AICPA issues TQA on accounting for payments under the centralized partnership audit regime

Editor: Sally P. Schreiber, J.D.

The AICPA issued a technical question and answer (TQA) March 22 to help financial statement preparers account for the amount a partnership pays the IRS for previous underpayments of tax, interest, and penalties.

Under the centralized partnership audit regime enacted by the Bipartisan Budget Act of 2015, P.L. 114-74, the IRS assesses and collects underpayments of tax from a partnership rather than pursuing payments from partners, unless the partnership elects to pass the adjustments through to its partners.

TQA 7200.09, Tax Accounting Considerations Under Partnership Audit Regime, offers nonauthoritative guidance and states that this collection of tax from the partnership instead of the partners is an administrative convenience on the part of the government. Thus, the income taxes on partnership income should continue to be attributed to the partners.

Therefore, the partnership would not apply the FASB Accounting Standards Codification Topic 740, Income Taxes, accounting model to account for amounts it pays to the IRS for previous underpayments of tax, interest, and penalties. Instead, a payment made by the partnership under the centralized partnership audit regime should be treated as a distribution from the partnership to the partners in the financial statements of the partnership, according to the TQA.