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IRS Zeroes in on Partnerships, Updates Forms to Improve Future Tax Compliance by Angie Adames, CPA

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Posted on November 20, 2019 by Angie Adames

In an effort to improve tax compliance and the quality of information reported by partnerships, the IRS recently issued updated versions of Form 1065, U.S. Return of Partnership Income, and Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc., for applicable taxpayers to use when filing their 2019 tax returns in 2020.

According to the IRS, tax filings by partnerships have increased almost 60 percent over the past 15 years, during which time filings by C corporations and S corporations combined grew by less than 15 percent. During that same period, the agency, suffering from budget cuts and a lack of resources, failed to identify a significant number of discrepancies in partnership filings, including partners who underreported flow-through income on Schedule K-1 and who failed to submit any tax returns. By updating the forms that partnerships and their partners use to report income, deductions and other tax-related amounts, the IRS hopes to better assess compliance risk, identify noncompliance and reduce IRS examinations of those taxpayers who are compliant.

The updated forms, which also include Form 1120-S, US Income Tax Return for an S Corporation and its Schedule K-1, reflect changes to the tax laws under the Tax Cuts and Jobs Act that went into effect for tax year 2018. In addition, the new forms include a checkbox that allows taxpayers to indicate if certain grouping or aggregation elections have been made.

About the Author: Angie Adames, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where she provides tax and business consulting services to real estate companies, manufacturers and closely-held entities. She can be reached at the firm’s Miami office at (305) 379-7000 or info@bpbcpa.com.

 

Information contained in this article is subject to change based on further interpretation of the law and subsequent guidance issued by the Internal Revenue Service.