Key Takeaways:
- The Internal Revenue Service (“IRS” or “agency”) will be auditing 75 of the largest partnerships, including hedge funds, real estate investment partnerships, publicly traded partnerships, and law firms, in addition to conducting 500 compliance audits of partnerships across industries
- These audits will be heavily coordinated and will use data analytics, including Artificial Intelligence (“AI”) tools
- The agency has announced that it will “stand up” a new group to focus on audits of large partnerships
- The IRS has made significant investments in hiring and onboarding staff trained in large partnership audits and has recently announced that it intends to hire 3,700 new technical employees
- Large partnership audits are a cornerstone of the IRS’s campaign to preserve appropriations under the Inflation Reduction Act of 2022 (“IRA”)
Large partnerships are facing a sea change in tax enforcement. Beginning with the Large Partnership Compliance program announced in 2021 and its most recent announcement that it intends to “stand up” a group focused on large partnership audits next year, the IRS is banking on revamped enforcement efforts targeting passthrough entities.
