Our $630 Tax Filing Mistake! ... Your tax deadline may be sooner than you think

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Published on March 04, 2023

Our $630 Tax Filing Mistake!

Your tax deadline may be sooner than you think

Photo by Kelly Sikkema on Unsplash

TLDR: file multi-member partnership LLC taxes by March 15th (not April 15th).

Citizen Upgrade is not a registered investment, legal or tax advisor, or a broker/dealer. All investment/financial opinions expressed by Citizen Upgrade are from the personal research and experience of the author and are intended as educational material for informational purposes only.

Unless you’re expecting a tax refund, it’s generally a bad thing to receive a piece of mail from the IRS. A few months ago, we received a letter notifying us of a $630 fine related to our 2021 tax filing. This came as a surprise since the Citizen Upgrade founders are no strangers to LLC’s and basic tax filing rules… or so we thought!

Below, we share our experience and what we’ve learned along the way.

The Penalty

First off, we had to confirm that this was real! There are many tax scams circulating these days, so we double checked the telephone numbers, return address, and regulation numbers quoted in the penalty notice.

Our fine was a “CP162a” notice, which indicated that our returns were filed late. Some quick research revealed that we had considered the filing deadline to be April 15, when in fact it was March 15.

The confusing thing here is that single member LLC’s are often treated as a “disregarded entity,” meaning that the filing is done through your personal tax return. Since personal tax returns are due on April 15, we incorrectly assumed this was the deadline for us as well. As a multi-member partnership LLC though, our filing deadline was March 15.

Since we missed the deadline, we faced a per member penalty of $210. This can add up pretty quickly if you’re a member of an LLC with several partners!

The Appeal

Next came our appeal by telephone to an IRS agent. They advised that we pay the fine to avoid more penalties associated with paying late. We could then request a refund of the paid penalty since it was our first time filing late. This is known as “first time abatement”, and is described alongside other “administrative” waivers described on the IRS.gov website.

Paying then Requesting a Refund

After mailing in our fine (certified mail this time), we submitted our refund request using “form 843” as advised by the IRS agent. The form only has space for two or three sentences of explanation, which can be a challenge, but is otherwise relatively straightforward.

Conclusion

What happened next you ask?

Unfortunately our request is still pending. We received a notice in mid-February stating that the IRS needs more time to review. The irony of the IRS’s late response related to a late filing penalty was not lost on us!

We will update this article once we hear back…. but in the meantime, double check your filing date and file on time!

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