I just want to echo what everyone else is saying - definitely notify the IRS even though your LLC had no activity. I was in almost the exact same boat about a year ago with an LLC I formed but never used. One thing I learned that might be helpful: when you write your letter to the IRS, be very specific about the timeline. Include the date you got your EIN, the date you dissolved with the state, and explicitly state that there was zero business activity during the entire period the LLC existed. This helps create a clear record that there was never any taxable activity to report. I also recommend sending it certified mail so you have proof of delivery. The IRS processing times can be slow, but having that certified receipt gives you documentation that you properly notified them if any questions come up later. Since you already handled the state dissolution, you're most of the way there. Just need to close the loop with the federal side and you'll be all set. Better to take care of it now than worry about it down the road!

I'm dealing with this exact same situation right now, so this thread is incredibly helpful! My single-member LLC has been sitting dormant for about 5 months after I got the EIN but never actually started the business. One question I haven't seen addressed yet - when you send the dissolution letter to the IRS, do you need to include any information about why the business never operated? I'm wondering if I should explain that it was due to changed circumstances, market conditions, etc., or if I should just stick to the facts (formation date, EIN, dissolution date, zero activity). Also, has anyone here had experience with what happens if you don't notify the IRS and just let it sit? I know several people have mentioned potential issues, but I'm curious about real-world consequences. Obviously I plan to do the right thing and send the letter, but I'm trying to understand the actual risk level if someone hypothetically didn't handle this properly. Thanks to everyone who's shared their experiences - this community is a lifesaver for navigating these confusing tax situations!

This is such a common and frustrating issue! Code 898 means the Treasury Offset Program has taken part of your refund to pay a debt you owe to another government agency (not the IRS). The debt could be from state taxes, unemployment overpayments, defaulted student loans, child support, or even old medical bills that went to collections. Your first step is definitely calling the Treasury Offset Program at 800-304-3107 with your SSN ready. They can tell you exactly which agency claimed the money and provide their contact information. Be prepared for long hold times, but this is the only way to find out what specific debt triggered the offset. What's particularly frustrating is that they can take your refund without any advance notice - you just discover it when your refund is smaller than expected. But once you know which agency is involved, you can contact them directly to either dispute the debt if you believe it's an error, or work out a payment plan if it's legitimate. Given the timing and amount, this could very well be related to unemployment benefits from the COVID era, as many states are now going back and auditing those claims years later. Don't lose hope though - even legitimate debts can often be resolved through payment plans or dispute processes. The key is identifying exactly what this is for first!

I'm really sorry you're going through this - it's such a stressful situation when your refund gets reduced without warning! Code 898 definitely means the Treasury Offset Program has intercepted part of your refund for a non-IRS debt. Everyone here has given you great advice about calling 800-304-3107 - that's absolutely your best first step. When you call, make sure to ask for: - The exact name of the agency that claimed the debt - Their direct contact information - The original debt amount vs. what was actually offset - The date the debt was referred to the offset program Given that you mentioned getting unemployment briefly in 2020, there's a good chance this could be related to that. A lot of states are going back now and auditing COVID-era unemployment claims, sometimes deciding people weren't eligible for benefits they already approved and paid out years ago. It's incredibly unfair that they can do this without any advance notice. Even if the debt turns out to be legitimate, don't give up! Most agencies will work with you on payment plans, and you absolutely have the right to request documentation proving the debt is valid. Sometimes these offsets happen due to system errors or debts that have already been resolved. The whole process is designed to be confusing, but you've got this! Keep us updated on what you find out.

I'm going through this exact same nightmare right now! Just received my LTR 2645 C letter this morning and had that immediate sinking feeling in my stomach, especially since we already received our refund back in February ($2,018). This entire thread has been absolutely invaluable - I had no idea this was such a widespread issue affecting so many taxpayers! Before stumbling across this discussion, I was convinced we had made some major error on our return or that the IRS was going to demand their refund back with penalties. It's honestly infuriating that in 2025, the IRS can have sophisticated systems that successfully process millions of returns and distribute refunds accurately, but then can't manage basic coordination between their own internal systems. How do you approve a return, send out the refund, but then weeks later have a completely separate system sending letters saying the return needs additional review? It's like the left hand has no idea what the right hand is doing. Reading through all the successful call experiences shared by both taxpayers and tax professionals here, I'm definitely calling first thing tomorrow morning using the direct number on the letter. It's frustrating that we have to spend our valuable time cleaning up their system glitches, but at least now I know exactly what to expect and that the agents are very familiar with this widespread coordination failure. Thank you so much to everyone who took the time to share their experiences and outcomes - this community has been infinitely more helpful than anything available on official IRS resources. It really demonstrates how powerful community support can be when dealing with government system failures!

I'm going through this exact same situation right now! Just received my LTR 2645 C letter two days ago and immediately panicked, even though I already got my refund back in March ($2,956). Reading through everyone's experiences in this thread has been such a huge relief - I had no idea this was happening to so many people! It's absolutely mind-boggling that the IRS can successfully process returns, approve refunds, and send out payments, but then their notification system is completely disconnected sending out review letters weeks later. I was up all night googling this letter thinking I had somehow messed up our taxes or that they were going to demand the money back. Finding this community discussion with so many people in identical situations has completely changed my perspective from panic to frustration at their system incompetence. Based on all the successful call experiences shared here, I'm definitely calling first thing tomorrow morning using the number on the letter. It's annoying we have to spend time fixing their system glitches, but at least now I know what to expect and that the agents are familiar with this widespread coordination failure. Thank you to everyone who shared their experiences and outcomes - this thread has been more helpful than anything I could find on official IRS resources. Really shows how valuable community support is when dealing with government system failures!

One additional consideration that might be helpful - make sure to review your S-corp election timing and any potential Section 1202 Qualified Small Business Stock (QSBS) benefits. If your LLC made the S-corp election early enough and you've held your interest for at least 5 years, you might qualify for the QSBS exclusion which could eliminate federal taxes on up to $10 million of the gain (or 10x your basis, whichever is greater). This would be even better than just avoiding the 3.8% NIIT - it could potentially eliminate the entire federal capital gains tax on your $875K gain. The QSBS rules are complex and have specific requirements around when the election was made, the type of business, and how the stock was acquired, but it's definitely worth having your accountant review this when they return. Also, since you mentioned multiple owners, each owner can potentially claim their own $10M QSBS exclusion, so the total benefit for your group could be substantial. This is one of those situations where the entity structure (LLC electing S-corp treatment) might actually work in your favor for tax planning purposes.

Looking at your situation, you're in a really strong position to avoid the 3.8% NIIT on your $875K gain. Since you've been actively involved in running the business since 2018, you almost certainly meet the material participation requirements that exempt you from NIIT. A few key points based on the great discussion above: **Material Participation** - With 6+ years of active involvement, you likely qualify under multiple tests (500+ hours annually, substantially all participation, or the 5-of-10 years test). The LLC/S-corp structure doesn't change this fundamental exemption. **Documentation Priority** - Start gathering evidence of your participation NOW: emails showing business decisions, calendar entries, meeting minutes, travel records, contracts you signed, etc. Even without perfect hour logs, multiple types of evidence showing consistent involvement will be convincing. **QSBS Potential** - This could be huge! If your LLC made the S-corp election early and you've held your interest since 2018, you might qualify for Section 1202 QSBS exclusion. This could eliminate federal taxes on your entire $875K gain (not just the 3.8% NIIT). Given the potential $131K+ in tax savings, consider having your accountant prioritize this analysis even if they're on vacation. **Next Steps** - Gather all formation documents, S-corp election paperwork, and ownership records. Document your business activities timeline. If QSBS doesn't apply, the material participation exemption alone should save you about $33K in NIIT. With the sale in 6 weeks, time is critical but you have multiple strong paths to significant tax savings. This is definitely worth expediting professional review!

Congratulations on reaching the funded status! As someone who's dealt with international tax situations, I can add a few practical points to what others have shared: The SBTPG funded status with trace number essentially means your refund has cleared the IRS approval process and is now in the final banking pipeline. Since you're filing from abroad, here's what I'd recommend: • Contact your bank proactively to let them know you're expecting a US government transfer - this can prevent any holds or delays • The trace number format should be 15 digits - if it's different, double-check you're looking at the right field • International banks sometimes require additional documentation for large government transfers, so having your tax return summary ready can help • Consider setting up account alerts so you're notified immediately when the deposit hits From my experience, once SBTPG shows funded, the failure rate is essentially zero. Your money is in the system and will arrive. The trace number is your insurance policy - it proves the transaction exists if there are any banking hiccups along the way. Since you mentioned being extra cautious about the process going smoothly, you might also want to confirm with your bank what their cut-off times are for processing incoming international transfers. Some banks only process these during specific windows, which could affect timing. You're in the home stretch now! 🌟

As an international filer who's been through this exact SBTPG funded status situation, I can tell you that you're basically home free at this point! The funded status with trace number means the IRS has already sent your money to SBTPG and they've initiated the transfer to your bank. Since you're filing from abroad, here's what I learned from my experience: • The trace number is crucial for international transfers - your bank may ask for it to verify the source of funds • Expect 2-4 business days for the money to hit your international account (slightly longer than domestic due to additional banking verification) • Some international banks automatically hold large government transfers for 24-48 hours as a fraud prevention measure • The SBTPG system is very reliable once it shows funded - I've never seen anyone not receive their money after reaching this status I'd recommend calling your bank's international transfer department to give them a heads up that you're expecting a US tax refund. This can prevent unnecessary holds or delays. Also, keep that trace number handy - it's basically your receipt that proves the transaction is legitimate. The waiting is the hardest part, but you're literally days away from having your refund! The system works, it's just a matter of letting the international banking process complete. 🎯