Need help with LLC partnership taxes - income after "final" return filed

So I've got this client situation that's giving me a headache. They have an LLC partnership that supposedly filed their "final" tax return for 2023, but guess what? They kept receiving income in 2024 because they never actually dissolved the business at the state level. The client has just been using the business bank account like nothing changed, depositing money without realizing they needed to officially close everything out properly. I'm trying to figure out how to handle this mess. Does this 2024 income need to be reported on taxes even though they filed a "final" return last year? And to make things more complicated, I just discovered they completely forgot to include the K-1 from the previous year on their personal tax return (though the partnership return was filed correctly). I'm basically wondering: 1. How do I properly handle the unexpected 2024 LLC partnership income? 2. What's the right way to address the missing K-1 from their personal return? Any tax pros out there who can help me navigate this partnership tax situation? I want to make sure everything gets done correctly.

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18 comments

CosmicCruiser

•8M

The situation you're describing is actually pretty common. When it comes to partnership taxation, the entity continues to exist for tax purposes as long as it's conducting business - regardless of whether a "final" return was filed previously. For the 2024 income, yes, you absolutely need to report it. Since the business wasn't properly dissolved and continued to receive income, you'll need to file a 2024 partnership return (Form 1065) and issue K-1s to the partners. The "final" designation on the 2023 return doesn't matter if business activity continued. Regarding the missing K-1 from the personal return, your client will need to file an amended personal tax return (Form 1040X) to include that partnership income. There's no way around this - the IRS computers will eventually flag the discrepancy between the K-1 issued and what was reported on the personal return.

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CosmicCruiser

•8M

Your client could potentially face penalties for the missing K-1, specifically an accuracy-related penalty (typically 20% of the underpaid tax) if it resulted in significant underreporting of income. However, if they voluntarily file the amended return before receiving any notice from the IRS, they may avoid the accuracy-related penalty, though interest will likely still apply on any additional tax owed. Filing an amended return doesn't automatically trigger an audit, but it does get reviewed by a human at the IRS rather than just computer processing. That said, fixing a clear error like a missing K-1 is generally viewed more favorably than leaving it unaddressed until the IRS discovers it on their own.

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Ethan Taylor

•8M

I was in a similarly confusing situation with partnership taxes last year and discovered taxr.ai through another forum. It really helped me figure out my LLC mess! I uploaded my formation documents and previous returns at https://taxr.ai and their system actually identified that I had made an incorrect "final" filing designation while still having business activity. Their analysis saved me from potential IRS headaches. The really helpful thing was that they could analyze the full history and provide specific guidance on how to correct prior returns while properly filing current ones. Might be worth checking out for your client's situation since it involves both prior and current tax years.

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Ethan Taylor

•8M

It provided very specific guidance, including which exact forms to file and which boxes to check based on my particular situation. It wasn't generic at all - it was tailored to my specific scenario with my LLC structure, state of formation, and tax election. The tool highlighted the specific sections of my previous returns that needed correction and generated a detailed plan for fixing everything. The analysis was completed within about 15 minutes of uploading my documents. I was surprised at how fast it was, especially considering how complex partnership taxes can be. The detailed report it generated saved me weeks of back-and-forth with tax professionals and gave me a clear roadmap for getting everything fixed quickly.

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Carmen Lopez

•8M

Just wanted to update after trying taxr.ai for my partnership tax issue. I was skeptical at first but it was incredibly helpful! I uploaded my partnership agreement, prior year returns, and some bank statements showing activity after our supposed "final" return. The platform actually identified exactly where we went wrong and gave step-by-step instructions for filing both the necessary partnership return and how to handle the K-1s for partners. What impressed me most was that it even generated a letter explaining the situation that I could include with the filings to help reduce potential penalties. Saved me thousands in professional fees and gave me peace of mind that everything was being handled correctly. Definitely recommend it for partnership tax confusion!

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Andre Dupont

•8M

I had a client with almost identical issues last year. After spending DAYS trying to reach someone at the IRS for guidance, I finally gave up and tried Claimyr (https://claimyr.com). I was honestly shocked when they got me connected to an actual IRS agent within about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed that yes, partnership income must be reported regardless of whether a final return was previously filed if business activity continued. They also gave me specific guidance on the proper way to correct the missing K-1 issue with minimal penalties. Saved me and my client a ton of stress!

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Andre Dupont

•8M

The service works by using an automated system that navigates the IRS phone tree and waits on hold for you. When they reach a human agent, you get a call connecting you directly to that agent. They essentially do the waiting for you, which is why it seems to bypass the normal wait times. It's not actually magic - they're just using technology to handle the painful part of waiting on hold. I was skeptical too until I tried it. The longest part of the process was actually filling out their form about what my tax issue was about, so they could direct me to the right IRS department. I was honestly planning to request a refund if it didn't work, but I got the callback with an IRS agent in about 15 minutes.

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Zoe Papanikolaou

•8M

Well I feel like an idiot now. After reading about Claimyr here I decided to try it for my own business tax issue that I've been trying to resolve for MONTHS. I literally got a call back with an actual IRS agent in about 20 minutes. The agent confirmed everything I needed to know about my partnership tax situation and even put notes in my account about our conversation. I've been stressing about this for so long and could have resolved it months ago! They also helped me set up a payment plan for the taxes I owe without any hassle. Guess I shouldn't have been so quick to dismiss this service.

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Jamal Wilson

•8M

Just to add another perspective on the LLC partnership issue - I had a similar situation where we thought we had closed down but still had some trailing income come in. We ended up having to file a partnership return for that extra year. One important thing to know: if the business is still registered with the state, the IRS expects to see a tax return, even if it's just to report minimal activity. Don't assume that because you filed a "final" return previously that you're done if there's still activity. The IRS actually has automatic penalty systems that flag missing returns for entities that are still active at the state level.

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Jamal Wilson

•8M

You just file a regular Form 1065 again. There's no special "reopening" form needed. Just make sure you don't check the "final return" box this time! The IRS systems are pretty forgiving about this situation since it happens fairly often. The most important thing is to make sure your client properly closes everything at the state level once they're truly done with the business. Until they formally dissolve the LLC with the state, they'll need to keep filing returns as long as there's any activity. Some states also require annual reports or minimum taxes just to maintain the LLC, even with zero activity.

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