Form 1065-X: Amended Return or Administrative Adjustment Request (AAR) – 2020 Tax Year Guide
What Form 1065-X Is For
Form 1065-X is the IRS form partnerships use to fix mistakes on previously filed partnership tax returns (Form 1065, Form 1065-B, or Form 1066 for real estate mortgage investment conduits). Think of it as the “oops, we need to correct that” form for partnerships—similar to how individual taxpayers use Form 1040-X to amend their personal returns.
However, there's an important twist for 2020: depending on your partnership type, you might be filing either a traditional “amended return” or something called an “Administrative Adjustment Request” (AAR). For tax year 2020, most partnerships fall under new audit rules called the Bipartisan Budget Act (BBA) regime, which went into effect for tax years beginning after December 31, 2017. Under BBA, partnerships generally must file an AAR rather than a traditional amended return to correct partnership-related items like income, deductions, credits, or partner allocations.
The form serves two key purposes: correcting errors on past returns and requesting adjustments that might result in additional tax owed or a refund. For 2020 returns specifically, you'll need to use the September 2018 version of Form 1065-X, which you can download from the IRS website. IRS Form 1065-X
When You’d Use Form 1065-X (Late/Amended)
Common Situations
You would file Form 1065-X when you discover your partnership made an error on a previously filed return. Common situations include:
- Math errors or transposition mistakes on income, deductions, or credits
- Incorrect partner allocations that need to be redistributed among partners
- Missing or incorrect Schedule K-1s issued to partners
- Overlooked deductions or credits that should have been claimed
- Income reported in the wrong year due to timing issues
- Changes based on an IRS audit of a related entity or partner
Timing Window
Timing is critical. You generally have 3 years from the later of: (1) the date you actually filed your partnership return, or (2) the original due date of the return (not counting extensions). For a 2020 calendar-year partnership that filed on time by March 15, 2021, you'd have until March 15, 2024, to file Form 1065-X.
Important Exception
Important exception: If the IRS has already issued a “Notice of Administrative Proceeding” for an audit, you cannot file an AAR for that tax year—the audit process takes precedence. BBA Partnership AAR Filing
Key Rules or Details for 2020
BBA vs. Non-BBA Partnerships
For 2020 partnership returns, several critical rules apply:
BBA vs. Non-BBA Partnerships: The most important distinction is whether your partnership is subject to BBA rules. For 2020, all partnerships are subject to BBA unless they qualified as an “eligible partnership” and made a valid election to opt out. An eligible partnership must have:
- 100 or fewer partners
- Only “eligible partners” (individuals, C corporations, S corporations, estates of deceased partners, or certain foreign entities)
- No partners that are trusts, other partnerships, or disregarded entities
If you elected out of BBA (by filing Schedule B-2 with your 2020 Form 1065), you file a traditional amended return using Form 1065-X. If you didn't elect out—which applies to most partnerships—you must file an AAR instead.
Correct Form Version
Correct Form Version: Use the September 2018 revision of Form 1065-X for 2020 tax years. Using the wrong version is a common mistake that can delay processing.
Paper Filing
Paper Filing: Form 1065-X can only be filed on paper. If you prefer electronic filing, you must use Form 8082 in conjunction with an amended Form 1065, checking the “Amended return” box.
Partnership Representative
Partnership Representative: BBA partnerships must have a designated “partnership representative” (PR) who has sole authority to act on behalf of the partnership. Only the PR (or designated individual if the PR is an entity) can sign Form 1065-X for an AAR. This is different from non-BBA partnerships where any partner can sign.
Imputed Underpayment
Imputed Underpayment: If your AAR results in additional tax owed (called an “imputed underpayment”), you must either pay it at the partnership level when filing, or elect to “push out” the adjustments to partners so they can pay on their individual returns. IRS Instructions for Form 1065-X
Step-by-Step (High Level)
Step 1: Determine Your Partnership Type
First, figure out whether you're a BBA partnership or not. Check your original 2020 Form 1065, Schedule B-2. If you didn't file Schedule B-2 or didn't elect out, you're subject to BBA rules.
Step 2: Obtain the Correct Form
Download the September 2018 version of Form 1065-X from IRS.gov for 2020 tax years. Don't use newer versions—they're for different tax years.
Step 3: Complete the Form
- Part I: Check the appropriate box indicating whether this is an amended return or AAR
- Part II: List the items being changed, showing original amounts, corrected amounts, and the differences
- Part V: Provide a clear, detailed explanation of each change and why it's necessary
- For BBA partnerships: Calculate any imputed underpayment and decide whether to pay it or push it out to partners
Step 4: Prepare Supporting Documents
- Non-BBA partnerships: Prepare amended Schedules K-1 for all affected partners and attach copies to Form 1065-X
- BBA partnerships: If pushing out adjustments or if adjustments don't result in an imputed underpayment, prepare Forms 8985 and 8986 (not amended K-1s)
Step 5: Signature
- Non-BBA: Any partner or LLC member must sign
- BBA: The partnership representative (or designated individual) must sign
Step 6: Make Payment (if applicable)
If there's an imputed underpayment and you're not pushing out to partners, pay using EFTPS or by check/money order, clearly marked “BBA AAR Imputed Underpayment” with your partnership's name, EIN, and tax year.
Step 7: Mail the Form
Send Form 1065-X to the same IRS service center where you filed your original 2020 Form 1065. Include all supporting documents and payment proof.
Step 8: Distribute Partner Forms
- Non-BBA: Provide amended Schedule K-1s to all affected partners
- BBA: Furnish Form 8986 to reviewed-year partners on the same date you file with the IRS
Common Mistakes and How to Avoid Them
Mistake #1: Using the Wrong Form Revision
Many partnerships mistakenly use the current version of Form 1065-X for 2020 returns. Always use the September 2018 version for tax years beginning before January 1, 2021.
How to Avoid: Check the IRS prior forms archive at IRS.gov/pub/irs-prior/ to get the correct version for your tax year.
Mistake #2: Filing Electronically
Form 1065-X cannot be e-filed. If you attempt electronic filing, your submission will be rejected.
How to Avoid: Use paper filing for Form 1065-X, or if you must file electronically, use Form 8082 with an amended Form 1065 instead.
Mistake #3: Wrong Signature Authority
BBA partnerships sometimes have a regular partner sign when only the partnership representative has authority. Conversely, non-BBA partnerships may think only one specific person can sign when any partner is authorized.
How to Avoid: Verify your partnership type on your original return and follow the signature requirements: PR/DI for BBA, any partner for non-BBA.
Mistake #4: Issuing Wrong Partner Forms
BBA partnerships frequently issue amended Schedules K-1 when they should be issuing Forms 8986, or vice versa for non-BBA partnerships.
How to Avoid: BBA partnerships filing AARs always use Forms 8986 (never amended K-1s). Only non-BBA partnerships and non-TEFRA partnerships issue amended K-1s.
Mistake #5: Insufficient Explanation in Part V
Vague explanations like “correcting income” or “fixing errors” aren't enough. The IRS needs specifics to process your amendment.
How to Avoid: Provide detailed explanations including which line items changed, the specific dollar amounts, and the business reason for each correction (e.g., “Line 1a ordinary income increased by $15,000 due to corrected depreciation calculation on equipment purchased in 2019—should have used 5-year recovery period, not 7-year”).
Mistake #6: Mailing to Wrong Service Center
Sending Form 1065-X to a different service center than where you filed your original return can cause significant delays.
How to Avoid: Check your original 2020 return filing records to confirm where it was sent, and use that same address for your Form 1065-X.
Mistake #7: Missing Payment Deadline
If your AAR results in an imputed underpayment, payment must be made when you file—not later.
How to Avoid: Calculate the imputed underpayment before mailing the form and make the payment simultaneously using EFTPS, debit/credit card, or check with proper notation.
What Happens After You File
Processing Timeline
Processing Timeline: The IRS doesn't publish specific timeframes for Form 1065-X processing, but partnerships should expect several months for complex amendments. Paper returns typically take longer than electronic filings.
IRS Review
IRS Review: The IRS will review your Form 1065-X to verify:
- The correct form version was used
- Calculations are accurate
- All required supporting forms are attached
- The explanation is sufficient
- Payment was received (if applicable)
Possible Outcomes
Three Possible Outcomes:
- Accepted as Filed: If everything checks out, the IRS processes your amendment. For refunds, you'll receive a check or direct deposit. The IRS will issue a letter confirming the changes.
- Additional Information Requested: The IRS may send a letter asking for clarification or supporting documentation. Respond promptly with the requested information to avoid delays.
- Disagreement or Audit: If the IRS disagrees with your corrections, they may initiate an examination. For BBA partnerships, this would be under the centralized audit regime; for non-BBA partnerships, traditional audit procedures apply.
Partner Responsibilities
Partner Responsibilities: Partners who receive amended Schedules K-1 or Forms 8986 have their own filing obligations:
- Non-pass-through partners (individuals, C corporations): File Form 8978 with their tax return for the year they received Form 8986
- Pass-through partners (partnerships, S corporations, trusts): Either pay the imputed underpayment or further push out to their own partners/shareholders using Forms 8985 and 8986
Interest and Penalties
Interest and Penalties: If your amendment results in additional tax owed, the IRS will charge interest from the original due date of the return. Penalties may apply if the original error was due to negligence or substantial understatement of income. Conversely, if you're owed a refund, the IRS pays interest from the date of your original overpayment.
No Response Needed
No Response Needed: In many cases, once you submit Form 1065-X correctly with all required documentation and payment, no further action is needed on your part unless the IRS contacts you.
FAQs
Q1: Can I still amend my 2020 partnership return in 2024?
A: It depends on when you filed. Generally, you have 3 years from the later of your actual filing date or the original due date (without extensions). For a calendar-year 2020 partnership that filed on March 15, 2021, the deadline is March 15, 2024. If you filed late—say in June 2021—your deadline would be June 2024. After the 3-year deadline, you generally cannot amend unless special circumstances apply (such as bad debt or worthless securities, which have a 7-year window).
Q2: Do I need to amend my personal tax return if I receive an amended Schedule K-1 or Form 8986?
A: If you receive an amended Schedule K-1 from a non-BBA partnership, and the changes affect your individual tax return, you should file Form 1040-X to amend your personal return. However, if you receive Form 8986 from a BBA partnership, you don't amend prior years—instead, you report the adjustment on Form 8978 with your current year tax return (the “reporting year”). The rules differ significantly, so pay attention to which form you received.
Q3: What if our partnership didn't designate a partnership representative on our original 2020 return?
A: If you're filing an AAR under BBA rules and never designated a PR, you can submit Form 8979 along with your Form 1065-X to designate one. The designation is treated as occurring before the AAR filing and becomes effective on the AAR filing date. Don't let the missing PR stop you from filing—just include Form 8979 with your submission.
Q4: Can we file Form 1065-X electronically for our 2020 return?
A: No, Form 1065-X itself cannot be e-filed. However, if you want to file electronically, you can use Form 8082 in conjunction with a complete amended Form 1065 (checking box G(5) “Amended return”). This electronic option is available for BBA partnerships filing AARs. For straightforward corrections, many practitioners find the paper Form 1065-X simpler despite the inability to e-file.
Q5: What's the difference between “push out” and paying at the partnership level?
A: When a BBA partnership files an AAR that results in additional tax (an imputed underpayment), it has two choices. It can pay the tax at the partnership level immediately when filing, or it can elect to “push out” the adjustments to its partners from the reviewed year, who then pay on their own returns. Pushing out transfers the tax liability from the partnership entity to the individual partners. There are pros and cons to each: paying at the partnership level is simpler but may result in higher effective tax rates; pushing out is more complex administratively but ensures partners pay at their own tax rates. If there's no imputed underpayment (changes result in a wash or a refund), the partnership must push out to partners—there's nothing to pay.
Q6: We had 125 partners in 2020. Could we have elected out of BBA?
A: No. To elect out of BBA, you must have had 100 or fewer partners (counting each Schedule K-1 issued, including K-1s that S corporation partners issued to their shareholders). With 125 partners, you exceeded the threshold and were required to follow BBA rules for 2020, which means filing an AAR rather than a traditional amended return. The 100-partner limit is firm—there's no rounding or exceptions.
Q7: How long will it take the IRS to process our Form 1065-X?
A: The IRS doesn't publish guaranteed processing times for Form 1065-X, but partnerships should expect 6 months or longer, especially for paper filings. Complex amendments involving multiple schedules, large dollar adjustments, or intricate partnership structures take longer. If you're expecting a refund and need the money urgently, plan accordingly—these don't get processed as quickly as regular returns. You can check on the status by calling the IRS Business and Specialty Tax Line at 1-800-829-4933, though wait times can be long.
