Beginning with 2018 tax returns, new procedures will take effect for IRS audits of partnership tax returns. These procedures will apply to partnerships and limited liability companies taxed as partnerships unless those entities are eligible to opt out and elect to do so.
The general rule under the reforms is that the IRS will make adjustments and assess and collect tax (including penalties and interest) at the partnership level. As a result of the new audit procedures, there are a number of issues that should be addressed by the entities to which the new audit regime applies. Among the most important issues to address are those relating to the new "Partnership Representative," such as the appointment, duties and powers of that person.
Lenhart Pettit recommends that all clients consider the potential impact of these rule changes on their partnership agreements or LLC operating agreements. Our tax law attorneys can help clients review and amend their agreements.