A field operations unit, announced last fall, has started work in the Internal Revenue Service’s Large Business and International Division to streamline audits of pass-through entities.
The unit is devoted to ensuring compliance of pass-throughs, including partnerships, S corporations and trusts — an area the IRS says has historically been under-scrutinized. Previously, pass-through exams were divided between LB&I and the Small Business/Self-Employed Division, based on the size of the entity.
Revenue agents in pass-through field operations will be assembled into geographically based teams: LB&I will start pass-through exams, regardless of entity size; SB/SE will continue to examine pass-throughs as part of a related exam of a return.
“We will be able to reverse our historically low audit rates for complex arrangements employed by certain high-wealth individuals and large entities,” said IRS Commissioner Danny Werfel, in a statement.
Amid the agency’s increased focus on wealthy entities, the IRS launched examinations of 76 of the largest partnerships with average assets over $10 billion that includes hedge funds, real estate investment partnerships, publicly traded partnerships, large law firms and other industries. The IRS chief counsel also created an associate office to focus on partnerships, S corps, trusts and estates.
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