Watch the fourth episode in this exclusive series featuring Michael J. Greenwald MPPM, CPA, Partner to help inform your decision-making in light of the new and complex partnership audit rules.
Read the Transcript
What we’re talking about today are the new partnership audit rules, technically known as the centralized partnership audit regime, which is actually as frightening as it sounds—and it affects all partnerships, anyone filing a partnership or term, whether they’re organized as a partnership or the limited liability corporation.
There are a lot of decisions that need to be made.You need to care about this because, among other things, you need to appoint a partnership representative, someone who will deal with the IRS on your behalf in the case of an examination of the tax returns. There are significant tax implications related to this. Most of them deal with how the partners are going to interact with other partners in the case of an examination and in the case of an adjustment by the IRS.
There are very complicated rules, particularly with regard to partners entering or leaving the partnership, that need to be addressed in the agreement because it’s going to be too late to try to come to terms with how new partners or exiting partners are going to be charged or be responsible for the ultimate payment of the tax under the new rules. There are going to be significant aspects of the redrafting of these agreements that are going to require input from an accountant, things like how partners are dealing with other partners, things that affect the preparation of partnership returns or the defense of the partnership in the case of an examination.
We would work with your attorneys, because they’re the ones who have to draft the amendments to the agreement, but they certainly could and should have input from the accountants as to how those amendments should read.
Contact your Friedman tax advisor to help you navigate the complex changes to partnership audit rules under the new tax code.
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