On March 18, 2015, the Treasury Inspector General for Tax Administration (“TIGTA”) issued a report to the Large Business, International Business, and Small Business/Self-Employed Divisions of the Internal Revenue Service. The report was the result of a review of the IRS’s partnership audit process, which revealed a lack of adequate performance measures. TIGTA noted that is has been more than 20 years since the IRS conducted a comprehensive compliance study on partnership, making it difficult to gauge the productivity and success of the IRS’s partnership audit process.

In its report, TIGTA recommended that the IRS: 1) develop a strategy to measure the success and productivity of all partnership audits; 2) develop a system that will determine the amount of taxes assessed as a result of all partnership audits; 3) ensure that audit closing and assessment efforts are included in productivity measurements; 4) update audit report writing software to accommodate certain types of adjustments and calculations to avoid inaccurate assessments; and 5) coordinate with the Department of the Treasury to assess the impact that proposed changes to the tax laws would have on the IRS’s partnership audit process.

In their response, IRS officials agreed with all five recommendations and stated that they plan corrective actions to address two of the recommendations, but cannot commit to making the recommended improvements for the remaining three recommendations because of a lack of available funding. The IRS’s Fiscal Year 2016 Budget Request did not include funding for a new system to address the issues discussed in this report.

To view the report, including the scope, methodology, and full IRS response, go to:http://www.treas.gov/tigta/auditreports/2015reports/201530004fr.html