IRS Partnership Audits
Experienced New York Partnership Tax Attorneys for High-Stakes IRS Audits
The Internal Revenue Service (IRS) has prioritized partnership tax compliance in recent years. According to the agency’s data, partnerships are responsible for some of the nation’s largest tax deficiencies, and partnerships are also frequently used as tools to execute abusive tax avoidance schemes.
Of course, the vast majority of partnerships are legitimate, and most partners do their best to ensure that they meet their federal tax obligations at both the individual and entity levels. But, this doesn’t stop the IRS from conducting audits; and, when in doubt, revenue agents will usually err on the side of noncompliance.
IRS Partnership Audit Defense Lawyers in New York
With this in mind, if you are preparing for an IRS partnership audit, it will be important to engage experienced defense counsel promptly. Not only do you need to be prepared to affirmatively demonstrate compliance (to the extent possible), but you also need to be prepared to defend against allegations of noncompliance as necessary. Some examples of issues that frequently arise during IRS partnership audits include:
- Failure to report taxable partnership income
- Failure to withhold or pay estimated taxes
- Use of multi-tiered partnership structures for tax mitigation purposes
- Use of partnership assets (including aircraft and yachts) for personal purposes
- Claiming personal travel and other personal expenses as partnership tax deductions
- Improper calculation of taxes owed in connection with partner distributions
- Improper calculation of taxes owed on mergers, acquisitions and other partnership-level transactions
Again, these are just examples. Many more issues can expose partnerships and individual partners to substantial penalties; and, when facing an audit, it is critical to ensure that you have a clear and comprehensive understanding of any issues that are likely to arise during the process.
In mid-2024, the IRS announced that it will begin taking “a new series of steps to combat abusive partnership transactions that allow wealthy taxpayers to avoid paying what they owe.” These steps include using artificial intelligence (AI) tools to identify “red flags” for partnership tax fraud and prioritizing enforcement in certain areas, such as tax-evasive basis-shifting transactions. This type of initiative typically signals an enhanced focus on enforcement in general; and, with the IRS’s additional resources under the Inflation Reduction Act, we fully anticipate that the rate of IRS partnership audits will increase significantly over the next several years.
Preparing for an IRS Partnership Audit
If the IRS is preparing to audit your partnership (or if an audit is already underway), what do you need to do? One of the most important steps for mounting a successful defense is to proactively identify any relevant compliance-related concerns. Our New York partnership tax attorneys can help; and, if there are compliance-related concerns we need to address, we can get to work immediately building a custom-tailored defense strategy focused on avoiding unnecessary consequences.
Speak with a New York Partnership Tax Attorney at Thorn Law Group
To speak with a New York partnership tax attorney at Thorn Law Group in confidence, please call (914) 534-6004 or contact us online. We will arrange your initial consultation as soon as possible.
