I’m a cpa, and from what I can tell I’m the only one on Lemmy, god help me, so I’ll chime in.
Partnerships with $10 billion assets are no joke so I would imagine they are businesses like real estate holding companies, hedge funds, private equity, venture capital, things like that. Probably clients of a Big 4 like PWC Deloitte EY or KPMG.
The thing about entities like that is that they tend to be insanely complicated with TONS of moving parts. They’ll be dealing with complex financial instruments, partners coming in and out, financing structures that aren’t at all straightforward (if you’ve seen Shark Tank Mr Wonderful is infamous for offering complex financing deals rather than straight equity deals) plus international tax complications, book/tax timing differences, and all kinds of other stuff I can’t begin to get into.
Oh, and that’s just the tax side of it all. That’s not even starting to talk about the actual accounting, recording the transactions, balance sheets, income statements, and so on, which is an enormous layer of complexity before we even think about tax. Zillions of moving parts with plenty of room for errors and omissions.
Partnerships don’t pay tax at the business level so the individuals who own them need to report the income and activity on their personal returns and pay tax at that level. It’s not at all easy reporting their share of activity from entities like hedge funds and PE so plenty of mistakes are made, some quite substantial. Im guessing they are going to look at the partnerships first and compare to the biggest owners returns to make sure everything jives.
I find this news great. Our industry often faces challenges due to time constraints, budget limitations, client-provided data quality, logistics, and so on. Unethical behavior is rare among practitioners, but there are some shady ones. Typically, we defer issues, leaving them for others to handle, which seldom result in consequences.
Throughout my career, the IRS has never questioned our filed returns for individuals or businesses. We’ve received notices, mostly related to administrative matters rather than full audits.
A strengthened IRS enhances compliance, but the accounting industry is strained with few professionals and a lack of future talent. We already cut corners for efficiency, so aiming for flawless accuracy could pose a significant problem. It’s just another challenge to add to our list…