The IRS will set up a new unit to focus on large or complex passthrough entities as it continues to pay closer attention to high-income compliance issues, the Service said Wednesday in a news release.
The unit will be housed in the IRS Large Business and International (LB&I) division and will include some of the 3,700 people that the Service plans to hire for the expanded enforcement efforts concentrating on complex partnerships, large corporations, and high-income and high-wealth individuals, the release said.
The goal is “to disrupt efforts by certain large partnerships to use pass-throughs to intentionally shield income to avoid paying the taxes they owe” and “to end the era of historically low error rates for wealthy and large entities, while making sure middle- and low-income filers continue to see no change in audit rates for years to come,” IRS Commissioner Danny Werfel said in the release.
LB&I Commissioner Holly Paz announced the new unit Wednesday in a speech at a Tax Executive Institute meeting in New York City. The unit is expected to formally “stand up” sometime late in 2024, although work involving passthroughs will continue to intensify in the meantime, she said.
The new unit eventually will include current staff in LB&I and the Small Business/Self Employed division, Paz said.
The establishment of the new unit follows the IRS announcement on Sept. 8 that Werfel described as “the start of a sweeping, historic effort” to focus more tax enforcement efforts on the wealthy and those who abuse the law, including a focus on large partnerships.