The head of the Internal Revenue Service’s small business unit said his division expects to move from focusing on audits of small corporations to partnerships.
During a speech at the American Institute of CPAs’ National Tax Conference in Washington, D.C., last week, Faris Fink, the commissioner in charge of the IRS’s Small Business/Self-Employed Division reportedly told attendees that his unit would make a top priority of auditing the tax returns of partnerships and other pass-through entities. “The Service has for a long time focused its energy on corporations,” he said, according to Bloomberg’s Lydia Beyoud. “Frankly, we’re a little bit behind the curve in getting around to developing a partnership strategy.”
Part of that strategy will involve training agents at the IRS to look more closely at S corporations, partnerships and other pass-through entities, which now make up 95 percent of all U.S. businesses, according to figures from the IRS.
“Frankly, our training was not geared for dealing with those types of large, complex partnerships,” he said. “Historically, we would think of a partnership as having, say, 10 partners” with a limited number of tiers.
However, the IRS is now encountering partnership returns listing 82,000 partners and 182 tiers. Fink indicated that the IRS plans to step up its scrutiny of such returns in the future.
“We as an organization have recognized that this is something that we’ve got to be paying attention to, not just this year, but going forward,” he said.
The IRS announced earlier this month that it is expanding its Fast Track Settlement program for small businesses, which helps them settle their back taxes with the IRS more quickly (see IRS Expands Fast-Track Settlement Program for Small Businesses under Audit).