Calvetti Ferguson co-hosted a webinar with Thompson & Knight LLP focused on the IRS’s proposed changes to the partnership audit rules and focus areas for IRS enforcement on February 11, 2021. The panel of Calvetti Ferguson tax experts and Thompson & Knight legal experts discussed what the new rules could mean for a partnership from the choice of entity to present entity and what to expect in a partnership audit under these tough new rules. Below is a synopsis of the material covered during the webinar.
In 2021, the IRS issued final regulations that made a number of changes to the centralized partnership audit regime, which was enacted by the Bipartisan Budget Act of 2015. The changes were designed to address some of the concerns that had been raised by taxpayers and practitioners about the new regime.
One of the most significant changes was the addition of a new election that allows partnerships to “push out” any adjustments that are made as a result of an audit. Under the push-out election, the partnership would not be liable for any additional taxes that are due as a result of the adjustment, and the partners would instead be responsible for paying the additional taxes.
The final regulations also made a number of changes to the procedures for conducting partnership audits. For example, the regulations now require the IRS to provide the partnership with a copy of the audit report at least 60 days before the date on which the IRS is scheduled to issue a final determination. This will give the partnership more time to review the report and prepare for any appeals that may be necessary.
The final regulations are a significant step forward in the implementation of the centralized partnership audit regime. The changes that were made should help to make the regime more fair and efficient for both taxpayers and the IRS.
Here are some of the key changes that were made to the partnership audit rules in 2021:
- Partnerships can now elect to “push out” any adjustments made due to an audit. This means that the partners, rather than the partnership, would be responsible for paying any additional taxes that are due.
- The IRS is now required to provide the partnership with a copy of the audit report at least 60 days before the date on which the IRS is scheduled to issue a final determination. This will give the partnership more time to review the report and prepare for any appeals that may be necessary.
- The regulations were also clarified to make it easier for taxpayers to understand their rights and obligations under the centralized partnership audit regime.
These changes are a positive step for taxpayers and should help to make the centralized partnership audit regime more fair and efficient. For guidance on IRS regulations and tax planning, please contact us using the form below.
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