Form 1065 Tax Year 2018 Checklist
2018 Uniqueness
2018 introduces the BBA centralized partnership audit regime; section 199A qualified business income deduction; the section 163(j) business interest limitation requiring Form 8990; TEFRA repeal; carried interest 3-year holding period; and DPAD repeal.
Year-Specific Programs for This Form and Year
Form 1065 for 2018 is the first year subject to the Bipartisan Budget Act's centralized partnership audit regime; partnerships may elect out via Schedule B-2 if they have 100 or fewer eligible partners. Section 199A qualified business income deduction (up to 20%) begins; the partnership must provide each partner with W-2 wages, UBIA of qualified property, and QBI codes Z-AD on Schedule K-1 box 20. Section 163(j) business interest expense limitation applies; partnerships deducting business interest must file Form 8990 unless the exception applies.
Significant 2018 Changes to Form 1065 Structure
Item G (Page 1): Prior instruction included a checkbox for technical terminations. The 2018 instruction removed this checkbox; technical terminations no longer apply after 2017. This represents a removed provision.
Schedule B, Questions 1–22: Prior instruction included TEFRA election questions. The 2018 instructions removed TEFRA questions; Questions 21–26 were added for the section 721© partnership, section 267A hybrid arrangements, section 163(j), centralized audit regime opt-out, and QOF eligibility. This represents an updated provision.
Schedule K, Line 6c: Prior instruction reported ordinary and qualified dividends only. The 2018 instruction added dividend equivalents (section 871(m) income). This represents an added provision with new code 6c for dividend equivalents reported on Form 1040 line 3a.
Schedule K, Box 11 Codes: Prior instruction had Codes F–H reserved or not present. The 2018 instruction added Code F: Section 951A GILTI income; Code G: Section 965(a) inclusion; Code H: Subpart F income other than 951A/965. This represents an added provision.
Schedule K, Box 13 Code K: Prior instruction designated Code K: Deductions—portfolio (2% floor). The 2018 instruction changed Code K to: Excess business interest expense (section 163(j)). This revision represents an updated provision.
Schedule K, Line 20 Codes: Prior instruction indicated that Codes Z–AD were not present. The 2018 instruction added Codes Z–AD for section 199A qualified business income information: Z (QBI income), AA (W-2 wages), AB (UBIA qualified property), AC (qualified REIT dividends), AD (qualified PTP income). This revision represents an added provision.
Schedule K-1, Box 6c: Prior instructions did not have such a box. The 2018 instruction added a new box 6c for dividend equivalents. This amendment represents an added provision.
Schedule K-1, Box 20 Code AE–AF: Prior instruction did not include these codes. The 2018 instruction added Code AE: Excess taxable income (section 163(j) limitation); Code AF: Excess business interest income. This represents an added provision.
Ten-Step Checklist
Step 1: Confirm Partnership Type and Filing Requirement
Confirm partnership type (domestic general/limited, LLC, or other) on Schedule B question 1; if spouse and only co-owner materially participate, they may elect a qualified joint venture under section 1 to avoid filing Form 1065.
Step 2: Establish Filing Deadline and Extension Options
File Form 1065 with all Schedules K-1 (one per partner present any time during the tax year) by the 15th day of 3rd month after the tax year end (March 15 for calendar year 2018) unless Form 7004 extension is filed.
Step 3: Complete Schedule B Questions and Centralized Audit Election
Answer Schedule B questions 1–26; if “Yes” to question 25 (electing out of the centralized partnership audit regime under section 6221(b)), prepare Schedule B-2 listing eligible partners (individuals, C corporations, foreign C-corp-equivalent entities, S corporations, or estates of deceased partners) with a maximum of 100 total partners counted.
Step 4: Report Partnership Income
Report income page 1 lines 1a–8: gross receipts (1a), returns/allowances (1b), cost of goods sold via Form 1125-A (line 2), other income sources (lines 4–7); total income line 8.
Step 5: Report Partnership Deductions
Report deductions on page 1, lines 9–21: salaries/wages, guaranteed payments, rent, taxes, utilities, repairs, depreciation (attach Form 4562 if required), retirement plans, employee benefits, and other deductions; do not deduct meals and entertainment expenses, home office (with exceptions), or certain education costs.
Step 6: Calculate Ordinary Business Income and Tax Items
Calculate ordinary business income on line 22 (line 8 minus line 21); enter Tax and Payment items on lines 23–30 (look-back interest, BBA AAR imputed underpayment, other taxes, total balance due, payment, amount owed, and overpayment).
Step 7: Complete Schedule K for Partners’ Distributive Shares
Complete Schedule K reporting partners’ distributive shares: ordinary business income line 1, net rental income lines 2–3, guaranteed payments line 4, capital gains lines 8–10, section 179 deduction line 12, qualified business income deduction codes Z–AD in box 20, section 965 information code G in box 11, new dividend equivalents code 6c in line 6.
Step 8: Complete Balance Sheet and Reconciliation Schedules
If partnership total receipts exceed 250,000 OR total assets exceed 1 million, complete Schedule L (balance sheet) and Schedule M-1 (reconciliation); if total assets exceed 10 million or M-3 filing otherwise required, complete Schedule M-3 instead of M-1.
Step 9: Attach Required Supporting Forms
If deducting business interest in 2018 and section 163(j) limitation applies (absent real property or farming exception), file Form 8990; if section 965 is applicable, report on Form 965 and Schedule K-1 code G; if depreciation is required, attach Form 4562; if capital gains, attach Schedule D.
Step 10: Sign, Distribute, and File the Return
Obtain signature of one partner or LLC member on Form 1065 page 3 signature block (not preparer); if paid preparer completes return, preparer must sign, enter PTIN, and complete paid preparer section; furnish copy of Form 1065 and Schedule K-1 to each partner on or before the due date (including extensions); file at the mailing address corresponding to the principal place of business state.
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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.
