Is Your LLC Or Partnership Ready For Its (Possibly) Impending Audit?

On September 1, 2020, as a first step in its stated intention to increase Partnership audits in 2021, the Internal Revenue Service added a new section, BBA Centralized Partnership Audit Regime, on its website at IRS.GOV.

BACKGROUND

Before January 1, 2018, when the IRS audited a partnership (including any entity taxed as a partnership, like the typical limited liability company), and tax, interest or penalties were owed, the IRS could only collect from the individual partners. For small partnerships or LLC's (ten or fewer partners or members), the IRS had to audit each partner or member, too. For larger partnerships, the IRS could audit only the partnership, and not each partner, but it still had to collect any amounts due directly from each partner. Consequently, the IRS typically audited only about 1% of partnerships each year.