Tax and benefit services

Partnership audit services

About

As part of the Bipartisan Budget Act of 2015, the federal government enacted sweeping changes to how the IRS audits partnerships and LLCs. Due to the changes, all partnership agreements and all operating agreements for an LLC taxed as a partnership should be reviewed and amended.  

The new audit regime, which takes effect Jan. 1, 2018, is designed to raise tax revenue and make it easier for the IRS to audit partnerships and LLCs. To that effect, the new regulations centralize the assessment and collection of tax directly at the entity level for the partnership or LLC. (Traditionally the IRS had audited and assessed tax on the partners or members rather than the entity itself.) 

Every partnership and LLC should amend their governing documents to:

  • Designate a partnership representative who will have the sole authority to make binding decisions in audit proceedings. The IRS will designate a partnership representative if one is not appointed. 
  • Authorize selections regarding complex set of elections under the new audit rules.

To assist partnerships and LLCs in navigating the new IRS rules and to help minimize any potential negative impact, McDonald Hopkins has created two new programs:

  • McDonald Hopkins Partnership and LLC Amendment Program - A program designed to prepare clients for the new rules by amending their governing documents.
  • McDonald Hopkins Partnership Representative Specialists - A program that provides clients with a reliable option for their partnership representative.
     
Partnership & LLC Amendment Program

McDonald Hopkins has developed a program to review the relevant provisions of your current governing document and advise you on your specific options relating to the audit rules. We have streamlined the process and are offering this service at a fixed fee.  Based on our review and advice provided, you can then decide how to proceed in amending your partnership agreement or LLC operating agreement. As part of the fixed fee, we will make the desired changes in a single amendment to be adopted by the partners of the partnership or the members of the LLC . Our program strikes the balance between taking your specific needs into account while making the necessary amendments to your agreement in an efficient and economical manner.

The partnership and LLC amendment program consists of the following steps:

  1. Initial consultation: McDonald Hopkins will schedule an initial consultation with you and one of our tax attorneys who will briefly go over the new audit rules and inquire about the current status of your partnership or LLC.
  2. Operating agreement review: After the initial consultation, we will review your partnership agreement or operating agreement and will draft an amendment in response to the  new audit rules.
  3. Follow-up call: Once your business has received our draft amendment, we will schedule a follow up call to go over the new changes with you, and explain the requisite steps regarding the adoption of the amendment.

If you are interested in participating in this program, please contact us at amendment@mcdonaldhopkins.com or leave a message at (216) 430-2050.

Partnership Representative Specialists

Why use McDonald Hopkins as your partnership representative?

  • We will track any correspondence received from the IRS and follow the notice provisions  contained in your partnership agreement or operating agreement using a formalized, database-driven system. We will also take the appropriate steps to notify the partners or members (where required) and obtain appropriate consents regarding certain decisions.
  • We have the experience and expertise in serving as the partnership representative.  Furthermore, we have significant experience in handling partnership tax audits.The cost to delegate responsibilities to McDonald Hopkins involves an initial set-up fee and a modest annual fee.
  • The regulations require that each partnership representative that is an entity (such as a corporation or LLC) designate a person to serve as the primary contact with the IRS. With McDonald Hopkins, this person (your “partnership representative designee”) will be one of our tax partners.
  • Each partnership representative designee has vast experience drafting and interpreting the terms of partnership agreements and operating agreements as well as handling controversies with the IRS.
  • You will receive a discount on legal fees in the event that you use McDonald Hopkins to handle aspects of an audit.
  • Your engagement letter makes it clear that if you request  a change to your partnership representative, we will cooperate in every way.
Insight
McDonald Hopkins is dedicated to keeping our clients up-to-date on the latest developments and upcoming changes related to the new partnership audit rules.

Alerts, blogs, news, and events

WATCH: How to opt out of new partnership audit rules image WATCH: How to opt out of new partnership audit rules
WATCH: Who should I pick for partnership representative? image WATCH: Who should I pick for partnership representative?
WATCH: Why do I need to amend my partnership or LLC agreement now? image WATCH: Why do I need to amend my partnership or LLC agreement now?
Death of the Tax Matters Partner: What Owners of Partnerships and LLCs Need to Know  About New Rules event image Death of the Tax Matters Partner: What Owners of Partnerships and LLCs Need to Know About New Rules
OCT 17, 2017
WATCH: Liability mismatch: Who is liable if a partnership is audited? image WATCH: Liability mismatch: Who is liable if a partnership is audited?
WATCH: Death of the tax matters partner image WATCH: Death of the tax matters partner
Federal Partnership Audit Rules Update event image Federal Partnership Audit Rules Update
SEP 27, 2017
WATCH: Partnership audit rules 101 image WATCH: Partnership audit rules 101
Death of the Tax Matters Partner: McDonald Hopkins to host discussion on new IRS partnership audit regulations image Death of the Tax Matters Partner: McDonald Hopkins to host discussion on new IRS partnership audit regulations
"Law Firms Urging Clients to Prepare for New Federal Rules That Will Affect Partnerships and LLCs" image "Law Firms Urging Clients to Prepare for New Federal Rules That Will Affect Partnerships and LLCs"
McDonald Hopkins announces partnership audit services image McDonald Hopkins announces partnership audit services
IRS releases guidance on opting in to the new partnership audit rules image IRS releases guidance on opting in to the new partnership audit rules
All partnerships should amend their partnership agreement for new IRS audit rules image All partnerships should amend their partnership agreement for new IRS audit rules
How much power does the partnership representative really have? image How much power does the partnership representative really have?
State issues with the new partnership audit rules image State issues with the new partnership audit rules
What Trump’s regulatory freeze means for partnership audit rules image What Trump’s regulatory freeze means for partnership audit rules
Opting out of the partnership audit rules: What’s in the new regulations? image Opting out of the partnership audit rules: What’s in the new regulations?
How to plan for new partnership audit rules image How to plan for new partnership audit rules
Audit rules live on despite White House “freeze” on partnership audit regulations image Audit rules live on despite White House “freeze” on partnership audit regulations
Temporary regulations issued on early election of new partnership audit rules image Temporary regulations issued on early election of new partnership audit rules
States working to adapt to IRS partnership audit rules changes image States working to adapt to IRS partnership audit rules changes
Partnerships and LLCs must rethink the “Tax Matters Partner” role image Partnerships and LLCs must rethink the “Tax Matters Partner” role
"TAX TIPS: Changes are coming to IRS partnership audits"  image "TAX TIPS: Changes are coming to IRS partnership audits"
Significant change to partnership audits image Significant change to partnership audits
Attorneys

Attorneys

David M. Kall profile image

David M. Kall

Michelle Gearity profile image

Michelle Gearity

David D. Ebersole profile image

David D. Ebersole

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