New Partnership Audit Rules

New Partnership Audit Rules

The Bipartisan Budget Act of 2015 (BBA) significantly changed the way the IRS will audit partnerships. The Act repeals the current partnership audit rules (TEFRA and ELP) and replaces those with new rules that will most likely increase partnership audit rates. These rules take effect for tax years beginning after December 31, 2017:

  • Any audit adjustments will result in tax being imputed at the partnership level and the partnership would pay the tax, interest and penalties.
  • Partnership Representative would be the sole contact for dealing with the IRS during an audit.
  • Small partnerships (less than 100 partners) meeting certain requirements will be able to ‘check the box’ on their Form 1065 to elect out of the new rules.

Of course these rules are more extensive than the few changes mentioned above. The IRS is in the process of releasing a complete set of final regulations so as more concrete details emerge we will pass those on. Please feel free to reach out to one of our tax professionals with additional questions on this matter at 859-331-1717.

Please see Rudler PSC e-Tip New Partnership Audit Rules by Suzanne Danks, CPA, Tax Supervisor, for more details.