Posted In: Business
As you’re likely aware, the Bipartisan Budget Act that took effect at the beginning of this calendar year introduced several changes regarding business taxation. Among these changes, the IRS is no longer required to collect back tax due from the individual partners who owe, if an audit reveals that an adjustment is needed. This means that current partners may be responsible for past due taxes from former partners.
The new law does make an important provision that allows certain partnerships to “elect out” of the new rules if conditions are met. Business owners must take affirmative steps to avoid falling into the negative effects of the new rules.
If a business qualifies, the provision requires an annual election on a timely-filed return for the tax year to which it relates.
If your partnership (or business taxed as a partnership) has 100 or fewer partners and all partners are either individuals, corporations, or the estates of deceased partners, consider the following:
If your business has more than 100 partners – or any of the partners are either another partnership, a limited liability company (LLC) or a trust – you will not be eligible to elect out of the new rules. That said, the partners may make a “push-out election” to past partners, instead of accepting the tax consequences of the current partners paying the tax of prior-year partners. In order to provide for this flexibility:
Contact Ambassador Advisors for more information, and visit an experienced attorney (like those on our team) to update your agreements.
Source: CPA Journal
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