♠ Posted by Marc J. Soss in Florida Corporate Attorney,Florida Corporation,Florida LLC,Florida LLC attorney,Partnership Tax Laws,Sarasota Tax Attorney,Sarasota Tax Lawyer at Tuesday, April 05, 2016
The
Bipartisan Budget Act of 2015 has strengthened the IRS’s ability to audit
partnerships (including multi-member LLCs). The new rules apply to tax years
beginning after 2017, and will apply to partnerships of 100 or more partners.
To prepare for these changes, Partnerships should amend their Partnership Agreements
and select a “Partnership Representative” (sole contact individual with the IRS
auditor and someone authorized to make all decisions regarding how to handle
the audit).
The
new rules require the IRS to assess the partnership if filing errors are
detected during an audit. The Partnership Representative will then be
responsible to determine whether the partnership itself (the current partners,
indirectly), or those who were partners during the audit period, should pay the
assessment. The Partnership Representative will also be able to determine
whether the entity could opt-out of the new rules (if it has 100 or fewer
partners, individuals, S corporations, C corporations, or estates of deceased
partners). If you have an S corporation partner, then you must count each of
its shareholders for this purpose. If a Partnership Representative is not
designated by the entity, the IRS reserves the right to appoint one for the
entity.
Partnerships
should begin planning for 2017 today by determining: (i) who will serve as the Partnership
Representative; (ii) the level of indemnification they will receive against any
costs or liabilities that may be incurred in that role, and (3) the level of
accountability they will have to the company and its partners. It is important
to note that Partnership Representative does not need to be a partner of the
entity.
