When a person is engaged in a business endeavor, one thing that can prove to be very important is what disclosures they make to the Internal Revenue Service. Inadvertently failing to disclose certain things to the IRS could expose a business owner to some very unpleasant surprises indeed. An upcoming change in IRS rules and practices is expected to add some big consequences to one particular type of missed disclosure: failing to disclose a partnership.
A new audit regime is being put in place regarding partnerships. The new regime is expected to come into effect at the start of next year. Purportedly, once this new regime takes effect, a person could trigger significant tax liabilities if they fail to disclose that a business endeavor of theirs is a partnership.
Whether or not a given business endeavor is a partnership isn’t necessarily an obvious thing. So, it is possible for a person to be in a partnership without realizing it. With the new consequences the new regime could usher in for failing to disclose a partnership, taking steps to have an accurate and clear idea of whether they are or are not in a partnership could take on a whole new level of importance for business owners in the future.
One wonders how common accidental triggering of tax liabilities through a failure to disclose a partnership will be once the new regime takes effect.
When failing to disclose certain information to the IRS triggers an unpleasant surprise, like tax liabilities, for a business owner, how the owner responds can have significant ramifications. Mishandling the matter could lead to even further unpleasant surprises. Among the things that could lead to such mistakes is a business owner not having the right information on their options and rights when dealing with the IRS in relation to the matter. So, quality legal guidance from a tax attorney is something it can be critical for a business owner to have when facing tax consequences in relation to an inadvertent failure to disclose.
Source: Bloomberg BNA, “Beware of Accidental Partnerships Under New Audit Regime: IRS,” Allyson Versprille, June 6, 2017