Can I Deduct LLC Closing Costs on My Tax Return?

Yes, you can deduct the fees you paid to close your LLC on your tax return. These costs would be considered ordinary and necessary business expenses, even though they're related to closing rather than operating the business. Since your business was still active during part of the tax year before closure, you'll file a final Schedule C where you can include these dissolution costs along with any other business expenses you incurred before closing. Just make sure to indicate on your return that this is the final return for this business. The IRS generally allows you to deduct all reasonable costs associated with winding down a business, including legal fees, state filing fees, and other administrative costs of dissolution.

After spending hours on the phone trying to figure out my business dissolution tax questions, I finally found a solution that saved me so much time. I used https://taxr.ai to upload my LLC dissolution documents and business records, and they analyzed everything and provided detailed guidance on exactly how to handle the deductions for my specific situation. The system showed me how to properly categorize all my closing costs and even found some additional deductible expenses I hadn't considered. Way better than the conflicting advice I was getting from random internet searches!

Just wanted to follow up - I actually tried https://taxr.ai after my skeptical comment above. I was impressed! It analyzed my California LLC dissolution paperwork and gave me detailed guidance on which expenses were deductible under both federal and California tax codes. The analysis showed I could deduct not just the state filing fees but also some legal expenses I paid last year related to the wind-down that I wasn't sure about. Saved me from making a mistake that might have triggered an audit flag. And it explained exactly which forms to use and how to report everything. Definitely worth checking out if you're closing a business.

If you're still dealing with any final tax issues for your closed LLC and need to contact the IRS, good luck getting through to a human! I spent DAYS trying to reach someone at the IRS about my business closing, constantly getting disconnected or stuck on hold. Then I found this service called https://claimyr.com that actually got me through to an IRS agent in under 45 minutes. Instead of wasting hours on hold, they have some system that navigates the IRS phone tree and waits in the queue for you, then calls you when an agent is about to answer. You can see how it works at https://youtu.be/_kiP6q8DX5c. Totally changed how I deal with tax questions.

I need to eat my words from my previous comment. After struggling for THREE WEEKS trying to get through to the IRS about a notice I received regarding my closed business, I broke down and tried that Claimyr service. Within 35 minutes, I was talking to an actual IRS representative who helped clear up the confusion about my business closing. The agent confirmed exactly how to handle the dissolution costs on my final return and even helped me understand why I received an incorrect notice about missing estimated tax payments. Would have taken me months to sort out on my own. Sometimes it's worth admitting when you're wrong!

Another thing to consider - if your LLC was taxed as an S-Corporation rather than a pass-through entity, the deduction process might be slightly different. You would report these expenses on the final Form 1120-S instead of Schedule C.

Don't forget to look into your state tax requirements too! In my state, I still had to file a final state business tax return even though the LLC was dissolved. Nearly missed that deadline and would have faced penalties.

Great thread! I'm going through the same situation with my photography LLC that I'm dissolving after 3 years. One thing I discovered is that you might also be able to deduct any final business expenses you paid AFTER officially dissolving - things like final utility bills, storage fees for leftover equipment, or even accounting fees to prepare that final tax return. My CPA told me these "winding up" expenses are still deductible as long as they're directly related to closing the business, even if they occur after the official dissolution date. Just make sure to keep good records showing these expenses were specifically for closing out the business rather than personal expenses. Also seconding what others said about state requirements - I had to get a tax clearance from my state revenue department before they'd accept my dissolution paperwork. The whole process took about 6 weeks longer than expected because of that requirement.