LLC tax return: How much should it cost? Seeking Bay Area CPA

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LLC tax return: How much should it cost? Seeking Bay Area CPA

Scott Carrillo
Newark, CA · Member since 2017 · 22 posts · 7 votes

Formed a 3-way LLC partnership in 2018 but no business was conducted. How much should it cost to file and does each partner need to file separately? I received a quote for $600 and this seems outrageous. Also, does anyone have any bay area CPA referrals?

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Eamonn McElroy
Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
7y

@Scott Carrillo

Is the CPA you received the quote from located in the bay area (i.e. the number one COL area in the US right now)?  If so a base fee of $600 for a partnership federal and state return sounds very reasonable.

As @Brandon Hall mentioned, if the partnership had neither items of income nor items of loss during the tax year, a federal return is generally not required.

However, you will generally not be able to avoid a CA Form 568 obligation if the LLC is registered in California, even if it had no activity. Because of this the firm/practice/CPA you received the quote from will usually need to prepare the federal return anyway to get the CA return filed.

Highly encourage taxpayers obtaining a CPA/EA for the first time to obtain proposals from multiple CPA/EAs and ascertain the value they'll receive for each fee.  You might find this CPA is very reasonable compared to others in your area and/or a good value...

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  • Brandon Hall
    CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
    7y

    If no business was conducted, you may not have a filing liability. Otherwise the quote seems reasonable. We’d probably charge $800. CA stinks for entities.

    2Reply
  • Chris SvendsenPro Member
    Front Royal, VA · Member since 2016 · 306 posts · 240 votes
    7y

    I pay my CPA $700 for doing my LLC and personal taxes. Way more than I like to spend but saves me hours of my personal time so worth it to me.

    1Reply
  • Eamonn McElroy
    Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Scott Carrillo

    Is the CPA you received the quote from located in the bay area (i.e. the number one COL area in the US right now)?  If so a base fee of $600 for a partnership federal and state return sounds very reasonable.

    As @Brandon Hall mentioned, if the partnership had neither items of income nor items of loss during the tax year, a federal return is generally not required.

    However, you will generally not be able to avoid a CA Form 568 obligation if the LLC is registered in California, even if it had no activity. Because of this the firm/practice/CPA you received the quote from will usually need to prepare the federal return anyway to get the CA return filed.

    Highly encourage taxpayers obtaining a CPA/EA for the first time to obtain proposals from multiple CPA/EAs and ascertain the value they'll receive for each fee.  You might find this CPA is very reasonable compared to others in your area and/or a good value...

    2Reply
  • Stanley Bronstein
    Attorney, CPA, Broker & Author · Scottsdale, AZ · Member since 2018 · 532 posts · 488 votes
    7y

    @Eamonn McElroy 

    and @Brandon Hall

    @Brandon HallEven if a federal partnership return is not required (due to a lack of income), I always recommend to my clients that they file the return anyway (even if it reflects zero income). That way, they start the statute of limitations running for that tax year. If you file a return, the statute starts running. If you don't file a return, the statute does NOT run and that year remains an open tax year for audit purposes.

    Plus, the IRS computer system might be expecting a tax return to be filed for that tax year and you could get computer generated notices of non-filing that you then have to respond to. In my experience, it's much better to simply file the return in the first place.

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  • Eamonn McElroy
    Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Stanley Bronstein

    Interesting.  Generally if there is/are state return(s) that need to be filed because the bar is higher than the federal bar (like CA), I suggest filing the federal as the client is paying for it anyway to prepare the state return(s).

    Not sure I'd suggest filing the federal if it had no items of income and expense and no required state returns.  We're in the business of saving our clients money after all.  It would cost the client more for me to file a return than deal with the IRS if there's an issue.

    If a junior IRS auditor wanted to audit that tax year and get the partnership on 'failure to file', I'd laugh and just send a response letter.  Easy peasy.

    2Reply
  • Jared McCullough
    Member since 2019 · 122 posts · 44 votes
    7y

    I am in basically the same situation with a 3 way LLC in which a house was purchased but still under renovation so no income was gained. This being said this thread has me somewhat confused because some suggest it needs done while other suggest it doesn't. I am somewhat under the impression this then puts the decision on the LLC which to me seems a little backwards. Is there no "Right" answer?

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  • Eamonn McElroy
    Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Jared McCullough

    Treasury Reg §1.6031(a)-1(a)(3)(ii):

    A partnership that has no income, deductions, or credits for federal income tax purposes for a taxable year is not required to file a partnership return for that year.

    This is general information and does not constitute tax advice.  Always consult your tax CPA/EA before making a filing decision.

    1Reply
  • Katie L.
    Attorney and CPA · San Diego, CA · Member since 2017 · 590 posts · 422 votes
    7y

    @Scott Carrillo

    That price sounds entirely reasonable to me. You have to understand that a CPA’s time IS his/her money. CPAs aren’t out selling merchandise or some kind of goods that they receive a mark-up on to make money. Even though your return may not have complicated items of income or expenses, it takes time to set up a return, gather information, document the supporting info, converse back and forth with the client, postage, printing ink, software, etc. not to mention the liability the CPA is absorbing by signing the return as a paid preparer. All of that adds up quickly and $600, especially for the Bay Area in CA, sounds entirely reasonable to me. If your entity starts making money I wouldn’t be surprised to see that cost go up. Most entity returns in CA run probably closer to $1,000 as a general estimate. There’s always the option to self-prepare if you find the cost too high, and you may soon have a newfound appreciation for that $600 haha. I know CPAs in San Diego if you want to get a second quote.

    *this post does not create an attorney-client or CPA-client relationship. Readers are advised to seek professional advice.

    1Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    7y

    @Scott Carrillo

    Partnership returns normally cost more to prepare than individual returns and there are reasons for this.

    There are less tax practitioners that specialize in partnership taxation than you will find that specialize in individual taxation.

    The following is at the minimum required to prepare a blank partnership return
    1) Name, SSN/EIN, address, active/passive information for each partner
    2) Reading and understanding of partnership agreement
    3) Gathering EIN and address of partnership
    4) determine how tax law changes(I.E. 199A deduction) has an impact on the return.
    5) Time to prepare and review the return

    Regarding whether the partners have to file separately. There is one partnership return. However, the partnership return will distribute a "K-1" to each member his share of income/losses from the partnership.

    You should consult with a couple accountants here on pricing.
    I agree that a federal return is not required if there is no activity. However, you may be required to file the state return.

    [email protected]917-280-8544
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  • Houston Garcia
    Real Estate Broker · San Francisco Bay Area, CA · Member since 2015 · 116 posts · 76 votes
    7y

    @Scott Carrillo - I agree with other members, $600 sounds extremely reasonable. The average local cost I've seen is between $800-$1k. 

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  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Scott Carrillo. I had this same situation with my cpa. He charged me nothing since we didn’t really do any business last year. Normally he’d probably charge a couple hundred bucks. I spend about 600 for my personal tax returns

    1Reply
  • Scott Carrillo
    OP
    Newark, CA · Member since 2017 · 22 posts · 7 votes
    7y

    @Brandon Hall

    @Eamonn McElroy

    @Basit Siddiqi

    Hey just thought I would thank everyone for their responses. Just to add I live in California but the LLC partnership was formed in Wyoming through Anderson Advisors.

    I asked Anderson Advisors and here is what they said:

    "That is a great question that you are asking about your LLC. Your LLC was formed in Wyoming. You are right about it not being in California. Even though it is a Partnership, you still need to file something on record with the IRS. If there hasn't been any activity, you still need to report that so that you do not receive any penalties. I know that the Partnerships are for renovations, you still need to put on your taxes any work that you have done and the expenses. Here at Anderson Business Advisors, we charge $500 as a base fee for the taxes."

    I have heard of people that live in California form LLC's in California complain about an $800 fee the state charges, since my LLC was formed in Wyoming I would be avoiding this fee correct?

    I am still confused a bit, do I need to file anything for the LLC?

    I am looking to save money but not do something that may bite me in the long run.

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  • Eamonn McElroy
    Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Scott Carrillo

    California paints with a pretty broad brush regarding nexus and the $800 LLC tax obligation.

    If the LLC has a member-manager located in CA, generally speaking the LLC is "doing business" in CA regardless of where it is organized, and won't be able to avoid a CA 568 obligation or the $800 LLC tax.

    "If there hasn't been any activity, you still need to report that so that you do not receive any penalties."

    This isn't correct.  They either aren't familiar with partnership tax law or there are more nefarious reasons...like trying to pull the wool over your eyes because they're financially incentivized to do that.

    That would be a non-starter for me.

    Pros on this board are telling you that you probably don't have a federal obligation, but more than likely have a CA obligation for 2018.

    1Reply
  • Katie L.
    Attorney and CPA · San Diego, CA · Member since 2017 · 590 posts · 422 votes
    7y

    @Scott Carrillo

    California is a sort of beastly state when it comes to taxes and filings. Even if you create a non-CA LLC, if you are managing the business from California, you will be deemed to be "doing business" in California and therefore subject to CA taxes. California charges a minimum tax of $800 a year per LLC, and more if you have gross receipts in excess of $250k. So, if you create an LLC in another state, you will need to register it as a foreign LLC in California. Just because you created a WY LLC does not allow you to escape CA taxes and filing fees.

    *This post does not create an attorney-client or CPA-client relationship.  The information contained in this post is not to be relied upon.  Readers are advised to seek professional advice.

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  • Scott Carrillo
    OP
    Newark, CA · Member since 2017 · 22 posts · 7 votes
    7y

    @Eamonn McElroy

    @Katie L.

    Thanks for your replies,

    I asked Anderson Advisors if I would need to pay the $800 California LLC tax and here is there response:

    "In the State of California, there are franchise taxes that have to be paid every year. These fees have to be paid if you do business within the state. You don't have to worry about that because you don't have any entities there. Are you thinking about forming an entity in California?"

    They make it seem as though I don't have to pay it unless I formed the entity in California, this seems contradictory to what I have heard here.  Who is right? 

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  • Eamonn McElroy
    Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Scott Carrillo

    Scott, this is the second time you've asked Anderson Advisers what your compliance exposure is, and the second time they've been wrong.  They're now "oh for two".

    It's slightly surprising to me that you still think they might be correct when their information contradicts what pros on this sub-forum are telling you.

    "Doing business in California", as defined by California, does not mean merely having a business entity organized or incorporated there. Again, California paints with a very broad brush here. An LLC with a member-manager located in California is doing business in California.

    Pull up the 2018 California Form 568 instructions for confirmation.  Page 4 of the pdf.

    https://www.ftb.ca.gov/forms/2018/18_568bk.pdf

    Doing Business – A taxpayer is doing business if it actively engages in any transaction for the purpose of financial or pecuniary gain or profit in California or if any of the following conditions are satisfied:

    • The taxpayer is organized or commercially domiciled in California.
    • The sales as defined in R&TC Section 25120(e) or (f), of the taxpayer in California, including sales by the taxpayer’s agents and independent contractors, exceed the lesser of $583,867 or 25% of the taxpayer’s total sales.
    • The real property and tangible personal property of the taxpayer in California exceed the lesser of $58,387 or 25% of the taxpayer’s total real property and tangible personal property.
    • The amount paid in California by the taxpayer for compensation, as defined in R&TC Section 25120(c), exceeds the lesser of $58,387 or 25% of the total compensation paid by the taxpayer.

    In determining the amount of the taxpayer’s sales, property, and payroll for doing business purposes, include the taxpayer’s pro rata share of amounts from partnerships and S corporations. These amounts are reported on the member’s Schedule K-1 on Table 2, Part C.

    Partnerships and LLCs are considered doing business in California if they have a general partner or member doing business on their behalf in California. Likewise, general partners and members are considered doing business in California if the partnership or LLC, respectively, is doing business in this state. For more information, see R&TC Section 23101 or go to ftb.ca.gov and search for doing business.

    2Reply
  • Katie L.
    Attorney and CPA · San Diego, CA · Member since 2017 · 590 posts · 422 votes
    7y

    @Scott Carrillo  I agree with @Eamonn McElroy.  I think it's time for you to find a different set of advisors.

    *This post does not create an attorney-client or CPA-client relationship.  Readers are advised to seek professional advice.

    2Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    7y

    I agree with @Eamonn McElroy and @Katie L.. You are subject to the $800 tax/fee.

    [email protected]917-280-8544
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  • Scott Carrillo
    OP
    Newark, CA · Member since 2017 · 22 posts · 7 votes
    7y

    @Eamonn McElroy

    It's not that I think they are right, I'm just posting what they said.  It's good to know there are people like you around these forums to point people like me in the right direction.  Thanks for all your advice and guidance with my questions.

    @Katie L.

    I think you are right!

    @Basit Siddiqi

    Thanks for the feedback

    0Reply
  • DongHui Patel
    Member since 2021 · 95 posts · 30 votes
    4y

    @Scott Carrillo How has your experience been with Anderson so far?  Based on your responses from them, I am not impressed with thema nd thinking of looking elsewhere... 

    0Reply
  • Bruce D. Kowal
    Metro NY + New Bedford · Member since 2022 · 294 posts · 216 votes
    4y

    If it is done incorrectly, there is penalty and interest.   Weight the full consequences before you complain about a CPA's fees.

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