Last week, President Obama signed a two-year federal budget plan that includes changes in partnership audit procedures. The bill, which passed through Congress late last week, also contains revisions to the ACA, pension contributions and payroll revenue distribution.
The new audit guidelines will create a streamlined set of partnership audit rules by repealing the 1982 Tax Equity and Fiscal Responsibility Act (TEFRA). The TEFRA and Electing Large Partnerships (ELPs) distinction will be eliminated and streamlined into a single set of rules, allowing the IRS to examine a partnership’s items of income, gain, loss, deduction, credit and partners’ distributive shares for a particular year.
Any adjustments will be taken into account by the partnership, and not the individual partners, in the year that the audit or any judicial review is completed. Partners will not be subject to any joint and several liability determined at the partnership level. Additionally, as an alternative to taking any adjustments into account at the partnership level, a partnership would be permitted to issue adjusted information returns to the reviewed year partners.
The Congressional Budget Office (CBO) estimates that the partnership audit rule changes will generate $11.22 billion in revenue over the next 10 years.
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