The IRS has replaced the existing rules for auditing large partnerships with a set of new, streamlined rules. So in this episode of unsuitable on Rea Radio, we sit down with Chris Axene, a principal at Rea and a partnership guru, to learn what these new rules are and how they will impact partners and partnerships going forward.
So, What Changed?
The significant changes to partnership audit procedures and operating agreements flew under the radar, somewhat, buried under the shadow of the tax reform act that was passed in 2018.
One of the biggest changes under the new rules is that there is a designated partnership representative who has far more power and authority than the tax matters partners that existed under the old rules. So, partnerships now need to designate a representative, and if you don’t, the IRS can nominate one for you. This means one person in the partnership will have, in the eyes of the IRS, more power and authority when it comes to tax matters, so that could be troubling to other members of the partnership and will require changes to the operating agreement. However, no one really knows what the practical implications of these rules mean yet, and it will likely be 2020 before we start seeing them.
If you are in a business partnership or considering entering one, you will be interested in these other topics discussed in this episode:
- The importance of an operating agreement (& what happens when it isn’t followed).
- What the new partnership audit rules are and how they will impact partners and partnerships going forward.
- How some partnerships can potentially opt out of these new rules.
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official transcript
Click here to read the official transcript for episode 181, “New Partnership Rules”