New Partnership Audit Rules
New Rules Became Effective January 1, 2018
If you are a partner in a partnership or in an LLC taxed as a partnership, you need to know that there are new IRS audit rules that became effective January 1, 2018.
The new rules require that any tax due on partnership adjustments made by the IRS must be paid by the partnership. There is an opt-out election that certain qualifying partnerships may make. The new rules also replace the tax matters (TM) partner with a partnership representative (PR). If the partnership fails to designate its PR, the IRS will do so to its advantage. The PR has much broader powers than the TM had that could potentially significantly impact the other partners.
If you are the tax matters partner in a partnership and your tax professional or legal counsel has not yet contacted you regarding the new rules, you need to make a call to both of these advisors. Under the new rules, partners joining the partnership can become liable for the tax liabilities of former partners. Your tax professional can explain how the new rules will impact your taxes if your partnership is audited by the IRS. Legal counsel is needed to make the necessary changes to the LLC’s operating agreement (if taxed as a partnership) or partnership agreement.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.