A rule passed in 2015 takes effect for the 2018 tax year. Previously, the IRS rarely audited business returns. Under the new laws, IRS audits will now concentrate on business returns. The partnership (instead of individual partners) pays tax adjustments in the current year, which could place a substantial financial burden on smaller partnerships. Act now to make sure your business designates a representative to act on its behalf for tax purposes.
The Bipartisan Budget Act of 2015 (BBA) set up streamlined audit rules effective January 1, 2018. The new audit rules pertain to any business (such as an LLC) treated as a partnership for income tax purposes. These changes mean faster turnaround on IRS audits of partnership returns. In general, audits and adjustments will take place only at the partnership level. This means that all taxes are paid by the partnership, as opposed to individual partner under the old rules.
Each partnership has to choose a partner or other representative to act with full authority on the partnership's behalf. The partner or designee has to have a notable presence in the U.S. All partners are bound to the decisions made by this designated partner during the audit.
If the partnership opposes the decisions of the representative, the IRS can choose any person with a substantial U.S. presence to represent the partnership during the audit.
Which Entity Pays Taxes, Interest and Penalties?
Small and TEFRA partnerships don't pay taxes, interest or penalties. Individual partners do. However, large partnerships now pay taxes, interest and penalties at the partnership level. These amounts have to be allocated out to the partners separately.
During an Audit Hire a Tax Attorney or CPA
It's imperative that partnerships hire a representative in the event of an audit. An accountant or tax attorney can ensure that your taxes are filed properly regarding the recent changes. Otherwise, your business could face thousands of dollars in additional payments during the current tax year. This strain can lead to financial ruin for the business and its partners. Hiring a tax expert gives you the best chance to avoid this. Take advantage of a professional tax attorney and put your best foot forward when faced with an impeding IRS audit. The ability to take a step forward with your tax burden is important to your success. Your road starts here...Call Travis W. Watkins Tax Resolution and Accounting Firm today! Know your options and have a representative that deals with the IRS every day.
Call Toll Free: 800-721-7054.