New rules for audits of partnership returns

Effective for audits of partnership returns beginning after 2017, the IRS will use a centralized audit system that requires partnership adjustments to be determined at the partnership level and any tax attributable to the adjustments to be assessed and collected at the partnership level. These new rules allow for a small-partnership opt-out and an elective alternative to "push out" the audit adjustments made and tax paid to the partners. The audit process will be streamlined by limiting the right to notices and participation in the audit to one "partnership representative." This article presents the new rules and existing guidance that consists of a report by the Joint Committee on Taxation and temporary regulations on an early opt-in to the rules prior to their effective date.