Partnership Audit Results: According to the Fall 2011 Statistics of Income Bulletin, since 2000, the number of partnerships has increased at an average annual rate of 5.1%, with the majority of this growth coming from partnerships classified as Limited Liability Companies (LLCs). Given this phenomenal growth, one would think that the IRS has been sharpening its partnership examination skills. However, a recent Treasury Inspector General for Tax Administration report indicates otherwise. While the IRS closed nearly 25% more partnership exams in fiscal year (FY) 2011 than in FY 2007, 50% of the returns selected for audit by the tried-and-true Discriminant Index Function were closed as a no-change. Furthermore, no significant quality problems were identified that would suggest how the items selected and audited on the returns could substantially improve this no-change rate.
