Taxpayers may see examination rates for all businesses rise in the coming years as the IRS begins using more efficient procedures amid auditor shortages.
The number of large-corporation audits may not increase drastically, but the IRS will be able to be more efficient with the audits they are doing, and the government can raise more revenue and deter more tax avoidance, said Mark D. Allison, a member at Caplin & Drysdale, Chartered specializing in tax controversy.
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Partnerships, especially bigger entities audited by LB&I, will also likely face audits that look beyond top-line taxable income to more specific allocations among partners as the IRS improves its systems to track investors, [said a tax practitioner].
To do this, however, the IRS will likely need to train more auditors about the intricacies of the partnership rules, which differ greatly from corporate tax. The audit process is slowed down when IRS agents have to continually go back to specialists to get answers on a complex partnership issue, said Charles Ruchelman, a member at Caplin & Drysdale who focuses on partnership controversy issues.
“The challenge is for the IRS to get started on a partnership audit earlier,” Ruchelman said. “They tend to have more delays than on the corporate side of things.”
For more information on the new partnership audit rule, please visit www.partnershiprepresentative.com.
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Excerpt taken from the article “Record-Low Audit Rates Could Reverse as IRS Alters Exams” by Laura Davison and Colleen Murphy for Bloomberg BNA.