2018 Form 1065-X Instructions: Filing Review Checklist

Form 1065-X for Tax Year 2018: IRS-Accurate Checklist

Why 2018 Form 1065-X Is Unique

The Bipartisan Budget Act (BBA), effective for partnership tax years beginning January 1, 2018, fundamentally restructured partnership audit procedures and amendment processes. Form 1065-X now requires completion of either Section 1 (TEFRA for pre-2018 years) or Section 2 (BBA AAR for 2018 and later), with imputed underpayment calculations and potential partnership-level tax liability replacing amended K-1 passthrough.

Year-Specific Programs Applicable to 2018 Form 1065-X

For tax year 2018 and after, all partnerships subject to the centralized partnership audit regime (except those that elect out) must file an Administrative Adjustment Request (AAR) instead of an amended return to correct partnership-related items. The imputed underpayment, calculated by multiplying total netted partnership adjustments by the highest tax rate in effect for the reviewed year, is paid by the partnership at filing time or, alternatively, pushed out to reviewed-year partners under section 6227(b)(2).

TEN-STEP CHECKLIST: Form 1065-X, Tax Year 2018

STEP 1: Determine Partnership Classification

Identify whether the partnership tax year begins before January 1, 2018 (use Section 1—TEFRA/NonTEFRA Determination) or begins on or after January 1, 2018 (use Section 2—BBA AAR). For 2018 forms, confirm whether the partnership elected into the BBA for tax years beginning after November 2, 2015 and before January 1, 2018. Document this determination before proceeding to Part I, item E.

STEP 2: Gather Original and Amended Return Documents

Obtain the original Form 1065 for the year being amended (the “reviewed year”), including all Schedule K, Schedule K-1, and any supporting schedules or statements filed with that original return. If the original return was previously adjusted by the IRS, obtain the most recent audit report or notice of adjustment showing the adjusted amounts. Collect all documentation supporting the corrections being made (e.g., corrected invoices, depreciation recalculations, expense verification).

STEP 3: Complete Part I, Section 1 (if tax year begins before January 1, 2018)

Answer items A through D to determine TEFRA/NonTEFRA status. Item A: Confirm whether the partnership made an election to be treated as an Electing Large Partnership (ELP) under section 775; if yes, enter the election date. Item B: Document whether the partnership had 10 or fewer partners at all times during the tax year (note: husband and wife count as one partner for TEFRA purposes). Item C: Confirm all partners were U.S. citizens, resident aliens, C corporations, or estates of deceased partners at all times during the tax year. Item D: Determine whether the partnership filed Form 8893 (Election of Partnership Level Tax Treatment) to be treated as a TEFRA partnership. Based on answers to items B, C, and D, check the appropriate box in item E (Subject to TEFRA or Not subject to TEFRA), then check either “Amended Return” or “Administrative Adjustment Request (AAR)” in item F.

STEP 4: Complete Part I, Section 2 (if tax year begins after December 31, 2017)

Item A: Determine whether the partnership is revoking an existing partnership representative (PR) designation and appointing a successor at the same time this AAR is filed; if yes, attach Form 8979 (Partnership Representative Revocation, Designation, and Resignation). Item B: Calculate and document whether the adjustments on this AAR result in an imputed underpayment for the reviewed year by following the grouping, netting, and rate-multiplication procedure specified in section 6225(b). Item C: If the AAR results in an imputed underpayment, elect under section 6227(b)(2) whether to have adjustments taken into account by reviewed-year partners (push-out election) or to have the partnership pay the imputed underpayment; if electing modifications to the imputed underpayment, attach Form 8980 (Partnership Request for Modification of Imputed Underpayments Under IRC Section 6225©). Item D: The partnership is required to provide statements to the reviewed year partners containing their share of the adjustments. By signing below, the partnership representative declares, under penalties of perjury, that all statements have been provided to the reviewed year partners as required by the instructions. (This is a signature block declaration, not a conditional determination; furnishing Forms 8986 is a separate procedural requirement that applies when Item C push-out election is made or when adjustments do not result in an IU.)

STEP 5: Complete Part II—Income, Deductions, and Credits (Partnerships Only)

For each line (1–20c) on which an adjustment is being made, enter in column (a) the amount as originally reported on Schedule K for the reviewed year (or the previously adjusted amount if the return was changed or audited by the IRS). Enter in column (b) the net increase or decrease for each line being changed, using parentheses for decreases. Enter in column © the correct amount. Ensure all Schedule K line items being adjusted are included, including ordinary business income (line 1), net rental real estate income (line 2), guaranteed payments (line 4), interest income (line 5), dividends and dividend equivalents (lines 6a–6c), royalties (line 7), capital gains/losses (lines 8–10), other income (line 11), Section 179 deduction (line 12), contributions (line 13a), investment interest expense (line 13b), Section 59(e) expenditures (line 13c), other deductions (line 13d), self-employment items (lines 14a–14c), and credits (lines 15a–15f).

STEP 6: Complete Part IV—Imputed Underpayment Calculation (BBA AARs Only)

For BBA partnerships filing an AAR that results in an imputed underpayment, compute the imputed underpayment on a separate attachment (no prescribed form exists for this calculation). The attachment must show: grouping of adjustments by category (reallocation, residual, credit, creditable expenditure); netting of adjustments within each group; sum of net positive adjustments from reallocation and residual groups multiplied by the highest tax rate in effect under section 1 or 11 for the reviewed year; and any adjustments for credits and creditable expenditures. Enter the total imputed underpayment on line 1 of Part IV. Enter the total amount due (imputed underpayment plus any interest and penalties) on line 2. Enter total payment made (line 3), and calculate balance due (line 4 = line 2 minus line 3).

STEP 7: Prepare and Attach Form 8986 (if Applicable to 2018 AAR)

If the AAR contains adjustments that do not result in an imputed underpayment, or if the partnership is making a push-out election under section 6227(b)(2), prepare Form 8986 for each reviewed-year partner showing that partner’s allocable share of the adjustments. Complete the partner’s name, TIN, address, and share percentage on each Form 8986. The partnership must file a copy of all Forms 8986 with this Form 1065-X and furnish a copy to each reviewed-year partner.

STEP 8: Prepare Part V—Explanations of Changes

For each line number in Part II (or Part III for ELPs/REMICs) on which an adjustment is being made, provide: the line number being changed; the reason for the change; for partnerships, the box number and code used to report the item on Schedule K-1 (e.g., “Line 1, Code A”); detailed computation showing how the original amount was recalculated to arrive at the correct amount; if filing a BBA AAR with an imputed underpayment, show how the imputed underpayment was calculated and how any modifications were applied. Continue on additional pages if necessary.

STEP 9: Attach Supporting Documentation and Schedules

Attach a schedule to Form 1065-X supporting all positions reported that result in an imputed underpayment (required for BBA AARs). If corrected amounts involve items that must be supported with a schedule, statement, or form (e.g., depreciation schedule, rental income and expense details from Form 8825), attach the appropriate supporting document. If attachments include copies of forms or schedules from the original return, write “Copy Only—Do Not Process” at the top of each such copy. Attach amended Schedules K-1 or Schedules Q as required by Part I box selection. For non-TEFRA partnerships filing an amended return (not an AAR), file amended Schedules K-1 with this Form 1065-X and furnish copies to each partner; if filing an AAR, do not furnish amended K-1s to partners—instead furnish Form 8986.

STEP 10: Sign Form 1065-X and Verify Filing Requirements

For partnerships not subject to TEFRA or not electing into BBA, any partner or LLC member must sign the form in the signature block and date the entry. For BBA partnerships filing an AAR, the Partnership Representative (or Designated Individual, if the PR is an entity) must sign and date the form. A paid preparer may sign the form by rubber stamp, mechanical device, or computer software program and must enter their PTIN (not a Social Security number). Print or type the preparer’s name, firm name, EIN, and phone number. Make a check or money order payable to “United States Treasury” if paying any balance due (do not send cash). Enclose the check with the form. Verify that all required attachments are included before mailing to the IRS service center where the original return was filed.

Form-Specific Limitations for 2018

Limitation 1—TEFRA Partnerships Cannot File Certain AARs After Notice of Administrative Proceeding

A TEFRA partnership cannot file an AAR for a tax year once the IRS mails a notice of administrative proceeding under section 6231. After such notice is mailed, no partner may take a position inconsistent with the partnership’s return for that year.

Limitation 2—Non-TEFRA Partnerships Cannot File Administrative Adjustment Request

A partnership with a tax year beginning before January 1, 2018 that is not subject to TEFRA proceedings and did not elect into BBA cannot file an AAR; such partnerships may only file an amended return. If not subject to TEFRA and filing an amended return, the partnership must furnish amended Schedules K-1 to its partners, and each partner must then file their own amended return to reflect the partnership-level corrections.

Line Changes, Additions, or Redesigns for 2018 Form 1065-X

Addition 1—Part IV: Imputed Underpayment Section (New for BBA AARs)

Prior Year:

• Not applicable
  
  
• Pre-2018 tax years used only TEFRA procedures or electing large partnership procedures
  
  
• No centralized partnership-level imputed underpayment calculation
  
  

2018 Current Year:

• Applies to partnership tax years beginning after December 31, 2017
  
  
• Requires calculation and reporting of:
  
  
  
  • Imputed underpayment (Line 1)
    
    
  • Total amount due, including interest and penalties (Line 2)
    
    
  • Total payment (Line 3)
    
    
  • Balance due (Line 4)
    
    
• Partnerships filing a BBA AAR must attach a separate schedule showing:
  
  
  
  • Grouping
    
    
  • Netting
    
    
  • Rate-multiplication computation
    
    

Change Type: Added

Addition 2—Section 2: BBA AAR Determination Questions

For partnerships with tax years beginning after December 31, 2017, Section 2 (BBA AAR) replaces Section 1 (TEFRA/NonTEFRA) as the operative section. Section 2 requires completion of items A (partnership representative designation/revocation), B (imputed underpayment determination), C (push-out election or modifications election), and D (partnership representative signature attestation); these items did not appear on pre-2018 Forms 1065-X in this configuration.

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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.