<img height="1" width="1" style="display:none;" alt="" src="https://px.ads.linkedin.com/collect/?pid=938154&amp;fmt=gif">

Proposed Centralized Partnership Audit Regulations

Under the current Internal Revenue Service (IRS) partnership audit system, any adjustments made by an audit at the partnership level flow through to the partners. The partners are then responsible for their share of any additional taxes and penalties due.

Changes under the Bipartisan Budget Act of 2015 created a centralized partnership audit system. This system makes the partnership responsible for any changes that arise due to an IRS audit of the tax return. Any additional taxes and penalties related to these adjustments will be paid by the partnership as opposed to the partners each paying their share. These additional taxes and fees are nondeductible for the partnership.

Partnerships may elect to use the new audit system for tax years beginning after November 2, 2015 and before January 1, 2018. However, the new audit system will become mandatory for all partnership tax years beginning after December 31, 2017.

Eligible partnerships may make an annual election out of the new rules if they meet the following criteria:

  • The partnership has 100 or fewer partners during the year.
  • All partners must be eligible partners throughout the year. Eligible partners include individuals, C corporations, S corporations, eligible foreign entities, and estates of deceased partners.

The rules also provide methods for partnership level adjustments to be taxed at the partner level.

The rules require that partnerships name a partnership representative. The partnership representative takes the place of the tax matters partner. The representative must be a partner or other person with substantial presence in the United States.

The IRS may select the partnership representative on behalf of the partnership if the partnership fails to select one. The partnership and all of its partners are bound by the decisions of the partnership representative.

These rules could have a significant financial impact on entities taxed as partnerships.  We urge you to plan for the effect these rules could have on your entities. If you have any questions regarding the new rules, please contact your SVA Tax Professional.

Request More Information

Share this post:

Biz Tip Topic Expert: Glen Weyenberg, CPA

Glen Weyenberg, CPA

Glen is the President of SVA Certified Public Accountants. He has extensive experience in the real estate industry and consults on business continuity.

Awards and Affiliations

AT-Regional Leaders-Logo-white-2024


Madison, WI
1221 John Q Hammons Dr, Suite 100
Madison, WI 53717
(608) 831-8181

Milwaukee, WI
18650 W. Corporate Drive, Suite 200
Brookfield, WI 53045
(262) 641-6888

Colorado Springs, CO
1880 Office Club Pointe, Suite 128
Colorado Springs, CO 80920
(719) 413-5551

SVA BBB Business Review Man Standing


(888) 574-4782

Are you in the know on the latest business trends, tips, strategies, and tax implications? SVA’s Biz Tips are quick reads on timely information sent to you as soon as they are published.

Connect With Us

Copyright © 2024 SVA Certified Public Accountants | Privacy Policy | Cookie Policy | CCPA