works
The imputed underpayment in a NOPPA is computed at the highest tax rate. Modification under IRC 6225(c) is how a partnership brings that number closer to what the partners would actually owe.
Read the guide →The BBA Administrative Adjustment Request: How a Partnership Fixes a Filed Return
Under the BBA rules, a partnership fixes a mistake on a filed return with an administrative adjustment request. The deadlines are short, and the money may not flow the way you expect.
Read the guide →The BBA Partnership Audit Regime Explained: How the IRS Audits Partnerships Now
Under the BBA rules, the IRS audits the partnership, assesses the tax against the partnership, and binds every partner to the result. Here is how the system works.
Read the guide →The BBA Statute of Limitations: How Long the IRS Has to Adjust a Partnership Return
Under the BBA rules, the partnership return has its own clock under IRC 6235. It runs differently from the individual statute, and several events can stretch it.
Read the guide →The Imputed Underpayment Explained: How the IRS Taxes a Partnership Under BBA
Under BBA, the IRS can bill the partnership itself for an audit adjustment, at the top tax rate, in the year the audit ends. Here is how the imputed underpayment works.
Read the guide →The Partnership Representative Under BBA: Sole Authority, Real Risks
One person can settle your partnership's audit, extend the statute, and bind every partner. Here is what the IRC 6223 partnership representative can do and how to protect yourself.
Read the guide →The Push-Out Election Under IRC Section 6226: Shifting a BBA Audit to the Partners
A BBA partnership can avoid paying an imputed underpayment by pushing the audit adjustments out to the partners who were there in the reviewed year. The deadline is 45 days and cannot be extended.
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S Corporation Problems
Reasonable compensation, basis and distributions, shareholder loans, and elections that went sideways.
Form 7203 and S Corp Basis Limitations: What the IRS Now Sees on Your Return
Form 7203 shows the IRS your S corporation stock basis, debt basis, and allowable losses every year. If your numbers do not hold up, the losses and distributions you claimed may not either.
Read the guide →Inadvertent S Corp Termination: How To Save an Election You Lost by Accident
An S election can terminate the moment an ineligible shareholder shows up or the governing documents create a second class of stock. IRC 1362(f) lets the IRS treat the election as if it never ended.
Read the guide →Late S Corp Election Relief: Fixing a Missed or Lost Form 2553
If your S election was filed late or never filed at all, Rev. Proc. 2013-30 may let you fix it without a private letter ruling or a user fee, as long as you meet its requirements.
Read the guide →S Corp Distributions in Excess of Basis: When Your Own Money Becomes Taxable Gain
S corporation distributions are tax free only up to your stock basis. Take out more than that and the excess is taxed as gain, whether or not you tracked it.
Read the guide →S Corp Reasonable Compensation: How the IRS Turns Your Distributions Into Wages
If you work in your S corporation and take little or no salary, the IRS can reclassify your distributions as wages and assess employment taxes on them.
Read the guide →S Corp Second Class of Stock and Ineligible Shareholder Problems
One bad shareholder or one lopsided agreement can quietly end your S election. Here is how the eligibility rules work and how the damage can be repaired.
Read the guide →S Corp Shareholder Loans: How the IRS Looks at Money In and Money Out
Money you lend your S corporation can create debt basis. Money you take out and call a loan can become a taxable distribution. The paperwork decides which.
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K-1s, Basis & LLC Issues
K-1 mismatches, late and amended K-1s, partner loss limits, LLC classification, and owner liability.
Got an Amended or Late K-1? What Owners and Entities Need to Do Next
Whether you received a corrected K-1 or the entity needs to issue one, the right move depends on the entity type and its audit regime. Here is how to sort it out.
Read the guide →K-1 Mismatch Notices: Why the IRS Says Your Return Does Not Match Your Schedule K-1
The IRS matches the K-1 data the entity filed against what you reported. When the numbers differ, consistency rules can let the IRS assess quickly. Here is how to respond.
Read the guide →LLC Classification Problems and Form 8832: When Your LLC Is Not What You Think
An LLC is a state law label. For federal tax purposes it is a partnership, a disregarded entity, or a corporation, and filing the wrong return for the wrong one causes real problems.
Read the guide →Partner Loss Limitations: Basis, At-Risk, and Passive Activity Rules
The loss on your K-1 has to clear three gates before it reaches your return: basis, at-risk, and passive activity. Here is how each one works and the order they run in.
Read the guide →Who Is on the Hook When an LLC, Partnership, or S Corp Owes the IRS
Your LLC or S corporation owes the IRS. Whether that debt can follow you home depends on the type of tax, how the entity is classified, and state law.
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