Form 1065-X: Amended Return or Administrative Adjustment Request (AAR) — 2022 Complete Guide
What Form 1065-X Is For
Form 1065-X is the IRS form that partnerships use to fix mistakes or make adjustments to a previously filed partnership tax return (Form 1065), electing large partnership return (Form 1065-B), or real estate mortgage investment conduit return (Form 1066). Think of it as a "correction slip" for your partnership's taxes.
The form serves two main purposes. First, it can be filed as an amended return to correct simple errors like wrong numbers, missing information, or incorrect calculations on your original filing. Second, it serves as an Administrative Adjustment Request (AAR), which is a more formal process used by partnerships subject to special audit procedures to request changes to their tax treatment.
For partnerships with tax years beginning in 2022 (or after 2017), the form operates under the Bipartisan Budget Act (BBA) centralized partnership audit regime unless your partnership specifically elected out. This means that instead of the IRS examining each partner individually, they handle adjustments at the partnership level—which can streamline the process but comes with specific requirements.
When You’d Use Form 1065-X
You'll need Form 1065-X when your partnership discovers errors or needs to make adjustments after filing the original return. Common scenarios include finding mathematical mistakes, discovering unreported income, identifying incorrect deductions, or needing to correct partner allocation percentages on Schedule K-1 forms.
Timing Considerations
Timing is critical. You generally have 3 years to file an amended return or AAR. This 3-year window starts from the later of: (1) the date you actually filed your partnership return, or (2) the last day you could have filed it without extensions. For example, if your partnership's 2022 return was due March 15, 2023, but you filed it on February 28, 2023, your 3-year deadline runs from March 15, 2023—giving you until March 15, 2026.
However, there's an important exception: BBA partnerships cannot file an AAR after receiving a "Notice of Administrative Proceeding" from the IRS. Once that notice arrives, the door closes on voluntary corrections. This makes it crucial to file promptly once you discover issues.
For partnerships that are partners in other BBA partnerships, different timing rules may apply when filing for modification purposes under specific BBA provisions.
Key Rules or Details for 2022
The 2022 tax year brought specific requirements that distinguish it from earlier years. Most importantly, for tax years beginning on or after January 1, 2021 (including 2022), you must use the December 2022 revision of Form 1065-X. Using an outdated version will likely cause processing delays or rejection.
All partnerships with tax years beginning after 2017 are automatically subject to the BBA centralized partnership audit regime unless they made a valid election out. This is a fundamental shift from older TEFRA (Tax Equity and Fiscal Responsibility Act) procedures. Under BBA rules, only the designated Partnership Representative (PR) or Designated Individual (DI) can file an AAR on behalf of the partnership. Individual partners cannot file these corrections independently.
For 2022 returns that include international tax items, you may need to file amended Schedules K-2 and K-3. When amending these schedules, mark them clearly as "As Amended" at the top. For BBA partnerships filing an AAR, don't issue amended Schedules K-1; instead, use Forms 8985 and 8986 to communicate adjustments to partners.
Filing Method and Required Calculations
Paper vs. Electronic Filing: Form 1065-X itself is only for paper submissions. If you want to file electronically, you'll use Form 8082 (Notice of Inconsistent Treatment or Administrative Adjustment Request) together with an amended Form 1065 with the "Amended Return" box checked. The form must be filed with the same IRS service center that processed your original return.
A unique BBA requirement: you must always calculate an Imputed Underpayment (IU) and include it with your AAR—even if the calculation results in zero or shows that the adjustments don't actually create an underpayment. Think of the IU as the tax the partnership would owe at the partnership level due to the adjustments.
Step-by-Step (High Level)
Step 1: Determine Your Partnership Type
Identify whether your partnership is subject to BBA procedures (most partnerships with tax years beginning after 2017), TEFRA procedures (older partnerships), or neither. This determines who can sign the form and what additional forms you'll need.
Step 2: Gather Documentation
Collect your original return, all schedules, and documentation supporting the changes you're making. Prepare detailed explanations for each amended item with supporting calculations.
Step 3: Complete Part I (Classification)
Check the appropriate boxes identifying your partnership type and whether you're filing an amended return or an AAR. For BBA partnerships, you'll also indicate whether the AAR results in an Imputed Underpayment and whether you're electing to "push out" adjustments to partners instead of paying at the partnership level.
Step 4: Complete Part II or Part III
List each item being changed with three columns: (a) the amount as originally reported, (b) the net change (increase or decrease), and (c) the correct amount. Include all affected line items from the original Form 1065.
Step 5: Calculate Imputed Underpayment (BBA Only)
If you're a BBA partnership, complete Part IV to calculate the IU. This involves applying the highest tax rate to the adjustments and determining whether modifications apply to reduce the IU amount.
Step 6: Explain Changes in Part V
Provide a detailed narrative explaining why each change is being made. Attach additional pages if needed, with computations and supporting documentation.
Step 7: Attach Required Forms and Schedules
Include amended Schedules K-1 (for non-BBA partnerships) or Forms 8985/8986 (for BBA partnerships), amended Schedules K-2/K-3 if applicable, and any other supporting schedules. Mark copied schedules from the original return "Copy Only—Do Not Process."
Step 8: Sign and Date
The Partnership Representative (for BBA), Tax Matters Partner (for TEFRA), or authorized partner (for other partnerships) must sign the form. Unsigned forms are not considered valid returns.
Step 9: Pay Any Imputed Underpayment
BBA partnerships must pay any resulting IU (plus interest and penalties) at the time of filing unless they elect to push out adjustments to partners. Payment can be made via EFTPS, credit/debit card, or check payable to "United States Treasury."
Step 10: Mail to Correct Service Center
Send the complete package to the same IRS service center where you filed the original return.
Common Mistakes and How to Avoid Them
Using the Wrong Form Version
Many partnerships mistakenly use outdated versions of Form 1065-X. Always verify you're using the December 2022 revision for tax years beginning in 2021 or 2022. Check the revision date printed on the form itself.
Missing Supporting Schedules
A frequent error is failing to attach all necessary supporting documentation. Every amended item needs backup—whether that's a revised Schedule K-1, an amended Schedule K-2/K-3, or explanatory calculations. Label everything clearly with the partnership's name and EIN.
Wrong Signature Authority
Under BBA rules, only the designated Partnership Representative can sign an AAR—not just any partner. Verify that the correct person is signing, or the IRS will reject the filing.
Filing Electronically When You Should File on Paper
Remember, the actual Form 1065-X is paper-only. If you try to e-file using Form 1065-X, it won't work. For electronic submissions, use Form 8082 with an amended Form 1065 instead.
Confusing Amended Returns with AARs
BBA partnerships filing adjustments must file an AAR, not an amended return. The distinction matters because different rules, forms, and procedures apply. Part I of the form asks you to clarify which type you're filing—answer carefully.
Insufficient Explanations
Saying "error" or "miscalculation" isn't enough. Part V requires detailed explanations of what was wrong, why it was wrong, and how you're correcting it. Include step-by-step calculations showing your work.
Forgetting the Imputed Underpayment Calculation
BBA partnerships must always include an IU calculation—even when it's zero or negative. Omitting this calculation guarantees processing delays and potential rejection.
Not Furnishing Partner Notifications
When BBA partnerships file an AAR and elect push-out treatment (or have adjustments that don't result in an IU), they must furnish Forms 8986 to all reviewed-year partners on the same date the AAR is filed with the IRS. Missing this deadline creates problems for your partners.
Mailing to the Wrong Address
Always send Form 1065-X to the service center that processed your original return—not your local IRS office or a different center. The IRS website has a list of service center addresses organized by where your partnership is located.
Missing the Deadline
The 3-year window is firm. Late filings won't be accepted except in rare circumstances. Calendar the deadline immediately and build in buffer time.
What Happens After You File
Once the IRS receives your Form 1065-X, processing time varies depending on whether you filed an amended return or an AAR, and whether you're under BBA or TEFRA procedures.
For BBA Partnerships
If you paid an Imputed Underpayment, the IRS will process your payment and apply it to the adjustment year. If you elected to push out adjustments to partners instead (via Forms 8986), your partners must report the adjustments on their own returns—typically using Form 8978 for individual and C corporation partners. Pass-through partner entities must either pay their share of the IU or further push out to their own partners.
The IRS may contact you if they need clarification or additional documentation. They'll also verify that your IU calculation is correct and that you've properly notified partners when required. Once processing is complete, the IRS will issue updated records reflecting the adjusted partnership items.
For TEFRA Partnerships
The IRS evaluates whether to grant "substituted return treatment." If approved, your changes are treated as corrections of mathematical or clerical errors, and the IRS can assess resulting taxes to partners without conducting a full audit. Partners can then file amended returns to claim refunds.
If substituted return treatment isn't granted, the IRS may examine the partnership's return, take no action, or communicate adjustments to partners through other procedures. In this scenario, partners may still file amended returns, but the IRS cannot assess additional tax without conducting a proper deficiency proceeding.
Impact on State Returns
Changes to your federal partnership return almost always affect state tax returns. You'll likely need to file amended state returns as well. Contact the tax agencies in all states where your partnership filed returns to understand their amendment procedures and deadlines—these vary by state.
Judicial Review
If the IRS fails to act on an AAR filed by a TEFRA partnership or ELP within a reasonable time, the Tax Matters Partner or Partner with Authority can petition for judicial review. However, you must wait at least 6 months after filing the AAR but must file the petition within 2 years of filing the AAR.
Interest and Penalties
Interest generally accrues from the original due date of the return through the date of payment. For BBA partnerships paying an IU, interest is calculated from the day after the reviewed year's return due date through the adjustment year's return due date (or earlier payment date). If you elected push-out treatment, interest is calculated at the partner level. Additional penalties may apply for negligence, substantial understatements, or fraud.
FAQs
Q1: Can individual partners file Form 1065-X for the partnership?
No, not for BBA partnerships. Only the designated Partnership Representative (or Designated Individual if the PR is an entity) has authority to file an AAR on behalf of a BBA partnership. For non-BBA partnerships, generally any partner or LLC member can sign an amended return, though it's typically handled by the managing partner or member-manager.
Q2: What's the difference between an amended return and an Administrative Adjustment Request?
An amended return is used by partnerships not subject to BBA or TEFRA procedures to correct simple errors. An AAR is a more formal mechanism used by partnerships under BBA or TEFRA audit procedures to request adjustments. The key difference is that AARs follow special procedural rules, require specific forms (like Forms 8985/8986 for BBA), and are handled differently by the IRS.
Q3: Do we have to pay the Imputed Underpayment immediately when filing an AAR?
BBA partnerships have a choice. You can either: (1) pay the IU at the partnership level when filing the AAR, or (2) elect under section 6227(b)(2) to "push out" the adjustments to the reviewed-year partners, who then report them on their own returns. If you choose push-out, the partnership doesn't pay the IU, but you must furnish Form 8986 to all reviewed-year partners on the date you file the AAR.
Q4: What if we miss the 3-year deadline?
Generally, if you miss the 3-year deadline, you cannot file an amended return or AAR for that year. There are very limited exceptions, such as when tax law changes retroactively affect prior years, but these are rare. The best approach is to set calendar reminders and act promptly when you discover errors. Some state deadlines differ from federal deadlines, so check those separately.
Q5: Can we file Form 1065-X electronically?
No, Form 1065-X itself is only for paper filing. If you want to file electronically, you must use Form 8082 (Notice of Inconsistent Treatment or Administrative Adjustment Request) along with an amended Form 1065 (or Form 1065-B as applicable) with the "Amended Return" box checked. Consult the Instructions for Form 1065 for electronic filing procedures.
Q6: Do we need to provide amended Schedules K-1 to all partners?
It depends on your partnership type. Non-BBA partnerships should furnish amended Schedules K-1 to all affected partners. However, BBA partnerships filing an AAR do NOT furnish amended Schedules K-1. Instead, they use Forms 8985 and 8986 to communicate adjustments when they elect push-out treatment or when adjustments don't result in an IU.
Q7: What happens if the IRS disagrees with our amended return or AAR?
If the IRS disagrees, they may contact you for clarification or additional documentation. For BBA partnerships, the IRS may adjust your IU calculation or deny certain modifications. For TEFRA partnerships, the IRS may initiate examination proceedings. In some cases, they may simply deny the request. You'll have opportunities to respond to IRS communications and, if necessary, pursue judicial review or appeals depending on the circumstances and the applicable procedures (BBA, TEFRA, or standard amendment).
This guide provides general information based on IRS publications and instructions for Form 1065-X (Rev. December 2022). Tax situations vary widely, and partnership taxation involves complex rules. Consult a qualified tax professional or CPA for advice specific to your partnership's circumstances.
