The IRS audit rules for all partnerships (including LLCs that
are taxed for income tax purposes as partnerships) have changed
dramatically. Effective for tax years beginning on or after January
1, 2018, unless a partnership can "elect-out" of the new
audit rules altogether, the partnership will be liable for tax
underpayments arising from an audit. This shift basically causes a
partnership's current year (the year when the audit is
conducted) partners to be responsible for reviewed year (the
audited year) tax liabilities. Under the old audit rules, taxes
were assessed against those who were partners during the reviewed
year. Therefore, unless certain steps are taken to "push
out" tax liabilities to reviewed year partners, there is a
significant risk that a partnership's current year partners
will be liable for taxes attributable to reviewed year partners.
This result could be particularly problematic if current year
partners are different than reviewed year partners.
