I was wondering what most LLC traders are doing about the centralized audit regime? Are you guys electing out of it or no? Any help appreciated
I didn't elect out. If my LLC could be audited more frequently (that remains to be seen), the partners should not be audited (all of their taxes) for one possible partnership mistake. That way, the potential audits stay at my LLC level. This is a family partnership: It is also why I made that choice.
I would rather have it done at partnership level as well but I have couple of concerns with not electing out. Just trying to understand before i make a decision: 1) Partnership will have to pay tax at highest individual level of 37% rather than individual partners tax rate, though there seems to be a way around this. 2) Audit adjustments would be reflected in the year an audit is concluded rather than in the year being audited. Those are my biggest concerns.
Like you, I think the 37% tax rate could be easily challenged. The biggest risk that I can see (if any) regarding my partnership tax return could be the business tax status: Even if I am really confident about it, this is apparently an IRS classic. So, with the new audit rule, no need for each partner to go to court, as the partnership will do it (just in case...). I didn't know your second point. I don't think that would make much difference for me, except differing the adjustment consequences, which is not that bad.