Form 1065-B (2015) Tax Year: Electing Large Partnership Filing Checklist
Year-Specific Context for 2015
Form 1065-B serves as a specialized information return for electing large partnerships (ELPs), consolidating most partnership-level items into net income or loss figures while passing limited separately stated items to partners through Schedule K-1. For tax year 2015, the form incorporates Affordable Care Act information reporting requirements under sections 6055 and 6056 for calendar years beginning after December 31, 2014, enhanced qualified small business stock gain exclusion provisions for stock acquired after September 27, 2010, and notification of the upcoming March 15 filing deadline change effective for partnerships with tax years beginning after December 31, 2015.
Form-Specific Attributes and Limitations
An ELP is defined under section 775 of the Internal Revenue Code as a partnership with one hundred or more partners in the preceding partnership tax year, though partnerships with fewer than one hundred partners may elect ELP status by filing Form 8752. Unlike standard Form 1065, the 1065-B computes and reports most partnership items at the partnership level rather than separately stating them to partners. Section 179 expense deductions must be separately stated to partners and claimed on individual returns subject to partner-level limitations. ELPs with C corporation partners and average annual gross receipts exceeding five million dollars must use accrual method accounting except for farming businesses. Partnerships with nonresident alien partners must comply with withholding obligations under sections 1441 through 1446, filing Form 1042 and Form 1042-S as applicable.
Required Schedules and Attachments
Every Form 1065-B must include Schedule K-1 for each partner, prepared in triplicate if filing on paper. Form 8825 is required if the partnership has rental real estate income or loss. Schedule D must be attached for capital gains and losses. Schedule M-1 is required unless the partnership files Schedule M-3 instead. Schedule M-3 must be filed if total assets at year-end equal or exceed ten million dollars or if total receipts equal or exceed thirty-five million dollars. Schedule M-2 showing partners’ capital accounts is mandatory. Form 4562 must be attached if claiming depreciation. Form 8611 is required if reporting low-income housing credit recapture. Partnerships must attach statements for section 754 elections and section 1411 elections regarding net investment income.
Ten-Step Filing Checklist for 2015 Form 1065-B
Step 1: Confirm ELP Status and Accounting Method
Verify the partnership qualifies as an electing large partnership under section 775. A partnership is an ELP if it has one hundred or more partners in the preceding partnership tax year, or if the partnership has fewer than one hundred partners but has made an affirmative election to be treated as an ELP by filing Form 8752. Confirm accounting method selection. If the partnership has any C corporation partner and average annual gross receipts exceed five million dollars in any of the three preceding years, accrual method is required except for farming businesses. Gather all business records, bank statements, loan documents, and capital account records supporting the selected accounting method.
Step 2: Gather Required Source Documents
Collect Forms 1099-MISC, 1099-NEC, 1099-INT, 1099-DIV, 1099-B, and all upstream Schedule K-1s from partnerships or S corporations. Track purchase cost basis and holding periods for qualified small business stock to report gains eligible for section1202 one hundred percent exclusion. Compile partner information including name,
address, TIN, profit sharing percentage, and capital account balances. If unable toobtain partner TIN despite reasonable inquiry, attach statement requesting TIN. Gather fixed asset purchase receipts, depreciation schedules, asset disposal documentation, and section 179 election documentation.
Step 3: Calculate Cost of Goods Sold
Complete Form 1125-A and transfer line 8 amount to Form 1065-B line 2. Include beginning inventory, purchases, and ending inventory. Apply consistent inventory valuation method (FIFO, LIFO, average cost, or other IRS-authorized method). Include all costs required to be capitalized under section 263A uniform capitalization rules including direct materials, direct labor, allocated indirect overhead, depreciation on production assets, and capitalized interest. Identify differences between book COGS and tax COGS for Schedule M-1 or M-3 reconciliation.
Step 4: Report Rental Real Estate Activities
Complete Form 8825 for all rental real estate activities. Enter property type, physical address, fair rental days, and personal use days for each property. Report gross rental income excluding personal use days. List all deductible rental expenses including advertising, auto and travel, cleaning, commissions, insurance, mortgage interest property taxes, repairs, supplies, and utilities. Transfer net income or loss from Form 8825 line 21 to Form 1065-B line 3.
Step 5: Complete Depreciation and Section 179 Deductions
Complete Form 4562 for all depreciable property. List each asset with date placed in service, basis, recovery period, and depreciation method. For property placed in service during 2015, calculate depreciation using MACRS tables with appropriate convention. Report section 179 deductions on Form 4562 line 12 and separately state to partners on
Schedule K-1 box 12. Complete Part V for listed property showing business-use
percentage exceeding fifty percent. Calculate depletion for oil, gas, minerals, and timber
on Form 4562 Part IV. Report depreciation on Form 1065-B line 19 and depletion on line
20.
Step 6: Identify Separately Stated Items
Identify all items requiring separate statement to partners due to special limitations or partner-level treatment. Report charitable contributions in Schedule K-1 box 3, investment interest expense in box 9 using code B, net capital gains and losses using codes C1 and C2, section 1231 gains and losses using code C3, self-employment income using code D, guaranteed payments in box 3, distributions in box 5, depletion deductions with applicable code, qualified small business stock gains eligible for section 1202 one hundred percent exclusion using code M7 for stock acquired after September 27, 2010 and held more than five years, and nondeductible expenses with appropriate codes. Report low-income housing credits from Form 8611 in box 3.
Step 7: Prepare Schedule M-1 or Schedule M-3 Reconciliation
If total assets at year-end are less than ten million dollars and total receipts are less than thirty-five million dollars, complete Schedule M-1 reconciling book income to tax income. Report net income per books, income included on books but not on return, guaranteed payments, and nondeductible expenses including meals and entertainment subject to fifty percent limitation, fines, and penalties. If total assets equal or exceed ten million dollars or total receipts equal or exceed thirty-five million dollars in any of three preceding years, file Schedule M-3 with detailed line-by-line reconciliation of book to tax income, specific deduction differences, timing differences, and financial statement special items.
Step 8: Complete Schedule L and Schedule M-2
Complete Schedule L showing total assets, liabilities, and partners’ capital accounts as of beginning and end of 2015 tax year using the partnership’s accounting method. Report cash balances, receivables, inventory, prepaid expenses, depreciable property at cost less accumulated depreciation, intangible assets, accounts payable, notes payable, and other debt obligations. Complete Schedule M-2 showing each partner’s beginning capital account balance, contributions, share of net income or loss, share of separately stated items, distributions, and ending capital account balance for entry on Schedule K-1.
Step 9: Assemble Schedules in Prescribed Ordee
Assemble Form 1065-B pages 1-5, Schedule B if applicable, Schedule C if Schedule M-3 filed, Schedule D if capital transactions exist, Schedule K, Schedule L, Schedule M-1 or M-3, Schedule M-2, Form 4562 if claiming depreciation, Form 8825 if rental real estate activities exist, Schedule K-1 for each partner in triplicate, Form 8611 if applicable, and statements regarding section 754 or section 1411 elections. Enter zero on lines where no amount applies. Do not attach unsolicited documentation. Ensure Schedule K totals reconcile with combined Schedule K-1 entries.
Step 10: Execute Signing and Filing Procedures
Have one general partner or LLC member manager sign and date the return. If partnership is in receivership or bankruptcy, receiver or trustee must sign with court authorization attached. If paid preparer participates, preparer must sign, date, and provide name, address, phone number, EIN or SSN. Mail completed Form 1065-B with all required schedules to appropriate IRS Service Center based on principal place of business location. If total assets are ten million dollars or more or if Schedule M-3 filed, mail to IRS Service Center in Ogden, Utah. Filing deadline is fifteenth day of third month following tax year close (March 15 for calendar-year partnerships). File Form 7004 for automatic two-month extension; additional four-month extension available with second Form 7004.
Penalty Provisions
Failure to file by due date or filing incomplete return results in penalty of one hundred ninety-five dollars multiplied by number of partners for each month of failure, maximum twelve months, unless reasonable cause shown. Failure to pay tax by due date results in penalty of one-half percent per month of unpaid tax, maximum twenty-five percent. Failure to furnish Schedule K-1 to partner when due or including incorrect information results in penalty of two hundred sixty dollars per Schedule K-1. Intentional disregard increases penalty to five hundred twenty dollars or ten percent of aggregate items
required to be reported, whichever is greater. Maximum aggregate penalty for calendar-year failures is three million, one hundred seventy-eight thousand, five hundred dollars.
Critical 2015 Changes
The 2015 Form 1065-B documents upcoming filing deadline change from April 15 to March 15 (fifteenth day of third month) effective for partnerships with tax year beginning after December 31, 2015. ACA information reporting requirements under sections 6055 and 6056 became effective for calendar years beginning after December 31, 2014, requiring applicable large employers to file Form 1095-C for each full-time employee and Form 1094-C as transmittal. Enhanced qualified small business stock provisions under section 1202 provide one hundred percent gain exclusion for QSBS acquired after September 27, 2010 and held more than five years, reported on Schedule K-1 using box 9 code M7.
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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.
