New Partnership Audit Rules Will Radically Change Partnership Tax Examinations

Beginning in 2018, the rules for auditing partnership income tax returns will change dramatically. The most significant change is that tax deficiencies determined in a partnership audit may be collected from the partnership itself, unless the partnership elects to “push out” the deficiency to its partners. Partnerships and multiple-member LLCs taxed as partnerships should consider amending their agreements to prepare for the new audit rules, including the partnership examination process. There is no one-size-fits-all approach that will work for all partnerships, however. Instead, partners should determine what provisions make sense in light of the partnership’s membership, size, activities, and other factors.