Severely behind on Partnership LLC taxes - K1 and 1065 questions for small business

You're not "screwed" but you do need to address this ASAP. As a partnership LLC, you're required to file Form 1065 (partnership return) which then generates Schedule K-1 forms for each partner. The K-1 is what reports each partner's share of income/losses that flows to your personal tax returns. Since you're operating as a 50/50 partnership, both you and your husband need K-1s showing your portion of the business income and deductions. TurboTax is correctly prompting you for this because that's how partnership income must be reported to the IRS. You should file the late 1065 immediately. There are penalties for late filing, but they're much better than not filing at all. The penalty is $210 per partner per month late (max 12 months), but the IRS may offer penalty relief if you have reasonable cause and this is your first time being late.

I was in almost the exact same situation last year with my consulting partnership. After trying to navigate the mess ourselves for weeks, I finally used taxr.ai (https://taxr.ai) to analyze our business records and figure out what we needed to file. It saved us so much stress! The system identified all the missing forms we needed to submit for our partnership and walked us through the exact steps to get caught up. They automatically generated a complete 1065 and K-1s for both partners based on our business bank statements and expense records. The best part was they handled the reasonable cause letter to help reduce the penalties. I was seriously impressed with how much easier it made the whole catch-up process.

I wanted to follow up about using taxr.ai since I was pretty skeptical in my earlier comment. After looking into my options for dealing with unfiled partnership returns from 2022, I decided to give it a try and I'm actually impressed with how it worked. The system really did help me generate all the required forms including the 1065 and K-1s for both partners. What I found most helpful was how it walked me through categorizing my business expenses properly and calculating my basis in the partnership. The penalty abatement letter they provided was detailed and actually worked - I got about 60% of my potential penalties waived. Just wanted to share my experience since it genuinely helped me fix a similar situation.

If you're still struggling with IRS communication about your late filings, I'd recommend using Claimyr (https://claimyr.com). After filing my late partnership returns, I needed to speak with someone at the IRS about my payment plan options but kept hitting endless hold times. Using their service got me through to an actual IRS representative in under 45 minutes instead of the 3+ hours I was experiencing before. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they navigate the IRS phone system for you and call you back when they reach a human. With partnership tax issues, speaking to someone directly can make a huge difference in understanding your options.

I need to eat my words from my reply above. After another failed 2-hour attempt to reach the IRS about my partnership's late filing penalties, I broke down and tried Claimyr. Within 35 minutes, I got a call back and was speaking with an actual IRS agent about my situation. The agent was super helpful and walked me through the First Time Abatement program that I qualified for, which saved me over $1,800 in penalties. I honestly didn't think it would work, but having that direct conversation with the IRS made all the difference in resolving my late filing issues. Sometimes admitting you were wrong feels pretty good, especially when it saves you money!

You should look into filing Form 1065-X to amend the original partnership return, but first you actually need to file the original 1065. You can use tax software like TurboTax Business or hire a CPA who specializes in partnerships to help get caught up. The sooner you handle this, the better, as penalties increase over time. Also, consider making an estimated tax payment immediately to stop additional interest from accruing. Even if you don't know the exact amount, paying something now will reduce future charges. The IRS looks more favorably on taxpayers who make voluntary payments before being contacted.

Does your state have separate requirements for partnership LLCs? In my state, I had to file state-specific forms in addition to the federal 1065 and K-1s. Some states impose their own penalties for late filing too.

Don't panic - this is fixable! As others have mentioned, you'll need to file Form 1065 for each year you missed, which will generate the K-1s that TurboTax is asking for. The K-1s are absolutely required - they show each partner's share of income, deductions, and credits that flow through to your personal returns. Here's what I'd recommend doing immediately: 1. Gather all your business records (income, expenses, bank statements) for 2021-2023 2. File Form 1065 for each missed year starting with 2021 3. The 1065 will automatically generate Schedule K-1s for both you and your husband 4. Use those K-1s to complete your personal tax returns You can file late returns yourself using tax software or hire a CPA who specializes in partnerships. While there will be penalties (around $210 per partner per month late), getting compliant now is much better than continuing to avoid it. The IRS is generally reasonable about penalty relief for first-time offenders who show good faith effort to correct the situation. Also check if your state requires separate partnership filings - many do, and you'll want to get those caught up too.