New Report: Large Partnerships can be Difficult for IRS to Audit
These days, it is increasingly rare to find a business partnership that consists of two doctors, lawyers or financial professionals setting up shop together. The Government Accountability Office defines a large partnership as having at least $100 million in assets and at least 100 direct and indirect partners. Over the last few years, the number of businesses organized as large partnerships has grown substantially. Between tax years 2002 and 2011, IRS data shows that the number of large partnerships in America more than tripled.
But, while the IRS is reportedly auditing more of these large partnerships, they are having more difficulty in doing so. Produced for a Senate Subcommittee on Investigations hearing held July 22, a new report from the Government Accountability Office detailed the challenges the IRS is facing when it comes to auditing large partnerships.
For starters, simply identifying the person to represent the partnership in the audit, a legal requirement of the Tax Equity and Fiscal Responsibility Act of 1982, can take months. Passing audit adjustments to the taxable partners across the tiers of a large partnership can be difficult. And, the IRS must complete a partnership audit within the three year statute of limitations.
It is more than understandable if you are not particularly troubled by the tribulations of the IRS. But, if you are being audited, sometimes the IRS’s problems can become your problems. To ensure a complicated process or a rushed audit do not result in mistakes being made pertaining your tax liability, it is important to consult your own experienced tax attorney.
Source:Accounting Today, “IRS Has Trouble Auditing Large Partnerships,” Michael Cohn, July 22, 2014
