What IRS Form 1065-B (2016) Is For

IRS Form 1065-B (2016) was designed for electing large partnerships (ELPs) under section 775 of the Internal Revenue Code (IRS Instructions for Form 1065-B (2016)). Unlike standard partnerships, ELPs aggregated most income and expense items at the partnership level and passed through net results to partners. ELPs generally required 100 or more partners in the prior tax year.

When You'd Use Form 1065-B for 2016 (Late or Amended Filing)

You’d file a late 2016 Form 1065-B if your ELP never submitted the return by the March 15, 2017 deadline, received IRS notices about non-filing, or needs to correct prior errors. Late filings may involve IRS CP notices, penalty assessments, or the need to issue corrected K-1s. Refund claims are unavailable since the statute of limitations has expired.

Key Rules Specific to 2016

• Second-to-last ELP year: The ELP system was repealed after 2017 under the Bipartisan Budget Act.
  
  
• Electronic filing: Large partnerships were generally required to file electronically if they had filing capacity.
  
  
• K-1 requirements: Schedules K-1 had to be furnished to partners by March 15, 2017, regardless of return status.
  
  
• Penalty rates: Late filing penalties were $195 per partner per month, capped at 12 months.
  
  
• Audit framework: 2016 returns still followed TEFRA audit rules, unlike the centralized audit regime starting in 2018.
  
  

Step-by-Step (High Level)

• Gather transcripts: Use Form 4506-T or IRS.gov to request account transcripts and identify prior filings or penalties.
  
  
• Prepare 2016 Form 1065-B: Download the correct 2016 version; do not use current forms, as rules differ.
  
  
• Complete schedules: Fill out Schedules K, K-1, L, and other required schedules based on activity.
  
  
• File properly: E-file if possible; otherwise, mail paper returns to the IRS Ogden, UT processing center.
  
  
• Maintain records: Keep all return copies, schedules, and proof of filing for compliance and future reference.
  
  

Common Mistakes and How to Avoid Them

• Using incorrect form versions: Always use the 2016 Form 1065-B to follow ELP rules.
  
  
• Overlooking e-file mandates: Partnerships with over 100 partners generally had to file electronically.
  
  
• Miscalculating partner counts: Exclude service partners from eligibility counts but ensure accurate partner reporting.
  
  
• Late K-1 distribution: Furnish all Schedules K-1 by March 15, 2017 to avoid additional penalties.
  
  
• Mixing regimes: Don’t apply post-2017 audit rules to 2016 filings.
  
  
• Weak penalty relief requests: Provide detailed supporting evidence when seeking abatement for reasonable cause.
  
  

What Happens After You File

The IRS typically processes late partnership returns in 8–16 weeks, though older-year filings may take longer. You’ll receive acknowledgment if e-filed, or updates through IRS Practitioner Priority Service for paper filings. Filing stops additional penalties from accruing but doesn’t remove those already assessed. You can request relief by submitting Form 843 or appeal IRS determinations through the Office of Appeals.

FAQs

Can I still file Form 1065-B for 2016 even though ELP rules were repealed?

Yes. The repeal applied to tax years beginning after December 31, 2017. For 2016, you must still use Form 1065-B since it was an active ELP year. Late or amended filings should follow the 2016 instructions to ensure compliance, even though the ELP framework has been eliminated for current and future years.

What's the penalty for filing my 2016 Form 1065-B late?

The penalty is $195 per partner per month, up to a maximum of 12 months. For a 100-partner ELP filed six months late, the penalty totals $117,000 ($195 × 100 partners × 6 months). Penalties apply regardless of income or losses, and additional fines may apply for late Schedule K-1 delivery.

Do I need to get tax transcripts before filing my late return?

It’s recommended, though not required. Tax transcripts help confirm whether the IRS already has a return on file, whether substitute returns were created, and what penalties have been assessed. This information ensures you file correctly and may guide penalty abatement requests or installment payment arrangements if balances are already due.

Can I get refunds for 2016 if I file late?

No. The refund statute of limitations is three years from the original due date (March 15, 2017) or two years from payment, whichever is later. For 2016 returns filed now, that deadline has expired. Filing today ensures compliance and prevents further penalty accrual but does not result in refunds for prior payments.

Should I amend my state partnership return too?

Most states require amended returns if you change your federal return. If your 2016 Form 1065-B is filed late or amended, verify state-specific rules. Some states automatically adjust based on federal filings, while others require a separate amended return. Always check with your state’s tax authority for deadlines and procedures.

How do I prove reasonable cause for penalty abatement?

Provide clear documentation showing circumstances beyond your control, such as medical emergencies, natural disasters, or reliance on professional advice. Include evidence like hospital records, insurance claims, or CPA correspondence. A well-documented reasonable cause request strengthens your case for penalty relief and avoids generic or unsupported explanations, which the IRS often rejects.

What if my ELP had fewer than 100 partners in some months during 2016?

ELP eligibility is determined by the prior year’s partner count. If your partnership had 100 or more partners in 2015 and made the election, it remained classified as an ELP for 2016, even if partner numbers dropped during the year. Once elected, the status continues unless properly revoked.

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