Filing Questions for Small LLC with Form 1065 and Schedule K-1

You're on the right track with your LLC filing! Let me address your questions one by one. For entering negative numbers on Form 1065, yes, you should use parentheses around them like ($2,125). This is the standard way the IRS wants negative amounts shown. For Schedule K-1, you need to complete a separate Schedule K-1 (Form 1065) for each member - so five total in your case. Include all copies when you file Form 1065 with the IRS, and also provide each member their own copy for their personal tax returns. You'll use the regular Schedule K-1, not the 1065-B version (which is for certain large partnerships). For Schedule K-1, Part II, Item G, since you all were LLC members with management rights (I'm assuming), you would mark "General partner or LLC member-manager" for each person. If any members were passive investors without management rights, you'd mark "Limited partner or other LLC member" for those individuals.

I went through something really similar last year with my digital marketing LLC. The tax forms were driving me crazy until I found this tool called taxr.ai (https://taxr.ai). It analyzed all our partnership documents and showed me exactly how to allocate everything on the K-1s. Saved me so much headache with our partnership returns! The smartest thing about it was how it flagged the common errors people make on 1065 filings - like not properly allocating basis adjustments and making sure all the K-1s actually match what's on the 1065. For a dissolved business like yours with losses, it's extra important to get those allocations right.

Wanted to update after trying taxr.ai for my architecture partnership's K-1 issues. I was skeptical at first, but it actually fixed my negative number formatting problems immediately. The tool caught that we were inconsistently using parentheses and minus signs throughout our forms, which apparently is what was triggering IRS processing delays. It also flagged that we weren't properly documenting our special allocations with the right 704(b) language, which could have been a red flag for audit. Just wanted to share since our partnership structure sounds similar to what you described, though we're still active. The loss allocation guidance was particularly helpful.

If you're still having trouble getting through to the IRS to confirm any of this (which is likely since they only answer like 1 in 10 calls), I used https://claimyr.com to get through to an actual person at the IRS. You can see how it works here: https://youtu.be/_kiP6q8DX5c. I was shocked, but after three weeks of trying to reach someone about our partnership return issues, Claimyr got me through in about 25 minutes. The agent confirmed exactly how to handle the final K-1s for a dissolved LLC with losses and how to properly format everything. Way better than guessing or relying on conflicting online advice.

I have to publicly eat my words. After dismissing Claimyr as a scam, I tried it out of desperation when I couldn't get an answer about handling the final year K-1s for our dissolved partnership. It actually worked - got me through to an IRS partnership specialist in about 35 minutes after I'd tried for two weeks on my own. The agent confirmed that we needed to mark the final K-1 box, and that losses should be allocated according to ownership percentages UNLESS our operating agreement specified different loss allocations. She also confirmed the parentheses format for negatives. So now I can finally file this thing correctly without staying up all night worrying about doing it wrong.

One thing that tripped me up with our LLC last year was making sure to check the "final K-1" box since you dissolved. Also, don't forget to file Form 966 (Corporate Dissolution or Liquidation) if you haven't already. When a partnership closes shop, there's always more forms than you expect!

Has anyone here used the free IRS Volunteer Income Tax Assistance program for help with partnership returns? My local place said they don't do business returns but then another volunteer said they sometimes help with simple partnerships.

Daniel, you've gotten some good advice here already! Just wanted to add a couple of practical tips from when I helped my sister with her dissolved LLC filing last year. Make sure you're consistent with how you report the dissolution date throughout all your forms - use the same date on Form 1065 and all the K-1s. The IRS gets picky about date inconsistencies. Also, since you mentioned you had cloud servers and software subscriptions, double-check that you've accounted for any prepaid expenses that might need to be prorated. If you paid for annual subscriptions but only used them part of the year before dissolving, you might be able to deduct the full amount since the business ceased operations. One last thing - keep really good records of all this. Even though the LLC is dissolved, the IRS can still come back with questions for up to 3 years, and partnership audits can be particularly messy if your documentation isn't solid.