Q & A’s
How does the IRS
benefit from the
change?
The new rules allow the IRS to
deal with only one point of
contact – the Partnership
Representative. This individual,
who does not have to be a
member or partner, has the
power to obligate the entire
group. The IRS will benefit from
LLCs and LPs not being able to
give them the run around on
who has authority for the entity
(which did occur under the old
What has changed?
audit the entity and not the
individual partners. In many
situations, the entity – and not
The new rules change how the the partners – will pay any tax
IRS can audit an LLC or LP. In shortfall. The new program is
the past, an IRS audit of an LLC called the Centralized
or LP taxed as a partnership Partnership Audit Regime.
involved auditing, settling and
collecting tax shortfalls from
each individual partner. In a
master limited partnership (think
oil and gas or real estate) with
They will also benefit from being
able to asses any tax shortfalls
against the entity itself and not
the individual partners.
What if my LLC is
taxed as an S
Corporation or C
Corporation?
thousands of partners, this was
very difficult.
rules.)
The new rules only apply to
LLCs taxed as partnerships.
The IRS decided (and Congress However, in the event of a
approved) that it was best to change of taxation, it will be
conduct audits at the entity (LLC important to amend your LLC
or LP) level. They now can just Operating Agreement.
.
New IRS Rules
for LLCs and
LPs Taxed As
Partnerships