What Form 1065-X Is For

Form 1065-X is the IRS form partnerships and certain other entities use to correct errors on previously filed returns or to request administrative adjustments. The 2018 tax year was particularly significant because it marked a major transition in partnership audit procedures, moving from the old TEFRA rules to the new Bipartisan Budget Act (BBA) centralized audit regime. Understanding which rules apply to your 2018 return is critical to filing correctly.

Primary Uses

First, it corrects errors on previously filed returns. If you discovered mistakes on your original Form 1065, Form 1065-B, or Form 1066—whether incorrect income amounts, wrong deductions, misallocated items to partners, or mathematical errors—Form 1065-X is the paper filing method to fix these problems. IRS

Second, it files an Administrative Adjustment Request (AAR). This is the mechanism for partnerships subject to centralized audit procedures (either under the old TEFRA rules or the new BBA regime) to proactively request adjustments to partnership items. Unlike a simple amended return, an AAR triggers specific audit procedures and may result in the partnership itself paying additional taxes rather than requiring each partner to amend their individual returns.

The form includes detailed sections for reporting changes to all Schedule K items—ordinary business income, rental income, capital gains, deductions, credits, foreign transactions, and alternative minimum tax items. For 2018, partnerships needed to carefully identify whether they were filing under TEFRA procedures (for tax years beginning before January 1, 2018) or under the new BBA procedures (for tax years beginning after December 31, 2017, or those that elected into BBA early). IRS Form 1065-X Instructions, January 2018

When You’d Use Form 1065-X

General Filing Window

Partnerships can typically file an amended return or AAR within three years after the later of: (1) the date the original return was filed, or (2) the last day for filing the return (excluding extensions). For a calendar-year 2018 partnership that filed on time in March 2019, the deadline to amend would generally be April 15, 2022. IRS Form 1065-X Instructions

Before IRS Action

For TEFRA partnerships and REMICs, you must file before the IRS mails a notice of final partnership administrative adjustment to the Tax Matters Partner. For BBA partnerships, you cannot file an AAR after a Notice of Administrative Proceeding has been issued. Once the IRS has initiated formal audit proceedings, your window for filing an AAR closes. IRS

Common Situations Requiring Amendment

• You received corrected information from underlying entities (corrected K-1s from other partnerships)
• You discovered computational errors in allocating income or losses among partners
• You identified missed deductions or improperly claimed credits
• Partner ownership percentages were reported incorrectly
• You need to correct basis calculations that affect distributions

Important Note on Electronic vs. Paper Filing

For 2018, many partnerships required to e-file their original return must also e-file amendments. If you're required to e-file electronically, you would submit an amended Form 1065 (not Form 1065-X) through approved software. Form 1065-X is specifically for paper filing situations, including non-TEFRA partnerships filing on paper and certain AAR scenarios. IRS Guidance for Amended Partnership Returns

Key Rules or Details for 2018

The TEFRA vs. BBA Divide

For partnerships with tax years beginning before January 1, 2018, the old TEFRA (Tax Equity and Fiscal Responsibility Act) rules applied. For tax years beginning on or after January 1, 2018, the new BBA (Bipartisan Budget Act of 2015) centralized partnership audit regime took effect. The centralized partnership audit regime is generally effective for tax years beginning January 2018. IRS

TEFRA Partnership Determination

Under TEFRA rules, partnerships were subject to centralized audit procedures unless they qualified for the “small partnership exception.” A small partnership had 10 or fewer partners, and all partners were U.S. individuals, resident aliens, C corporations, or estates of deceased partners. For this determination, a husband and wife counted as one partner. Small partnerships that didn't elect into TEFRA could only file amended returns, not AARs. IRS Form 1065-X Instructions

BBA Partnership Rules

Under BBA, most partnerships became subject to the centralized audit regime by default. The key difference: under BBA, the partnership itself (not individual partners) is generally liable for any additional tax resulting from audits or AARs. Partnerships must designate a “Partnership Representative” (replacing the old “Tax Matters Partner”) who has sole authority to act for the partnership. Only the reviewed year partnership representative or designated individual can file and sign an AAR on behalf of the partnership. IRS

Election Into BBA for 2018

Partnerships could elect to apply BBA rules to returns for tax years beginning after November 2, 2015, and before January 1, 2018. This election could be made when filing an AAR by attaching a specific statement to Form 1065-X and writing “Election under Section 1101(g)(4)” across the top. The election required various representations about the partnership's solvency and ability to pay potential tax liabilities. IRS Form 1065-X Instructions

Schedule K-1 Requirements

When filing Form 1065-X as an amended return (not an AAR), partnerships must generally provide corrected Schedule K-1 forms to all affected partners and file them with the IRS. However, if filing an AAR under TEFRA or BBA procedures, amended Schedule K-1s are NOT furnished to partners—the adjustments are handled at the partnership level under the centralized audit procedures. For BBA partnerships filing an AAR, they furnish Form 8986 (not amended Schedule K-1s) to partners. IRS

Push-Out Elections

Under BBA, if an AAR results in an imputed underpayment, the partnership can elect to “push out” the adjustments to the reviewed-year partners rather than paying the tax at the partnership level. This election must be made on the AAR and requires furnishing Form 8986 to each affected partner along with Form 8985 filed with the IRS. IRS

Step-by-Step (High Level)

Step 1: Determine Which Rules Apply

First, identify whether your 2018 return falls under TEFRA or BBA rules based on when your tax year began. Complete Part I of Form 1065-X, answering questions A through G to establish whether you're filing under TEFRA, non-TEFRA, BBA, or non-BBA procedures. This determines which subsequent sections of the form you'll complete. IRS Form 1065-X

Step 2: Identify All Changes

Create a comprehensive list of every item that needs correction. Review your original Schedule K and identify which line items changed. Gather supporting documentation for each adjustment—amended K-1s received from other entities, corrected 1099 forms, recalculated worksheets, or documentation supporting newly discovered deductions.

Step 3: Calculate Net Changes

For each line item on Part II (or Part III for ELPs/REMICs), report three amounts: (a) the amount as originally reported, (b) the net increase or decrease, and (c) the correct amount. The form requires detailed calculations showing how you arrived at each change. Document whether changes increase or decrease income, with decreases shown in parentheses. IRS Form 1065-X Instructions

Step 4: Prepare Part V Explanations

This is critical—the IRS requires detailed explanations for every change. For each adjusted line item, specify the line number, explain why the original amount was incorrect, show your calculations in detail, and explain how the correction affects each partner's Schedule K-1. If you're filing an AAR with an imputed underpayment, include calculations showing how you determined the underpayment amount. A BBA partnership must always include a computation of the imputed underpayment, even when the amount is zero or less than zero. IRS

Step 5: Prepare Amended Schedule K-1s or Form 8986 (If Required)

If you're filing a non-TEFRA amended return, create corrected Schedule K-1s for all affected partners. Mark them clearly as “Amended” and ensure they match the adjustments on your Form 1065-X. Partners will use these to amend their individual or corporate returns. Remember: if filing an AAR under centralized audit procedures, you do NOT furnish amended K-1s to partners. Instead, BBA partnerships furnish Form 8986 to partners when making a push-out election or when adjustments don't result in an imputed underpayment. IRS

Step 6: Complete Signature and Payment Sections

The appropriate person must sign the form—for non-TEFRA partnerships, any partner can sign; for TEFRA partnerships, the Tax Matters Partner must sign; for BBA AARs, the Partnership Representative must sign. If the amendment results in additional tax due, calculate the amount and include payment with your submission. For BBA partnerships, payment must be made at the same time the AAR is filed. IRS Form 1065-X

Step 7: File with Appropriate Service Center

Mail Form 1065-X to the same IRS service center where you filed your original 2018 return. Include all required attachments: supporting schedules, amended K-1s (if applicable), any forms referenced in your explanations (like Form 8980 for BBA modifications), and payment if tax is due. IRS Form 1065-X Instructions

Common Mistakes and How to Avoid Them

Mistake 1: Using Form 1065-X When Electronic Filing Is Required

Many partnerships required to e-file their original return must also e-file amendments. Filing Form 1065-X on paper when you're required to e-file can result in processing delays or rejection. How to avoid: Check whether your partnership met the e-filing threshold. Generally, the criteria used to determine whether the original Form 1065 is required to be filed electronically also apply to amended returns. If required to e-file, submit an amended Form 1065 electronically, not Form 1065-X. IRS Form 1065-X Instructions

Mistake 2: Incorrectly Determining TEFRA vs. BBA Status

The most consequential error for 2018 returns is misidentifying which audit regime applies. A partnership with a tax year beginning December 1, 2017, is still under TEFRA; one beginning January 1, 2018, is under BBA. How to avoid: Look at the first day of your tax year, not the calendar year. Carefully complete the Part I determination questions. If you elected into BBA for a pre-2018 tax year, you must follow BBA procedures. IRS

Mistake 3: Furnishing Amended K-1s When Filing an AAR

Partners get confused about when to issue corrected Schedule K-1s. Under centralized audit procedures (TEFRA and BBA AARs), amended K-1s are NOT sent to partners—adjustments are handled at the partnership level. How to avoid: Understand the difference between an amended return (non-TEFRA partnerships correcting errors) and an AAR (TEFRA/BBA partnerships requesting adjustments under centralized procedures). Only issue amended K-1s for non-TEFRA amended returns. BBA partnerships use Form 8986 instead of amended K-1s. IRS

Mistake 4: Incomplete Part V Explanations

The IRS frequently rejects or delays processing when explanations are vague or incomplete. Simply writing “Error on original return” doesn't provide sufficient detail. How to avoid: For each change, specify: the exact nature of the error, why it occurred, the specific calculation showing the correction, which partners are affected and by how much, and what supporting documentation exists. Show all mathematical computations. IRS Form 1065-X Instructions

Mistake 5: Failing to Account for Partner-Level Impacts

Partnerships sometimes correct partnership-level items without considering how changes flow through to partners who may have already filed their returns. How to avoid: Before filing, communicate with all affected partners. Understand that partners may need to amend their individual returns (for non-TEFRA amendments) or wait for partnership-level resolution (for AARs). Document how each partner's distributive share changes.

Mistake 6: Missing the Filing Deadline

Partnerships often miss the three-year statute of limitations for filing amendments, permanently losing the ability to correct errors or claim refunds. How to avoid: Calendar your amendment deadlines carefully. Remember the three-year window runs from the later of the filing date or due date of the original return. For 2018 returns, if you filed on time in March 2019, your deadline was approximately April 2022. IRS

Mistake 7: Incorrect Signature Authority

Having the wrong person sign Form 1065-X can invalidate the entire filing. How to avoid: Verify who has signing authority. For TEFRA partnerships, only the designated Tax Matters Partner can sign AARs. For BBA partnerships, only the Partnership Representative can sign. For non-TEFRA partnerships, any general partner or LLC member-manager can sign. IRS Form 1065-X Instructions

What Happens After You File

Initial Processing

Once the IRS receives your Form 1065-X, it enters their system for processing. Unlike individual tax returns, partnership returns don't generate immediate acknowledgment letters. Processing times vary significantly—typically several months for straightforward corrections, but potentially longer for complex AARs requiring examination.

For Non-TEFRA Amended Returns

The IRS processes the corrections and makes corresponding adjustments to the partnership's account. If the amendment results in a refund, the IRS will send payment with interest calculated from the original due date. If additional tax is due and you didn't pay when filing, the IRS will send a bill with interest and possibly penalties. Importantly, partners must separately amend their individual returns (Form 1040-X) or corporate returns to reflect the corrected K-1 information.

For TEFRA AARs

Under the old TEFRA procedures, the Tax Matters Partner can request “substituted return treatment,” which allows the IRS to process the AAR as a mathematical or clerical correction and send refunds directly to partners without a formal examination. If substituted return treatment isn't requested or granted, the IRS has three options: (1) allow the adjustments and credit/refund overpayments to partners, (2) conduct an examination of the partnership return, or (3) take no action. If the IRS doesn't act within 6 months, the Tax Matters Partner can petition the Tax Court, Court of Federal Claims, or District Court for judicial review (but must wait until 6 months have passed and petition within 2 years of filing the AAR). The 2-year period may be extended if the IRS and the TMP agree in writing. IRS Form 1065-X Instructions

For BBA AARs

The process differs significantly. If the AAR results in an imputed underpayment, the partnership generally pays the tax at the highest applicable rate unless it elects the “push-out” option. With push-out, the partnership furnishes Form 8986 to reviewed-year partners showing their share of adjustments, and those partners report the adjustments on their returns using Form 8978 (for individuals and C corporations) for the year they receive the statement. If the AAR doesn't result in an imputed underpayment (for example, it only reduces income), partners still receive Form 8986 showing their share of adjustments. The partnership can apply modifications to reduce the imputed underpayment by filing Form 8980 with the AAR. IRS

Interest and Penalties

Interest accrues on any additional tax due from the original return's due date until payment. Interest rates are determined under Section 6621 and adjust quarterly. For underpayments, expect a late payment penalty of 0.5% per month (up to 25% maximum) if you didn't pay with the Form 1065-X. Additional penalties may apply for negligence, substantial understatements, or fraud. IRS Form 1065-X Instructions

Communication and Follow-Up

The IRS may send letters requesting additional documentation or clarification. Respond promptly to avoid processing delays. Keep copies of everything you submitted and track certified mail receipts. If processing exceeds reasonable timeframes without contact, you can call the IRS practitioner priority line or contact the Taxpayer Advocate Service for assistance.

FAQs

Q1: Can I file Form 1065-X electronically?

Generally no—Form 1065-X is designed for paper filing. However, partnerships required to e-file must submit an amended Form 1065 electronically (not Form 1065-X). The same criteria that determined whether your original return required e-filing applies to amendments. For BBA partnerships filing AARs electronically, use Form 8082 with an amended Form 1065. IRS Guidance for Amended Partnership Returns

Q2: Do all partners need to amend their personal returns when we file Form 1065-X?

It depends. If you filed a non-TEFRA amended return, yes—you must furnish corrected Schedule K-1s to affected partners, and they should amend their individual returns (Form 1040-X) or corporate returns to report the corrected information. However, if you filed an AAR under TEFRA or BBA centralized procedures, you do NOT give partners amended K-1s. Under BBA, partners receive Form 8986 and report adjustments using Form 8978 on their reporting year return. IRS

Q3: What's the difference between an amended return and an Administrative Adjustment Request (AAR)?

An amended return (checked box in Part I, Section F) is used by non-TEFRA partnerships to correct errors, and it requires furnishing amended K-1s to partners who then file their own amended returns. An AAR (different checkbox in Part I, Section F) is a formal request by TEFRA or BBA partnerships to adjust partnership items under centralized audit procedures, where the partnership itself may be liable for additional tax. The key distinction: amended returns flow through to partners individually; AARs are resolved at the partnership level. IRS Form 1065-X Instructions

Q4: Our partnership has a short tax year in 2018 due to formation or dissolution. Which rules apply?

If your 2018 short tax year began before January 1, 2018, TEFRA rules generally apply. If it began on or after January 1, 2018, BBA rules apply. However, there's an important exception: if you're filing an AAR for a 2018 short-year return under BBA, you cannot use Form 1065-X if filing electronically—you must use Form 8082 instead. IRS Form 1065-X Instructions

Q5: We're a small partnership with 8 partners, all individuals. Do we need to worry about TEFRA or BBA procedures?

For 2018 tax years beginning before January 1, you likely qualified for the small partnership exception from TEFRA (10 or fewer partners, all U.S. individuals, resident aliens, C corps, or estates). If you didn't elect into TEFRA using Form 8893, you'd file a simple amended return. For 2018 tax years beginning on or after January 1, BBA applies, but you may be eligible to elect out if you have 100 or fewer partners and all are eligible partners. IRS Form 1065-X Instructions

Q6: How long do I have to file Form 1065-X for my 2018 return?

Generally, three years from the later of: (1) when you filed the original return, or (2) the original return's due date (excluding extensions). For a calendar-year 2018 partnership that filed on March 15, 2019, the deadline would be April 15, 2022 (three years from the unextended due date of April 15, 2019). File as soon as you discover errors to avoid running up against the deadline. IRS

Q7: What happens if we file Form 1065-X but the IRS never responds?

For non-TEFRA amended returns, the IRS may simply process your changes without notification if they accept them. For TEFRA AARs, if the IRS takes no action within 6 months, the Tax Matters Partner can file a petition for judicial review (but must file before 2 years from the AAR filing date). For BBA AARs, similar procedures exist. If processing seems stalled, contact the IRS after a reasonable time. Keep detailed records of your filing, including certified mail receipts and tracking numbers. IRS Form 1065-X Instructions

Additional Resources

For More Information: Visit IRS.gov/Form1065X for the current form, instructions, and updates. The 2018 forms and instructions are available in the IRS Prior Year Forms section at IRS.gov.