Glad you found it helpful! Good luck with your business.

July 9, 2015
Many thanks for your blog. A couple of days ago, I received a letter from the IRS basically rejecting my 2014 Form 1065 submittal as incomplete, requesting that I submit Schedules M-1, M-2 and completing Item F on my 1065 submittal plus completing Item J in the two Schedule K-1s submitted. The IRS letter also had space for me to sign a Schedule L Exemption Declaration, and of course, the Signature Declaration for my response. I have spent a couple of days on the matter and the single item that bothered me the most was the term “reportable entity partner”. I surfed the IRS website and couldn’t find an adequate response. I didn’t complete the items requested because it had never been required of me in the past. Back in the late 70s, I told a coworker that I was going to come up with a formula for amortization and he told me that this was impossible. Well I did that plus derive one for the equity balance for the time of a loan. A couple of years later, I found that the two formulas were already out there. I have taken a course in accounting some 25 years ago, and a couple of years back I decided to change to the accrual method of accounting and made out spreadsheets on all of the accounts. Then when it came time to file I just couldn’t get it together in time. It just became so complicated to put all the accounts together and then deal with the reconciliations, that I just decided to use a simple profit analysis (revenues less expenses) and sent a copy of that information to the IRS to support my filing. There were no questions asked on any of my previous returns until a couple of days ago regarding my submittal for the tax year 2014. Well, I just completed the Schedule L (a masterpiece) and Schedules M-1, M-2 and M-3.

I just completed a letter to the IRS I intended to send along with my submittals. In essence the draft letter states that I received their letter and am enclosing forms initially in response to their requests and apologize for not completing the forms as they expected. My letter ends with the questions that follows: “Why would the IRS send out a letter to the manager of a limited partnership with a Schedule L Exemption Declaration to be signed, if it is required from the start? Why was it not stated therein that I had to complete Schedule L and perhaps even mention that Schedule M-3 might also be required? I hope you understand my view point. I always have wanted and desired to fulfill my obligations as a taxpayer.”

Last night I didn’t sleep at all with all of this in mind. I had thoughts of ending the partnership and remembered seeing a form on its.gov about terminating a partnership. Why do they make it so hard to run a business!

I wanted to thank you for your blog. I believe that there are some serious issues with regard to these IRS requirements, even within their own ranks! I still still have the option of sending in only what they requested with the signatures. I reckon I will sleep on it a couple of more nights as I still have 27 more days to respond before penalties.

Glad you found this helpful. I too was surprised by how much harder the 1065 was versus personal taxes. Sorry, but I don’t know anything about capital purchases.

It’s my pleasure, Emily. I spent hours searching the web for something like this… and I figured I wasn’t the only one :)