The IRS issued final regulations in T.D. 9829 that explain procedures for electing out of centralized partnership audits. It describes what partner information must be disclosed in the election, the requirements for notifying partners of the election, and the requirement that the IRS consent to revoke an election. The centralized partnership audit rules are generally effective for partnership taxable years beginning after Dec. 31, 2017.
The annual election out is only available to partnerships required to furnish 100 or fewer Schedules K-1, which includes K-1s issued by an S corporation partner, where each partner in the partnership is an individual, C corporation, foreign entity that would be treated as a C corporation if it were a domestic entity, S corporation or estate of a deceased person.
Last year, TSCPA’s Federal Tax Policy Committee issued comments and testified at an IRS public hearing on the proposed rules.