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Temporary regulations issued on early election of new partnership audit rules

The Bipartisan Budget Act of 2015 (BBA) provided for new partnership audit rules that significantly change the way IRS partnership audits will be handled. While these rules are not mandatory until January 1, 2018, partnerships can elect to be subject to the new rules now. Temporary regulations were issued last month, specifying how a partnership can elect into the new rules for IRS audits prior to the 2018 effective date. In addition to providing mechanical rules for early use of the new audit provision, these regulations give some insight into issues that the IRS is beginning to identify as the effective date approaches.
The new audit rules will allow the IRS in most cases to assess any additional tax resulting from the audit against the partnership itself – eliminating the need to proceed against the individual partners. Read more…