Closing LLC with losses

[bambuk6]

I created an LLC in 2016. It showed losses in 2016 and 1017 (around $4500 total). Now I realized that I won't have time to work on it any more and want to close it. If I close this LLC that never showed profit - can it trigger an audit? What's the best way to handle this?

 

[LdiJ]

I created an LLC in 2016. It showed losses in 2016 and 1017 (around $4500 total). Now I realized that I won't have time to work on it any more and want to close it. If I close this LLC that never showed profit - can it trigger an audit? What's the best way to handle this?

Its not very likely to trigger an audit, because its probably smart to shut down an LLC that isn't making any money, therefore it would appear to be the normal thing to do.

 

[Taxing Matters]

I created an LLC in 2016. It showed losses in 2016 and 1017 (around $4500 total). Now I realized that I won't have time to work on it any more and want to close it. If I close this LLC that never showed profit - can it trigger an audit? What's the best way to handle this?

Certainly it could trigger an audit. Whether it will is another matter. Having an audit is not a big deal as long as you return is accurate.

 

[LdiJ]

Certainly it could trigger an audit. Whether it will is another matter. Having an audit is not a big deal as long as you return is accurate.

I agree that an audit is not a big deal if the return is accurate, however the percentage of returns that get audited is extremely low to start with, and unless something raises a red flag its even lower. A brand new company that makes very little in sales and folds in two years is highly unlikely to trigger an audit.

 

[Taxing Matters]

I agree that an audit is not a big deal if the return is accurate, however the percentage of returns that get audited is extremely low to start with, and unless something raises a red flag its even lower. A brand new company that makes very little in sales and folds in two years is highly unlikely to trigger an audit.

Which does not contradict anything I said — it could result in an audit but there is no guarantee that it will. The point is, people worry too much about what things trigger an audit. They should report things accurately taking all the deductions and credits the law allows them and not worry about whether they may get audited as a result of it. If the return is accurate and the taxpayer can prove it then the audit is nothing to fear.

 

[LdiJ]

Which does not contradict anything I said — it could result in an audit but there is no guarantee that it will. The point is, people worry too much about what things trigger an audit. They should report things accurately taking all the deductions and credits the law allows them and not worry about whether they may get audited as a result of it. If the return is accurate and the taxpayer can prove it then the audit is nothing to fear.

My intent was not to contradict anything that you said but to further continue the point. I do agree that an audit is nothing to fear if a return is accurate. However, a certain number of people do seem to have an irrational fear of an audit...and they are generally people who have no intention of cheating in the first place.