§6232 Assessment, Collection, and Payment

Summary

When a partnership adjustment creates an extra tax for the adjustment year, the IRS can treat and collect that extra amount like a tax for that year. The usual IRS deficiency procedures do not apply. If an administrative adjustment request falls under section 6227(b)(1), the extra amount must be paid and may be assessed when that request is filed. The IRS generally cannot assess, levy, or sue to collect the extra amount until 90 days after it mails a notice of final partnership adjustment, and if a partner files a petition under section 6234, the IRS must wait until the court decision is final. One exception to this timing rule is a “specified similar amount” (a particular technical amount defined in section 6226(b)(4)(A)(ii) and amounts assessed on a partner that is itself a partnership). The Tax Court can stop actions that break the timing rule only if a timely petition was filed and only for the adjustments in that petition. The partnership can also sign a written waiver to remove these timing limits. Simple math or clerical errors can be fixed right away under rules like those for math errors on returns. If the partnership or the partners do not pay an assessed imputed underpayment (or a specified similar amount) within 10 days after the IRS’s demand, the interest rate on that debt is increased by 5 percentage points instead of 3. The IRS may then assess each partner for their share of the unpaid amount. The IRS will decide each partner’s percentage so that the shares add up to 100 percent. If a partner pays, the partnership’s liability is reduced by that amount. S corporations and their shareholders are treated the same way. The usual deficiency procedures do not apply to these partner assessments, and the IRS generally has 2 years from its notice and demand to assess a partner.