IRS Told To Identify Partnership Return Audits That Will Be More “Productive”

Published by Michael Novogradac on Monday, July 23, 2012 - 12:00am

According to a recently released Treasury Inspector General report, “The number of partnership audits has increased as the IRS strives to maintain coverage over the growing number of partnership returns filed while addressing the compliance risk they pose.”

Here are some key points from the report: 

  • Report: “The IRS closed 24.94 percent more partnership audits in FY 2011 than in FY 2007.” 
    • * My observation: Yes, over the last few years, there have been about 25% more partnership audits. 
  • Report: “… examiners are recommending a considerable amount of adjustments to items reported on the returns …  For example, in FY 2011, examiners closed 5,310 audits of partnership returns and recommended approximately $728 million in adjustments to items reported on the returns.” 
    • * My observation: The average audit adjustment was about $140,000! 
  • Report: “In FYs 2009 through 2011, the SB/SE Division no-changed 5,247 partnership return audits of the 14,773 partnership returns it selected for audit from all sources.” 
    • * My observation: These stats mean nearly two-thirds of IRS audits result in adjustments!

And the conclusion? 

Well … the Treasury Inspector General reports that the “Director, Research, SB/SE Division, plans to work in collaboration with the SB/SE Division’s Examination function to analyze partnership  data files in order to better identify productive partnership returns for audit.”  

* Translation: More IRS audits of partnerships will result in more audit changes that raise more revenue.