Should You Elect Out of the New Partnership Audit Rules?1 min read
Because of this, a partnership should consider electing out of the new partnership audit rules.
The law sets up a centralized system for audit, adjustment, assessment and collection of tax that applies to all partnerships — except those eligible partnerships that have filed a valid election out.
Electing out of the centralized system will leave past-law partnership audit rules in place.
Unlike past-law partnership audit rules, an underpayment of tax determined as a result of an examination of a taxable year will be imputed to the year during which the adjustment is finally determined, and will be assessed against and collected from the partnership with respect to that year rather than the year under audit.
• a partnership in 2020 is under audit for the taxable year 2018 resulting in a determination of underpayment
• the partnership then litigates in tax court,
• the decision does not become final until 2021,
• that means the adjustment year is 2021,
• underpayment will then be collected from whoever is in the partnership in 2021, even though some 2018 partners may have left the partnership.
To be eligible to elect out, the partnership must have fewer than 100 partners and none of those partners can be in another partnership. A partnership will be allowed to elect out of the centralized system and have it and its partners governed by the past-law partnership audit rules.
The annual election will be made with a timely-filed return of the partnership taxable year to which the election relates. The election must include the name and taxpayer identification number of each partner of the partnership.
If this is something your partnership needs to consider, call Simons Bitzer at 317-782-3070 to discuss.
By Jason Saunders
Jason joined the firm in 2011 and has risen to the position of Tax Manager. In that role, he leads an expanding tax team and personally prepares highly complicated individual and corporate returns. Jason is known for his expertise in tax planning and preparation as well as a passion for researching new codes.
View bio | Read more articles
Here are a few additional articles you might be interested in:
Work Life Balance. . . Innovative Culture . . . Variety If you are a tax accountant with 5 years of accounting experience and this sounds intriguing, check this out. Work/life balance is a top priority with our team. We provide a family-friendly work environment with...read more
Work Life Balance. . . Innovative Culture . . . Variety If you are an accountant with 10-15 years of accounting experience and this sounds intriguing, check this out. Work/life balance is a top priority with our team. We provide a family-friendly work environment with...read more
No one starts a business hoping that it will fail, yet a quick check of business statistics shows that half of all businesses will. Large businesses have teams of experts who comb through complex reports to make decisions that affect hundreds of employees and ensure...read more