The IRS's New Streamlined Audit Rules for Partnerships

Sharon K. Burnett, PhD, CPA, CISA, and Darlene Pulliam, PhD, CPA

The Bipartisan Budget Act of 2015 (BBA) replaced the existing rules for auditing large partnerships with a new set of streamlined rules that take effect January 1, 2018. The new audit rules also apply to any entity that elects to be treated as a partnership for income tax purposes (i.e., LLC). Small partnerships (100 or fewer partners) that do not have a partnership as a partner can elect out of the new BBA rules [Internal Revenue Code (IRC) section 6221(b)]. Presumably, if a small partnership elects out of the BBA rules, then the partnership returns would be audited as part of each partner's individual audit, as has been true for small partnerships in the past.