IRS Establishes New Pass-Through Entity Tax Compliance Division

The Internal Revenue Service (IRS) is setting up a new division with the billions in new funding it received in the Inflation Reduction Act to go after uncollected taxes sheltered in companies that pass their tax liability through to their individual owners.

These kinds of businesses are known as “pass-through entities” and often take the legal designation of limited liability partnerships, S-corporations, general partnerships and sole proprietorships.

The new division will be contained within the IRS’s Large Business and International (LBI) Division, which collects taxes on corporations, S-corps, and partnerships with assets greater than $10 million.

The IRS said in a Wednesday statement that the creation of the new unit is part of an effort “to restore fairness in tax compliance by shifting more attention onto high-income earners, partnerships, large corporations and promoters abusing the nation’s tax laws.”