A Look Ahead: Mo’ BBA Audits, Mo’ Problems

Tax attorney Lee Meyercord spoke with Tax Notes on the expected ramp up of partnership audits by the IRS in 2022. This news brings a slew of practical implementation questions that could emerge as examiners and tax professionals delve deeper into the centralized audit regime.

Exam activity under the new rules, which were created by the Bipartisan Budget Act of 2015 and took effect in 2018, has been somewhat limited. The IRS applied BBA procedures to partnerships that elected early application of the regime to tax years 2016 and 2017, and in 2019 the agency began auditing a batch of 2018 partnership returns. The process hasn’t been fast, with an IRS official explaining at a September 2021 event that because BBA audits take longer than conventional exams do, the agency was still working on the 2018 returns.

Ms. Meyercord explained that as more partnerships start to receive an IRS notice of selection for examination or realize that a partnership audit is more likely now than in the past.

“I think we'll also discover that some partnerships did not update their partnership agreements to account for the BBA, contrary to practitioners’ advice...So I expect we might also be amending partnership agreements next year, too," she noted.

READ: A Look Ahead: Mo' BBA Audits, Mo' Problems (subscription required)