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October 28, 2024
2024-1973

IRS formally launches LB&I pass-through compliance unit

The IRS on October 22, 2024, announced (IR-2024-276) that the new pass-through field operations unit has "officially started work in its Large Business and International (LB&I) division" in an effort to more efficiently audit pass-through entities.

The new unit, announced last year, is specifically devoted to assuring compliance of pass-through entities of all sizes and type, including partnerships, S corporations and trusts. Examinations of pass-through entities were previously divided between LB&I and the Small Business/Self-Employed (SB/SE) division based on the entity's size.

Going forward, revenue agents in pass-through field operations will be divided into geographic teams and will be responsible for primary exams of pass-through returns. Pass-through exams will be started by LB&I regardless of the entity size. SB/SE will still examine pass-through entities in some cases, however.

The IRS said consolidating case-working experience and removing the entity-size barrier will help the agency achieve its goal of increasing audit rates in this area and streamlining workflows. The launch of the pass-through field operations unit meets one of the priorities of the IRS Strategic Operating Plan — "Fairness in Enforcement" — and is a significant part of overall expanded enforcement efforts focused on high-income and high-wealth individuals, partnerships and large corporations, the IRS said.

The IRS also noted a prior announcement of the creation of a new Chief Counsel associate office that will focus exclusively on partnerships, S-corporations, trusts and estates. The staff for that office will come from what is currently the Passthroughs and Special Industries (PSI) Office.

Implications

Standing up the pass-through field operations team is the next step in the IRS's efforts to increase the quantity and quality of enforcement in this area. That focus, in conjunction with the narrowed scope of the dedicated Chief Counsel pass-throughs office, should result in a greater number of audits, as well as more efficiency for both the IRS and taxpayers.

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Published by NTD’s Tax Technical Knowledge Services group; Chris DeZinno, legal editor
 

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