Investors in, and beneficiaries of pass-through entities (such as partnerships, S corporations and trusts) should be aware of the IRS's recent efforts to reverse its historically low audit rates and increase taxpayer compliance, through mobilization of its new pass-through unit.
Previously, pass-through exams were divided between two different IRS units, based on the size of the entity. Now, revenue agents will be organized geographically, and irrespective of entity size.
The new unit was announced last year and is now officially operating. This effort is another example of the IRS putting its most recent funding (received under the Inflation Reduction Act) to use.
The creation of a new unit specifically devoted to ensuring compliance of pass-throughs of every size and form—including partnerships, S-corporations and trusts—reflects the IRS's broader efforts to focus more attention and resources on an area that has historically been under-scrutinized.
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