For those of you with business partnerships (including LLCs taxed as partnerships) filing an IRS Form 1065 U.S. Return of Partnership Income, this blog contains important news for you. Treasury Regulations implementing the centralized partnership audit regime under the Bipartisan Budget Act of 2015 (the “BBA Procedures”) were published earlier this year. The BBA Procedures effectively replaced the three previously existing partnership audit regimes.
The BBA Procedures represent a new set of rules under which the IRS assesses and collects understatements of tax, interest, and penalties. Now, rather than assessing and collecting the tax attributable to the partnership from individual partners, the IRS can assess and collect at the partnership level, without having to identify specific partners and partnership items. The IRS can even assess and collect tax from the partnership (effectively from its existing partners), even if doing so allows a former partner to avoid tax that he or she should have paid for the year being audited.
The BBA Procedures affect all existing partnerships and is effective for all tax years beginning on or after January 1, 2018. The BBA Procedures could have a significant impact on any partnership that becomes subject to an IRS audit. Under the former Tax Equity and Fiscal Responsibility Act (“TEFRA”) rules, a “tax matters partner”—someone typically designated in a partnership agreement (e.g., an operating agreement)—could bind the partnership itself, but not individual partners, in IRS audit proceedings. [Read More @ Emerge Law Group]
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AggregatedNews, Khareem Sudlow
