Reporting Federal Audit Adjustments
For Partnerships Audited by IRS
Partnerships may be audited by the IRS under the federal partnership audit regime enacted within Bipartisan Budget Act of 2015 (BBA). Minnesota’s reporting and payment requirements for the partnership and partners depend on:
- If the partnership elects to pay their Minnesota tax liability at the partnership level using the Partnership Pays election
- The reviewed year of the adjustments
Partnerships Making the Partnership Pays Election
Partnerships use Schedule M3BBA, Partnership Audit Report, to file a federal adjustments report and make the Partnership Pays election.
Partnerships Not Making the Partnership Pays Election
Partnerships and each of their partners must file amended Minnesota returns for the reviewed years and report their pro rata share of the federal adjustments.
State Partnership Representative Designation
If the state partnership representative designation is not completed, the state partnership representative will be the same person as the partnership’s federal partnership representative.
The state partnership representative has the sole authority to act on behalf of the partnership, and its partners are bound by those actions.
What happens if I do not report adjustments?
If a partnership or partner fails to report a federal change or adjustment of tax, we may recompute the tax based on available information within six years from when the partnership or partner should have reported the federal adjustments. All applicable penalties and interest will be applied, including a 10% penalty for failure to report federal changes.