Never filed taxes. Election under 761 or the IRS code

James D. Bailey on

Our club treasurer researched this back in the early/mid
90's. She felt strongly that we did not need to prepare
taxes for our partnership. As a result we have never filed
taxes (please see 541 publication and 761 election). This
year we plan to start filing taxes because we have a new
treasurer and he makes good sense when explaining to us that
all partnerships should be filing.

Are we putting ourselves at risk for an audit? Our dividend
income is about 400.00 a year. There are about 8 members.
Our cpa suggested we also consider closing down the
partnership and opening a new one that files every year to
avoid any future problems. Boy that would be bad.

If we just start filing and bring up the fact that the IRS
gave confusing information in 541 publications and with the
761 will we be ok? We have a great club that is on
auto-pilot and if we close it down, it will never get back
up off the ground.

Thank you for any assistance or response.

Rip West on

If we just start filing and bring up the fact that the IRS gave confusing information in 541 publications and with the 761 will we be ok?

You seem to have researched the problems of coming in under the 761 election, so I won't comment on that. Yes, in my humble opinion, you will be ok.

Are we putting ourselves at risk for an audit? Our dividend income is about 400.00 a year.

What's the worry about an audit? Your partnership accounting should be pretty straight-forward. My advice is to file this year, and if you are questioned as to why you didn't file previously, tell them that you were operating under a 761 election. In all the cases with which I am familiar, this has never led to a problem, even in the few times the question was raised.

Rip West
Saint Paul, MN

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