Exam: IRS Takes Steps to Improve Partnership Audit and Enforcement
Journal of Tax Practice & Procedure
The Internal Revenue Service (IRS) continues its efforts to enhance partnership audit and enforcement through its latest compliance program, specific-issue campaigns, and other projects. While these measures have been underway for several years, the IRS announced that it expects to use some of the additional funding from the Inflation Reduction Act (IRA) to add new personnel and technology to support such initiatives. In this article, George Hani and Marissa Lee review areas of increased audit and enforcement interest, including the Large Business and International (LB&I) Division's four active campaigns focused on partnership tax issues, and they examine whether increased reporting could lead to increased audits. The authors conclude that the IRS is committed to improve the quantity and quality of its partnership audits and has enacted various initiatives. The IRS has adopted the Bipartisan Budget Act of 2015 (BBA) rules shifting tax liability from partners to a partnership, refined its audit selection process supported by new technology and more personnel, taken issue-based audits and other compliance measures, and required more standardized and detailed tax reporting. As the IRS continues to iron out the implementation details, partnerships and partners should pay close attention to follow-up developments and changes related to the IRS audit and enforcement.