Partner Tax Representatives
Beginning with 2018 tax returns, partnership audits will change to collect tax from the entity itself rather than individual partners. In addition, the new rules allow a partner tax representative to represent the partnership in audits.
The Tax Matters Partner (TMP) has been eliminated and replaced with a “partnership representative.” Unlike the TMP under old law, the partnership representative need not be a partner (can be any employee or even outside individual such as your CPA or attorney), but must have a substantial presence in the United States. The partnership representative will have sole authority to act on behalf of the partnership in connection with an audit. The partnership and all of its partners will be bound by actions taken by the partnership representative in the audit process.
Existing partnership agreements should be reviewed, and amendments will need to be drafted to address aspects of the new rules, including designating the “partnership representative” in place of the Tax Matters Partner.