Large Partnerships Have Balance Sheet Discrepancies
Large Partnerships Have Balance Sheet Discrepancies
The IRS has an initiative to review partnerships with more than $10 million in assets. They sent more than 475 letters to partnerships with balance sheet discrepancies.
The IRS received additional funding from the Inflation Reduction Act. Part of those funds are being used for additional compliance efforts including high net worth individuals and larger partnerships.
Partnerships with more than $10 million in assets are being sent letters asking why their ending balance sheet does not tie to their beginning balance sheet. If their balance sheet does not tie out, the tax return is required to provide a schedule reconciling the differences.
As of October 31, 2023, the IRS has sent 480 compliance letters to partnerships whose balance sheets did not tie and did not provide the required schedule. The IRS seems to assume that this will yield additional revenue.
In my 40+ years of being a CPA and preparing thousands of partnership returns I can’t remember a case of not having the beginning and ending balance not tie out. We might have had prior period adjustments for certain items but at least the balance sheets were consistent.
However, there are times where the classification of assets or liabilities on Schedule L might have been classified incorrectly and that was adjusted on the current Schedule L.
But I will also admit that I have reviewed many balance sheets on partnership tax returns that did not foot or have other issues.