Can BBA Partners Make Deposits Under IRC Section 6603?
By Jeffrey M. Glassman on February 10, 2023
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Jeffrey M. Glassman
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If you owe the IRS money in 2023, the interest accruals are far more costly than they have been in recent history. That is because Congress requires the IRS to charge a mark-up on the federal short-term rate, which has skyrocketed. Congress also has mandated that interest be compounded daily. Under these rules, most taxpayers are currently facing a 7% interest rate that compounds daily. Given these staggering interest rates, more and more of my clients are considering making what is known as a “deposit” to the IRS. Deposits stop interest from accruing to the extent of the amount of the deposit.
Unlike when a payment is made to the IRS, taxpayers can much more easily request their money back from the IRS when they properly make a deposit. That flexibility often makes deposits appealing. At the risk of oversimplifying, making a deposit is functionally equivalent to letting the IRS hold your money. Sometimes taxpayers can even earn interest when they make a deposit. Properly making a deposit requires compliance with IRS procedures.
As is relevant to this article, there has been an open question as to whether taxpayers, who are partners in BBA partnerships, can make a deposit against potential liabilities from a BBA partnership. Congress has not specifically said it can happen (nor have they said that it cannot happen). Treasury Regulations and Revenue Procedures have been similarly quiet. But according to the IRS website (link), the IRS now states that a partner of a BBA partnership under examination may make a deposit.
The IRS website provides:
If you have questions about this article, BBA partnership procedures, or any tax matter, please contact me at jglassman@meadowscollier.com or 214-749-2417.
Unlike when a payment is made to the IRS, taxpayers can much more easily request their money back from the IRS when they properly make a deposit. That flexibility often makes deposits appealing. At the risk of oversimplifying, making a deposit is functionally equivalent to letting the IRS hold your money. Sometimes taxpayers can even earn interest when they make a deposit. Properly making a deposit requires compliance with IRS procedures.
As is relevant to this article, there has been an open question as to whether taxpayers, who are partners in BBA partnerships, can make a deposit against potential liabilities from a BBA partnership. Congress has not specifically said it can happen (nor have they said that it cannot happen). Treasury Regulations and Revenue Procedures have been similarly quiet. But according to the IRS website (link), the IRS now states that a partner of a BBA partnership under examination may make a deposit.
The IRS website provides:
Deposits to suspend the running of interest on potential underpayments (under IRC 6603, Rev Proc 2005-18) made by (terminal) partners of BBA audited partnerships that are disputing the partnership adjustments and/or imputed underpayment amount:
A partner of a BBA partnership under examination may make a deposit under section 6603 by remitting to the Internal Revenue Service Center at which the taxpayer is required to file its return, or to the appropriate office at which the BBA partnership’s return is under examination, a check or a money order accompanied by a written statement designating the remittance as a deposit. The written statement also must include:
A partner of a BBA partnership under examination may make a deposit under section 6603 by remitting to the Internal Revenue Service Center at which the taxpayer is required to file its return, or to the appropriate office at which the BBA partnership’s return is under examination, a check or a money order accompanied by a written statement designating the remittance as a deposit. The written statement also must include:
- The name and TIN of the partnership under exam;
- The reviewed year of the partnership under exam;
- The Audit Control Number (ACN) of the partnership under exam;
- A statement identifying the amount of and basis for the BBA audited partnership’s disputable tax (for example, if partnership requested appeal, include 30-day letter, or if partnership petitioned court, include case docket number, of if partnership plans to petition court, include a copy of NOPPA or FPA); and
- The partner’s estimated allocable share of the adjustments and the tax, interest, and penalty calculation (the amount of payment.
If you have questions about this article, BBA partnership procedures, or any tax matter, please contact me at jglassman@meadowscollier.com or 214-749-2417.
