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Questions about proposed partnership rules

Georgia residents who are in business partnerships should be aware of regulations being proposed by the Internal Revenue Service regarding partnership audits. The agency is having a hearing that will provide taxpayers and their financial advisers the opportunity to voice questions about the rules.

The procedures for partnership audits are currently set by the Tax Equity and Fiscal Responsibility Act. However, as a result of the Bipartisan Budget Act of 2015, new policies will be in place on Jan. 1, 2018.

Tax professionals have a variety of questions about the proposed regulations. One of their concerns is whether tiered partnership push-outs would be a reality. They have been advocating for changes to the BBA that would permit tiered partnerships to allocate tax adjustments to the final partner. While the IRS failed to offer rules on push-outs for the partnerships in the proposed regulations, the agency did include provisions regarding addressing the issue at a later time.

Whether or not partnerships will have the ability to contest decisions made by the IRS during an audit is another concern for taxpayers, tax practitioners and attorneys as proposed regulations do not address the issue. While procedures for appeals are usually specified in an examination, there is absolutely no mention of them in the preamble or the regulations. Taxpayers also want to know if there will be leeway to change the partnership representative. Clarification regarding the role and obligations of the partnership representative is also needed.

An attorney who practices tax law may assist clients during and after an IRS tax audit. The attorney may engage in litigation to dispute the results of an audit. The factors surrounding the audit may be assessed, and the attorney may advise of corrective action that may be needed.

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