Good Evening - My question is to those businesses that are Texas Limited Liability Companies and have chosen to elect to be either a Partnership or Sole Proprietor for Federal Tax Purposes. Our L.L.C files a Form 1065. We were audited by Texas Workforce Commission for the year 2009. Field Auditor came back with adjustments to the Gross Wages and Taxable Wages (only up to $9,000 per person per year) for the distributions taken by one of our Partner/members. The 2nd Partner did not take any draws in 2009. Referring to Section 1.5.3 of the T.W.C. Law Manual, the auditor insists that because our Original Articles of Organization did not have a "formula" addressing how distributions to partners are to be made, therefore, the T.W.C. deems that those distributions are considered wages by the T.W.C. - They didn't bother to ask us for our Operating Agreement to see if this issue is addressed. The field auditor, taxed us, changed my 2009 forms and told me that if I didn't like their decision, I could appeal under Rule 13 - however, the two T.W.C.'s supervisors above the field auditor - told me they would not rule in our favor. For a more impartial hearing, I have written a letter with a copy of every e-mail back and forth with the T.W.C. tax manager, to the Commissioner of the T.W.C. Texas L.L.C.'s came into being in 1991 - that is 19 years. I have been a bookkeeper for better than 38 years - I have spoken to many local C.P.A's and attorneys. Not one has ever heard of the T.W.C. taxing distributions to partners. Are any of you familiar with Section 1.5.3 of the T.W.C. law manual?
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