Important Tax Updates for Partnerships and LLC’s

These new changes will affect you if you are a representative, partner, or member of a partnership or LLC. Effective for tax years beginning after December 31, 2017, a new IRS audit regime is in effect that dramatically changes how partnership tax audit adjustments are imposed. In addition, the IRS now requires the designation of a partnership representative. In short:

  • Audit adjustments that result in a balance due (imputed underpayment) are now assessed at the partnership/LLC level. Historically, partnership audits have been conducted at the partnership level with audit adjustments pushed through to partners in the year under audit. There is an option to elect out of the new audit regime if the partnership/LLC qualifies. If the partnership/LLC qualifies, the election can be made annually on the income tax return.
  • The partnership representative replaces the tax matters partner and has sole authority to act on behalf of the partnership/LLC regarding IRS proceedings and matters. The partnership representative is designated on the tax return annually.

To complete your 2018 partnership tax return, we need to know how you would like to address the above-mentioned items:

  1. Please indicate if you would like to opt out of the new partnership audit regime if the partnership/LLC qualifies.
  1. Please indicate who you are designating as the partnership representative. If the partnership representative is an entity, a designated individual must be identified as the individual through whom the partnership representative will act.

You can e-mail this information to the Hayashi Wayland tax partner or tax professional you work with or print this e-mail, note your answers and include it with the documentation provided for your partnership tax return. Please note, we cannot complete your partnership return until we have received responses to these questions. 

Please be sure to contact us if you have any questions.