New Jersey Business Tax Lawyers Explain TEFRA TEFRA stands for the Tax Equity and Fiscal

Responsibility Act of 1982; however, it has evolved into a much different use in the parlance of New Jersey tax lawye rs. TEFRA is the common acronym used to describe the judicial, examination, and processing requirements that apply to most entities treated as partnerships for income tax purposes. If you are uncertain if your partnership is a TEFRA partner ship, contact a New Jersey business tax lawyer. today to determine if you quali fy. TEFRA procedures are substantially different from non-TEFRA procedures and y our NJ tax lawyer can explain the differences. Before 1982, when investigating a partnership with an IRS audit, the IRS was req uired to locate and examine the income tax form of every partner, no matter wher e he or she was located. The IRS had to keep track of each partner s statute of limi tations, begin prosecution before any partner s statute of limitations expired, and litigate each case separately. These rules were not only burdensome for the IRS , they were also difficult for partnerships; many partners were surprised to fin d themselves investigated. TEFRA reformed these procedures. All examinations are now held at the partnershi p level and not at dozens of separate partner-level proceedings. Moreover, every partner now must report income regularly both through the partnership and indiv idually to make criminal tax evasion and other crimes more evident. In general, partnerships do not pay income tax. Instead, the partnership files a joint form that specifies the earnings of each member of the partnership, and then partner s file their own income forms. In general, every partnership follows TEFRA rules unless they meet the small partne rship exception. If a partnership has fewer than ten partners throughout the year, each of whom is a U.S. individual, a C corporation, or an estate of a deceased p artner, it may qualify for the small partnership exception. However, they can el ect to follow the TEFRA rules by attaching an election statement to the partners hip tax return the first year they would like to be subject to these rules. In addition, TEFRA rules permit the appointment of a tax matters partner. This partner is in charge of representing the partnership before the IRS and in federal civi l tax litigation for one taxable year. The duties of the tax matters partner inc lude representing the partnership in TEFRA proceedings, extending the statute of limitations for all partners, selecting the venue for litigation, applying for TEFRA refunds, settling partnership adjustments, receiving notices from the IRS, keeping the other partners informed, and providing information to the IRS about the partners. TEFRA rules are complex and confusing. If you seek to understand these rules, c all a NJ tax lawyer today who can explain TEFRA provisions and how they apply t o your partnership.