IRS unveils unit to tackle tax dodging by pass-throughs


There’s a new sheriff in town—sort of. The Internal Revenue Service (IRS) recently has announced the formation of a new work group within the Large Business and International (LB&I) division.

The unit, which will be tasked with holding large partnerships and other pass-through businesses accountable to pay the full amount of taxes they owe, will include many of the 3,700 agents the IRS is planning to hire. The hirings are part of its effort to ramp up tax compliance efforts against high-income earners, complex partnerships, large corporations and promoters.

At the heart of the new unit’s efforts are pass-through organizations, which include large partnerships and S corporations. The groups are not subject to the corporate income tax, but instead income is “passed through” onto the income tax returns of the individual or corporate owners and taxed at their income tax rates. Pass-throughs frequently are used by higher-income groups and can be complex tax arrangements.

The IRS will be coordinating with the National Treasury Employees Union (NTEU) on the effort. While the group will formally “stand up” late next year, work involving pass-through areas will continue to increase before that time.

Eventually, the IRS says the group will expand to include employees from both the LB&I and the IRS Small Business/Self-Employed division.

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