Significant changes to IRS audit procedures for partnerships and LLCs will go into effect January 1, 2018. The changes will apply to all partnerships and LLCs who elect to be taxed as partnerships. The change is represents a substantial change in methodology when amounts are owed to the IRS and requires a substantial discussion within the partnership or between the members of the LLC. In the past, when an IRS audit of a partnership or LLC resulted in a finding against the partnership or LLC and a balance owed, the IRS would be forced to pursue the individual partners to collect any balance owed. The new rules allow the IRS to pursue the partnership or LLC directly for any taxes owed, as well as penalties and interest.
This presents many challenges for partners or members which should be addressed within corporate documents. Your business will also need to identify a “partnership representative” for the IRS going forward. This individual is authorized by the partnership or LLC to act on behalf of the partnership or company and all other partners or members. The IRS will communicate directly and solely with the “partnership representative” and/or their legal counsel.
Allen Barron’s integrated tax, legal, accounting and business advisory services are of value in these cases. Our legal team will work with you and your company to make appropriate changes to the partnership agreement, operating agreement or other corporate documents. We must address the potential conflict of a partner or member’s interest or share in the tax year under examination versus the year in which the audit is concluded. We must also ensure the significant changes to IRS audit procedures for partnerships and LLCs are clearly understood by all affected parties. There are additional options the partnership or LLC may consider to mitigate the affect of the changes such as a “push-out” election.
Is your group ready for the impact of the changes to IRS audit procedures for partnerships or LLCs going into effect in 2018? We invite you to contact us or call 866-631-3740 for a free consultation. Learn about the impact of the IRS audit procedural changes and the actions you and your partnership or LLC should take to protect your personal and associated interests.