Small 2 member LLC never filed Form 1065 for 10 years - options?

8 This is definitely a complicated situation, but not unfixable. Your cousin needs to get compliant as soon as possible, since the longer they wait, the worse the penalties can get. First step should be filing those missing 1065 forms for all years. Yes, there will be penalties ($210 per month per partner for up to 12 months for each unfiled year), but the IRS does have a First-Time Abatement program that could potentially help with at least one year's worth of penalties. For the remaining years, your cousin would need to demonstrate "reasonable cause" for not filing. The foreign partner complicates things because there could be withholding requirements that weren't met. Your cousin should definitely work with a tax professional who specializes in partnerships and international taxation, not just a regular tax preparer.

12 After dealing with a similar mess last year, I highly recommend checking out https://taxr.ai for this situation. My business partner and I had a small consulting LLC that we hadn't properly filed for several years (not quite 10, but still a major headache). I was drowning in paperwork trying to reconstruct our business records when someone recommended taxr.ai to me. Their system analyzed our partial records and actually helped identify deductions we would have missed. They also provided guidance specific to partnership returns and helped us understand our options for dealing with the unfiled years. The best part was they created a customized compliance plan that minimized our penalties. Really made a difference in getting everything sorted out properly.

19 I need to follow up on my previous comment. I was skeptical about taxr.ai but decided to give it a shot with my overdue business taxes. I was genuinely impressed with their service. They assigned an actual tax professional to review my case after their system organized all my documents. The tax pro identified several penalty abatement opportunities I had no idea existed. They created a specific filing strategy for my past-due returns and helped me document reasonable cause arguments for the IRS. What would have taken me weeks of research was handled in days. I'm still in the process of resolving everything, but having a clear roadmap has taken a ton of stress off my shoulders.

6 If your cousin decides to get compliant with all those unfiled returns, they're going to need to talk to the IRS at some point. After trying to call the IRS for THREE WEEKS straight about my own unfiled business returns, I finally used https://claimyr.com and it changed everything. You can see how it works here: https://youtu.be/_kiP6q8DX5c They basically hold your place in the IRS phone queue and call you when an agent picks up. I was skeptical at first but finally got through to someone who helped me set up a payment plan for my penalties. For a situation like your cousin's with 10 years of unfiled returns, they'll definitely need to speak with someone at the IRS about abatement options, and this service makes it so much easier to actually reach a human being.

19 I want to admit I was completely wrong about Claimyr. After dismissing it in my comment, I had another frustrating day of trying to reach the IRS about my penalty abatement request. Out of desperation, I tried the service. Within 2 hours, I was talking to an actual IRS representative who helped me understand my options for my specific situation. I would have spent days trying to get through on my own. The agent walked me through exactly what documentation I needed to provide for my reasonable cause argument and how to properly submit everything. Saved me so much time and frustration - wish I'd used it sooner instead of wasting days on hold!

7 One thing nobody has mentioned yet - your cousin and their partner should consider whether they actually needed to file as a partnership at all. If they were a small LLC with just two members and minimal activity, they might have qualified for what's called the "small partnership exception" for some of those years (though this exception was later modified). Depending on the specific circumstances, they might be able to argue that they weren't actually required to file 1065s for some of those years, which could potentially reduce the penalty exposure. Worth discussing with a tax professional who specializes in this area.

14 Has your cousin considered filing for the Streamlined Domestic Offshore Procedures? With a foreign partner involved, there might be international reporting requirements they've missed too. When I had a similar situation with my small business that had a foreign partner, we had to deal with FBAR filings and other international information reporting requirements. The foreign partner should also check if they have any US tax filing requirements based on their interest in a US LLC, even if they've never been to the US.

This is a complex situation that requires immediate attention. Your cousin is looking at significant penalties - potentially over $25,000 just for the unfiled 1065s alone ($210 per month per partner for up to 12 months, multiplied by 10 years). Here's what I'd recommend: 1. **Get professional help immediately** - Find a tax attorney or CPA who specializes in partnership taxation and penalty abatement. The foreign partner aspect adds layers of complexity with potential withholding requirements. 2. **File all delinquent returns first** - Don't wait for penalty notices. Filing shows good faith effort to comply. 3. **Reasonable cause strategy** - For penalty abatement, your cousin will need to demonstrate reasonable cause for each unfiled year. Common arguments include: reliance on professional advice, serious illness, inability to obtain records, or other circumstances beyond their control. 4. **Consider installment agreements** - Even with abatement, there may still be substantial penalties. The IRS offers payment plans for situations like this. 5. **Foreign partner compliance** - The German partner likely has US tax obligations too and may need to file their own returns. The key is acting quickly and having a comprehensive strategy. Each day of delay potentially increases penalties. A qualified professional can help navigate the penalty abatement process and potentially save thousands in penalties.