What IRS Form 1065 (2018) Is For

Form 1065 is the U.S. Return of Partnership Income that partnerships must file to report annual income, gains, losses, deductions, credits, and other financial information (IRS Instructions for Form 1065, 2018). Partnerships themselves do not pay federal income tax. Instead, they pass profits and losses to individual partners, who then report their share on personal returns. All domestic partnerships, including multi-member LLCs taxed as partnerships, must file Form 1065 unless they neither earn income nor incur deductible expenditures.

When You'd Use Form 1065 for 2018 (Late or Amended Filing)

You must file a late 2018 Form 1065 if your partnership missed the original March 15, 2019 deadline (or the extended September 15, 2019 deadline).

Common situations include:

• Receiving IRS notices about unfiled returns
  
  
• Discovering unreported income
  
  
• Correcting previously filed information
  
  

For 2018, the late filing penalty was $210 per partner, per month, up to 12 months maximum.

For amendments, the Bipartisan Budget Act (BBA) audit regime required many partnerships to use Form 1065-X instead of the traditional amended Form 1065. Partnerships eligible to elect out of BBA rules (with 100 or fewer eligible partners) could still amend using Form 1065 with the “Amended Return” box checked.

‍

Key Rules Specific to 2018

• First year under BBA audit rules: Partnerships had to designate a partnership representative with a substantial U.S. presence.
  
  
• Qualified business income (QBI) deduction reporting: New Schedule K-1 reporting items for Section 199A.
  
  
• Business interest limitation: New Section 163(j) reporting with Form 8990.
  
  
• Carried interest rules: Section 1061 introduced a 3-year holding period for certain partnership interests.
  
  
• Repeal of Section 199: Domestic production activities deduction ended in 2018.
  
  
• Hybrid transactions: Section 267A anti-hybrid rules applied.
  
  

‍

Step-by-Step (High Level)

• Gather records: Obtain IRS transcripts and collect all partnership books, statements, and prior filings.
  
  
• Prepare Form 1065: Use the official 2018 version, ensuring the partnership representative is properly designated.
  
  
• Reconcile to books: Complete Schedule M-1 to reconcile book-to-tax differences, such as depreciation, guaranteed payments, and nondeductible expenses.
  
  
• Prepare K-1s: Issue Schedule K-1s to each partner, including QBI information for Section 199A.
  
  
• File properly: E-file if required (mandatory for partnerships with 100+ partners). Otherwise, mail to the correct IRS service center. For amendments, use Form 1065-X unless your partnership elected out of BBA.
  
  
• Retain documentation: Keep all filings, K-1s, and proof of submission for at least three years.
  
  

‍

Common Mistakes and How to Avoid Them

• Incomplete K-1 reporting: Missing Section 199A or misclassifying income types. → Always cross-check with 2018 instructions.
  
  
• Errors in book-tax reconciliation: Misreporting depreciation or guaranteed payments on Schedule M-1. → Reconcile carefully with accounting records.
  
  
• Partnership representative not designated: Using outdated “tax matters partner” language instead of new rules. → Ensure full completion of partnership rep section.
  
  
• Misclassification of activities: Incorrectly labeling passive vs. active activities under Section 469. → Review activities carefully for accuracy.
  
  
• Missed election deadlines: Failing to elect out of BBA centralized audit regime on time. → Review eligibility early and attach Schedule B-2 if applicable.
  
  

‍

What Happens After You File

The IRS generally processes partnership returns in 8–12 weeks, but late or amended filings may take longer. Notices may be issued for missing information or adjustments under BBA rules.

Key points:

• Penalties and interest: Assessed for late filing at $210 per partner per month.
  
  
• Appeal rights: Partnerships can appeal IRS adjustments through the Office of Appeals.
  
  
• Installment agreements: Penalty balances can be managed with Form 9465.
  
  
• Partner-level responsibility: Adjustments flow through to partners, who must update their individual filings.
  
  

‍

FAQs

Can I still file a 2018 Form 1065 in 2024 or later?

Yes. There’s no statute of limitations for unfiled returns, but penalties continue to accrue.

What is the penalty for filing late?

$210 per partner, per month, for up to 12 months (IRS Instructions for Form 1065, 2018).

How do I get transcripts for my 2018 partnership return?

Request online at IRS.gov, call 800-908-9946, or file Form 4506-T.

Can partnerships claim refunds?

No. Partnerships don’t pay income tax. However, partners can amend their individual returns with corrected K-1s.

Is there a deadline to amend partner returns with 2018 K-1s?

Yes. Generally three years from the original filing date, which expired in April 2022 for 2018 returns.

Do I need to amend state returns?

Yes, in most states. Federal changes usually require amended state partnership filings.

What if we elected out of BBA audit rules?

You may file an amended 2018 Form 1065 (with the Amended Return box checked) instead of Form 1065-X.

‍