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Business & farm
Partnership tax is in general complicated once it deviates from the plain vanilla partnership.
As a result, the IRS has struggled over the decades in attempting to streamline the audit process of a partnership entity. These entities range from a simple 2-person return to ones which can have hundreds of partners.
Effective for tax years beginning on or after 1/1/2018 the new centralized partnership audit process became effective. At a high level, a partnership with more than 100 K-1's cannot opt out of the centralized audit process. The instructions provide guidance on the determination of how to determine who is a partner for this determination. Further, in order to elect out, each of the partners must be either an individual, a C corporation, a foreign entity that would be treated as a C corporation if it were a domestic entity, an S corporation, or an estate of a deceased partner.
Under the centralized audit process, the IRS deals with one specific individual that represents the partnership and only that person. Should there be an audit adjustment, the partnership is responsible for paying the additional tax and any penalties. All partners are "bound" with this position. There are options as to whether the partnership just pays the tax or whether the tax will be allocated to the partners.
If a partnership is eligible to opt out, and in fact does so, then should there be an adjustment at the partnership level, the IRS is required to made any adjustments at the partner level; dealing with each partner separately.
As you can see, this is a somewhat involved area. This election is made on an annual basis.
Hopefully you now at least have a general understanding and can make your decision.
Also keep in mind the date of replies, as tax law changes.