Tax issue, California. I am a member in three LLCs, in which I am a member and investor and the Tax Matters Partner (TMP)....

Asked about 2 years ago - San Diego, CA

was placed under indictment and ongoing investigation for financial crimes, unrelated to our real estate holdings I believe. We need to file our tax returns to avoid penalties and other issues but this TMP is the person designated for such things, and she was already late on filing 2010, and 2011 now. How can we file our return if she was the one responsible for such things, do we just prepare, file and sign as a temporary designee? Now everyone is scared because of the implications associated with the TMP, so nobody wants to step up and sign for the returns on behalf of the LLC businesses but the returns need to be filed. How can we file the return, remain in compliance, and avoid association with the TMP? What a mess.

Attorney answers (2)

  1. Michael Charles Doland

    Contributor Level 20


    Lawyers agree

    Answered . What a misery. You should get some detailed advise from a business/tax lawyer or CPA with prior experience or employment with the IRS. You should not rely on any figures previously prepared by the TMP. The Manager(s) of the LLC(s) can appoint a new TMP. You should almost certainly go on extension for your filings. San Diego attorney Hillary Johns, who regularly posts on Avvo, may be a good first contact for you locally.

    The above is general legal and business analysis. It is not "legal advise" but analysis, and different lawyers may... more
  2. Dana Whitney Atchley

    Contributor Level 14


    Lawyers agree

    Answered . The partnership can revoke the designation of the current Tax Matters Partner and can designate a new Tax Matters Partner, even for tax years for which a return has already been filed. The steps for making these changes are set out in the pertinent portions of the Treasury Regulations, 301.6231(a)(7)-1. The direct link to the electronic copy of that section is here:

    The bottom line is that you and the partnership(s) don't have to be left swinging in the wind because the current Tax Matters Partner is no longer competent to handle the tax matters. Given the seriousness of the issues involved the partnership(s) should immediately retain a tax attorney with experience in partnership matters and partnership audits to assist you and the partnership(s) in fixing up the mess the current TMP has left. Your tax attorney should also retain an accounting firm to help with preparing the unfiled returns and reviewing the prior years' filed returns to see if there is anything in the returns that needs to be amended. It is important that your tax attorney retain the accountants and be the filter for the material that is provided to the accountants so that the IRS is limited in its ability to force disclosure of the reasoning and decision-making behind any positions that are taken on any of the returns that need to be amended or, in the case of the unfiled returns, filed.

    Please do this as soon as possible - like yesterday - and please do not say anything to any IRS agent who wants to speak with you, especially anyone who says they are a "special agent" - special agents are the IRS' criminal investigators and when they want to talk to you it's because they want to prosecute you - and make sure that all of your partners understand this as well. If anyone from the IRS does contact any of you, just politely refer that person to your attorney.

    My answer does not constitute legal advice and may not be relied upon by anyone for any purpose and does not... more

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