New Partnership Audit Rules Could Result in Partnership-Level Payment Obligations

by: Smith and Howard

December 17, 2015

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When President Obama signed the Bipartisan Budget Act of 2015 into law last month, it contained language that repeals both the partnership audit rules under the Tax Equity and Responsibility Act of 1982 (TEFRA) and the special rules for electing large partnerships (ELP). The Act replaced the TEFRA rules with a completely new regime for auditing partnerships. Now, tax adjustments resulting from partnership audits will generally be assessed at the partnership level. 

Under the new regime, the IRS will audit items of income, gain, loss, deduction, or credit of the partnership at the partnership level. Any taxes, interest, or penalties relating to the adjustments will also generally be assessed and collected at the partnership level, regardless of the number or size of partners, unless the partnership is eligible to opt out in a timely manner. The new procedures are effective for tax returns filed for partnership taxable years beginning after December 31, 2017, unless the partnership elects to have the new procedures apply sooner. 

If you would like to discuss how these partnership audit changes could affect your company, please contact Mark Abrams at 404-874-6244 or fill out our form below.

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