IRS to Establish Special Unit for Complex Passthrough Entities

IRS to Establish Special Unit for Complex Passthrough Entities

IRS to Establish Special Unit for Complex Passthrough Entities. In a recent news release, the Internal Revenue Service (IRS) has unveiled its plans to create a dedicated unit targeting intricate passthrough entities, thereby bolstering its oversight of high-income tax compliance matters.

Unit Placement within IRS

This newly formed unit will find its home within the IRS Large Business and International (LB&I) division. It will consist of a portion of the 3,700 individuals set to be recruited for the expanded enforcement initiatives, with a specific emphasis on intricate partnerships, large corporations, and high-earning individuals.

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Mission and Objectives

The primary objective of this initiative is to disrupt attempts by certain major partnerships to utilize passthrough structures deliberately to shield income and evade their tax obligations. IRS Commissioner Danny Werfel emphasized the need to end the historically low error rates observed among wealthy and large entities while ensuring that audit rates for middle- and low-income filers remain unchanged.

Announcement and Timeline

LB&I Commissioner Holly Paz made the formal announcement of this new unit during a speech at a Tax Executive Institute meeting held in New York City. Although the unit is expected to become fully operational in late 2024, efforts related to passthrough entities will intensify in the interim period.

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Staff Integration

The newly established unit will eventually include personnel from both the LB&I and Small Business/Self Employed divisions, further solidifying its commitment to addressing tax compliance challenges associated with complex passthrough entities.

Continuation of IRS Broader Enforcement Initiative

This development follows the IRS’s earlier announcement on September 8th, which Commissioner Werfel described as the initiation of a comprehensive and historic effort to enhance tax enforcement efforts, with a specific focus on the affluent and those who misuse tax laws, including a heightened emphasis on large partnerships.

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