LLC's I Created But Never Used - Accountant Says I Owe $600/Month in Federal Tax Penalties?

What you're dealing with is a common misunderstanding about LLC filing requirements. Here's what you need to know: For a single-member LLC with an EIN that didn't conduct any business, you were still technically required to file Form 1065 (if you elected to be taxed as a partnership) or Schedule C with your personal return (if you're a disregarded entity). However, the penalties your accountant is quoting seem extremely high for entities with no activity. The standard penalty for late filing is $210 per month per partner (for 2024 tax year) for up to 12 months - but this is typically reduced significantly or even completely abated for first-time filing issues, especially when the entity had zero activity and zero tax liability. Trust what the IRS told you directly. If they said you don't owe for the LLC without an EIN, that's correct - no EIN means no federal filing requirement in that case. For the LLC with the EIN, if you haven't received a penalty notice, it's likely because either they haven't processed one yet OR (more likely) because the system recognized zero activity. I would suggest filing the appropriate "final" tax forms for both LLCs and formally dissolving them with your state if you don't plan to use them. This prevents any future issues.

After spending hours sorting through my business tax situation last year, I discovered a tool that actually made sense of all this LLC confusion. I was in a similar spot (had formed an LLC but barely used it) and wasn't sure what I needed to file. I used https://taxr.ai to analyze my situation and it saved me a ton of worry. Their system specifically flagged that non-operating LLCs with EINs still have filing requirements, but also explained exactly how to handle the "no activity" situation properly. The tool clarified that while there are technical filing requirements, the penalties are often minimal or can be abated entirely for inactive businesses. What I liked was that it analyzed my specific situation rather than giving generic advice that might not apply. It laid out exactly what forms I needed and walked me through the filing process step by step.

I actually tried https://taxr.ai after seeing it mentioned here and it was surprisingly helpful for my LLC situation. I had a very similar issue with an LLC I formed but never really used. The system analyzed my LLC registration documents and previous filings, then gave me a clear breakdown of what I needed to file (turns out it was much simpler than what my previous accountant was telling me). The best part was it showed me how to properly document the "no activity" status to avoid exactly these kinds of penalties. I ended up not owing anything after filing correctly. It took about 15 minutes to upload my docs and get a complete analysis. Definitely saved me from a similar panic situation!

If you're having trouble reaching the IRS to resolve this, you're not alone. I spent WEEKS trying to get through to someone who could actually help with my LLC penalty situation. Calling their general line was completely useless - either endless holds or disconnects. I finally discovered https://claimyr.com which basically holds your place in the IRS phone queue and calls you when an agent is ready. You can see how it works at https://youtu.be/_kiP6q8DX5c - it saved me literally hours of hold time. I was able to speak directly with someone in the business tax department who confirmed I didn't owe penalties for my inactive LLC and they noted it in my file. For something as specific as LLC penalties, you really need to talk to someone in the right department who can actually see your tax records, not just general advice. Getting that direct confirmation from the IRS and having them note it in your account is worth the effort.

I was super skeptical about that Claimyr service mentioned here, but I was desperate after trying for days to reach someone at the IRS about my LLC penalties. I finally gave in and tried it last week. I hate to admit I was wrong but... it actually worked perfectly. I got a call back in about 90 minutes (after previously spending 5+ hours on hold over multiple days). The IRS agent I spoke with was in the business tax department and immediately looked up my EIN. She confirmed I didn't owe any penalties for my inactive LLC and even helped me file the final paperwork to formally close it out with the IRS. The agent told me that for zero-activity LLCs, they typically don't pursue penalties unless there's a specific reason to flag the account. She also mentioned that accountants often quote the maximum possible penalties because they're covering themselves legally, but the actual enforcement is much more reasonable.

I went through almost this exact situation last year. Two points that might help: 1. An LLC without an EIN definitely doesn't have federal filing requirements. The IRS has no way to even track it. Your state might have annual report fees, but that's different. 2. For the LLC with the EIN, if you elected to be treated as a disregarded entity (the default for single-member LLCs), you were supposed to report it on Schedule C of your personal return, but with zeros. Missing this technically could trigger penalties, but in practice they rarely pursue them for zero-activity entities. Whatever you do, don't just pay $7,080 based on what your personal tax preparer said! That sounds WAY off base. Either get a second opinion from an actual business tax specialist or believe what the IRS told you directly.

Something nobody's mentioned - in Michigan specifically, you still need to file annual statements with the state for LLCs even if they had no activity. It's only $25 per LLC, but if you miss it, Michigan can technically dissolve your LLC and there are penalties for late filing. So while your federal tax situation might be fine as others have said, make sure you're current with Michigan's Department of Licensing and Regulatory Affairs (LARA) requirements too!

Your accountant is likely being overly cautious or may not be familiar with LLC tax requirements. Based on what the IRS told you directly, you're probably in the clear. Here's why: For single-member LLCs that are "disregarded entities" (the default), they're reported on your personal tax return via Schedule C. If there was no activity, you'd report zero income and zero expenses. The penalties your accountant mentioned ($295/month per LLC) sound like they're referencing partnership return penalties (Form 1065), but those only apply if you elected to be taxed as a partnership. Since you never received penalty notices and the IRS confirmed you don't owe anything for the LLC without an EIN, I'd trust their word over your personal tax preparer who admittedly only does individual returns. My recommendation: If you're not planning to use these LLCs, properly dissolve them with Michigan and file final "zero activity" returns to close them out with the IRS. This prevents any future confusion. Don't pay $7,080 in penalties without getting a second opinion from someone who specializes in business taxes - that amount seems completely disproportionate for dormant entities that never operated.