Watchdog Criticizes IRS Effort to Examine Big Partnerships

The IRS’s approach to auditing large partnerships has been inadequate, largely because of limited resources and a faulty approach to identifying partnerships for closer scrutiny, a Treasury Department watchdog said Monday.

The IRS sent letters to 483 partnerships inquiring about potential issues with their returns, but ultimately decided not to proceed with audits because it needed to direct resources elsewhere, the Treasury Inspector General for Tax Administration said in a report. That didn’t allow time to address the partnerships’ returns before the three-year statute of limitations for auditing them ran out, TIGTA said.

The agency should eliminate duplicative steps ...