Business
IRS gears up to go after ‘complex partnerships’ despite lack of clear definition on July 31, 2023 at 9:30 am Business News | The Hill
The IRS is getting ready to go after what it calls “large, complex partnerships” as part of its push to pursue wealthy tax cheats with tens of billions of dollars in additional funding.
The IRS plans to double audit coverage for partnerships with $10 million or more in assets by fiscal year 2025 over fiscal 2021 levels.
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But new research from the government’s internal watchdog finds that the specific types of legal and commercial structures the IRS is targeting need to be more clearly defined in order to recoup the uncollected funds.
“IRS has not defined or developed guidance on what a large, complex partnership is or developed measures to ensure additional audits focus on such partnerships,” the Government Accountability Office (GAO) wrote in a report released Thursday.
Pinning down partnerships
Partnerships don’t pay taxes directly but pass their tax liability onto their owners through an IRS form K-1. They can be nested within other partnerships in networked or circular structures so complex they can resemble a tangle of spiderwebs or pieces of Byzantine jewelry.
This makes it difficult to audit them, as evidenced by atrophying audit rates.
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“The lack of a definition presents a challenge as IRS seeks to increase its audit coverage of partnerships,” the report read.
In a response to the criticism, the IRS acknowledged the haziness in the definition and said it’s working to be more precise.
“We plan to perform additional research and analysis to better understand the characteristics and define partnership segments,” Douglas O’Donnell, the deputy commissioner for services and enforcement at the IRS, wrote in a letter to the GAO earlier this month.
Current IRS Commissioner Danny Werfel said earlier this month on a call with reporters that the public should expect more updates on how exactly the IRS is going after big partnerships soon.
“We’re … focused on increasing our exam coverage for complex partnerships,” Werfel said. “In our upcoming next briefing we’ll provide more details on that.”
“I’m looking forward to future updates,” he said.
Partnership boom expands the tax gap
The GAO analysis found that only 54 large partnerships out of more than 20,000 got audited in 2019, for a rate of 0.3 percent.
That is just a hair shy of the audit rate for people who make $25,000 a year or less. In 2007, the audit rate for large partnerships was more than quadruple that.
Tax gap rises as IRS finds amount of unpaid taxes is increasing
Partnerships have also exploded in recent years as a commercial designation within the economy.
In 2002, there were about 3,000 partnerships worth more than $100 million in the U.S. In 2019, there were more than six times that amount.
The number of partnerships worth between $1 billion and $5 billion dollars has increased more than tenfold during that period, and the number of partnerships worth more than $5 billion has increased more than eightfold.
Unreported business income on individual income tax — precisely the type of income that pass-through entities like partnerships allow — is one of the largest segments of the “tax gap,” the amount the government is owed in taxes each year but fails to collect.
The IRS estimated the tax gap for personal business income to be $130 billion annually for tax years 2014 to 2016, which was the last time the tax gap was formally measured, but it is likely much higher than that now.
The gross tax gap was about $500 billion in those years, but last year former IRS commissioner Charles Rettig said it could be as much as $1 trillion.
A two-tiered tax system
Tax experts have long looked askance at partnerships as a potential tax dodge.
“The IRS does not treat K-1 income the same way that it does reports of people’s wages filed on W-2 forms or the reports of income from dividends, interest, royalties and contract jobs reported on Form 1099,” veteran tax reporter David Cay Johnston wrote in a 2003 book on the U.S. tax system.
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“IRS computers match every wage, dividend, interest, royalty and contract job report to what is listed on individual tax returns to make sure that every dollar earned in these ways is taxed. Not so partnership and K-1 reports,” he wrote.
The differential administrative treatment of partnership income is symptomatic of what Treasury Secretary Janet Yellen has described as the “two-tiered tax system” in the U.S.
“At the core of the problem is a discrepancy in the ways types of income are reported to the IRS: opaque income sources frequently avoid scrutiny while wages and federal benefits are typically subject to nearly full compliance,” she said in a 2021 statement on Congressional tax proposals.
Business The IRS is getting ready to go after what it calls “large, complex partnerships” as part of its push to pursue wealthy tax cheats with tens of billions of dollars in additional funding. The IRS plans to double audit coverage for partnerships with $10 million or more in assets by fiscal year 2025 over fiscal…
Houston Strong Child Placement Agency, a minority-owned adoption and foster care organization, is actively involved in the legacy planning process alongside Mrs. Donna Marshall-Payne and her company Doing Far More LLC. Their participation highlights how legacy planning extends beyond financial assets to encompass emotional security and generational impact for families—especially those formed through adoption and foster care. These important insights were shared during an interview with Roselyn Omaka and further brought to the community at the Black Entrepreneur Tour’s Spring Formal, hosted by Doing Far More LLC, where the conversation focused on building lasting legacies for all families.
How the Agency Contributes
- The agency assists families and children in the foster care system to find permanent, loving homes, emphasizing the importance of family stability as a foundational part of legacy creation.
- Legacy planning, as discussed by Marlon Randolph (Director of Operations), is not just about material inheritance but also about establishing emotional security and leaving a lasting positive imprint for future generations—values that resonate deeply with both the agency’s mission and Mrs. Donna’s approach.
- Their involvement in events like the Black Entrepreneur Tour, where they connected with Mrs. Donna, demonstrates a shared commitment to community impact and education around legacy planning.
Why Adoption Agencies Matter in Legacy Planning
- For adoptive and foster families, legacy planning includes preparing for the emotional and financial future of children who may have experienced instability, ensuring they are supported and secure even after the current caregivers are gone.
- The agency’s leadership, with experience in both social work and hospice care, advocates for comprehensive legacy planning—incorporating life insurance, emotional well-being, and continuity for children and families.
Collaborative Community Impact
- The collaboration between Doing Far More LLC and Houston Strong Child Placement Agency exemplifies a holistic approach to legacy planning, combining financial planning, emotional support, and community engagement.
- By involving adoption agencies in the legacy conversation, Mrs. Donna expands the definition of legacy to include the creation and nurturing of family bonds, not just the transfer of wealth or assets.
“That legacy piece is establishing yourself but then also establishing the generations that come behind, whether that’s from a position of life insurance, emotional security… all those different elements that bring that comfort to your loved ones when you’re no longer here and leaving your fingerprints and your footprints even when you’re gone.” — Marlon Randolph, Houston Strong Child Placement Agency
Houston Strong Child Placement Agency is directly involved in legacy planning by ensuring that foster and adoptive families are equipped to provide lasting security and support for children. Their collaboration with Mrs. Donna Marshall-Payne and Doing Far More LLC underscores the importance of integrating emotional, social, and financial planning to create enduring legacies for all types of families.
Connect with Doing Far More LLC for legacy planning:
📞 832‑745‑1114 | ✉️ info@doingfarmore.com | 📱 Instagram: @doingfarmorellc | 🌐 www.doingfarmore.com
Connect with Roselyn for PR:
✉️ Roselyn@bolanlemedia.com | 📱 Instagram: @bolanlemedia @RoselynOmaka | 🌐 www.bolanlemedia.com
At Doing Far More LLC’s Black Entrepreneurship Tour, Roselyn Omaka of Bolanle Media sat down with Hattie M. Banks, founder and CEO of B’Elite Hand Rolled Cigar Service, for a conversation that blended luxury, culture, and legacy. As one of the few Black African American cigar rollers in the industry, Hattie shared how her business is redefining elegance, offering bespoke hand-rolled cigars for weddings, corporate events, trade shows, and private celebrations.
During the interview, Hattie spoke about her passion for the art of cigar rolling and what sets B’Elite apart: “I specialize in the art of rolling cigars. I’m a bit of an anomaly because there aren’t many Black African American cigar rollers, so I consider myself special.” Her presence at the tour was inspired by the chance to connect with other entrepreneurs and to bring awareness to the importance of legacy planning, a theme central to Doing Far More’s mission.
Hattie emphasized that legacy planning is about making sure your affairs are in order so loved ones don’t have to face unnecessary stress, especially during difficult times. She encouraged others to embrace these conversations and highlighted how events like the Black Entrepreneurship Tour help bring visibility and support to small businesses and cultural traditions.
B’Elite offers immersive, hands-on cigar rolling experiences, from VIP packages that include luxury accessories and bourbon pairings to live rolling for events, all crafted for those who expect nothing less than the elite. Hattie’s story is a testament to the power of passion, representation, and planning for the future.
Watch the full interview with Hattie on Bolanle Media’s YouTube channel (@bolanlemedia)—like and subscribe for more inspiring stories. For more on B’Elite Hand Rolled Cigar Service, visit their website or connect for your next event.
The Black Entrepreneur Tour: Spring Formal, hosted at The Grand UpperRoom in Katy, TX, was more than just an event—it was a powerful reminder of what it means to build and protect a legacy in Houston’s Black community. This impactful gathering was made possible entirely by Doing Far More LLC, led by the visionary Mrs. Donna Marshall-Payne. Her passion and dedication brought together entrepreneurs, visionaries, and families for an afternoon focused on real strategies for generational wealth, with a special emphasis on the often-overlooked role of real estate in legacy planning.
Roselyn Omaka from Bolanle Media and Mrs. Donna Marshall-Payne from Doing Far More LLC
The Meaning Behind the Movement
Legacy planning is about more than passing down money or a business. It’s about ensuring that the values, stories, and assets you’ve worked hard to build will continue to benefit your family and community for generations. As Mrs. Donna shared, “It’s not just about what you leave behind—it’s about how you set your loved ones up to thrive long after you’re gone.” The event created a safe, celebratory space for guests to share their personal journeys, challenges, and triumphs, making the experience deeply meaningful for all who attended.
The Real Estate Advantage
One of the most impactful topics discussed was the role of real estate in legacy planning. Real estate is more than an investment—it’s a cornerstone of generational wealth. By securing property, families can:
- Build equity that appreciates over time
- Provide stable housing or rental income for future generations
- Avoid the pitfalls of probate and family disputes through proper titling and estate planning
- Anchor a family’s presence and influence in their community
As highlighted during the event, many families lose valuable real estate due to lack of planning, leading to unnecessary legal battles and the loss of generational wealth. Mrs. Donna and her team emphasized the importance of proactive steps—like creating wills, trusts, and clear succession plans—to ensure that homes and properties remain assets, not burdens, for those left behind.
A Conversation That Matters
A highlight of the afternoon was the video interview with Roselyn Omaka, Founder and CEO of Bolanle Media. Sitting down with Mrs. Donna, Roselyn explored the deeper significance of legacy planning and how real estate can be a game-changer for Black families and entrepreneurs. Their conversation brought to light the urgent need for education and action, inspiring attendees to think beyond immediate business success and focus on long-term impact.
A Community United by Purpose
The Spring Formal wasn’t just about information—it was about inspiration and connection. Guests shared personal stories, learned from experts like Brittany Hall, owner of La Lutte Empire; Marcus Bowers , CEO of She’s Happy Hair and Cinema Anywhere Houston; and Martel Matthews (Black Wall Street and Trustavio), and left with practical tools to start their own legacy planning journeys. The event’s unique “pre-planning party” atmosphere turned a traditionally somber topic into a celebration of life, family, and future possibilities.
Stay Connected
Families looking to keep up with Mrs. Donna Marshall-Payne and Doing Far More LLC can find resources, events, and one-on-one support through their website, social media, and direct contact. The movement continues, and everyone is invited to be part of a legacy that uplifts, protects, and empowers the next generation.
This entire impactful event was brought to you by Doing Far More LLC—Mrs. Donna Marshall-Payne’s vision and leadership made it all possible.
Contact Mrs. Donna Marshall-Payne & Doing Far More LLC:
- Phone: 832-745-1114
- Email: info@doingfarmore.com
- Instagram: @doingfarmorellc
- Facebook: Doing Far More LLC
- Website: www.doingfarmore.com
Let’s do far more—together!
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