What Form 1065-X (2021) Is For
Form 1065-X (2021), Amended Return or Administrative Adjustment Request (AAR), is used by partnerships to correct mistakes or make changes to previously filed partnership tax returns. It applies to partnerships that originally filed Form 1065, U.S. Return of Partnership Income, and need to update items such as income, deductions, or partner allocations. This form allows a partnership to amend its return or, under the Bipartisan Budget Act (BBA), file an Administrative Adjustment Request.
The form also applies to partnerships that are part of the BBA regime and must correct partnership-level items through the centralized audit process. For the 2021 tax year, this includes most partnerships that file under the BBA rules. The purpose of the form is to ensure partnership income, deductions, credits, and partner shares are correctly adjusted and reported.
For a detailed breakdown of filing requirements, eligibility rules, and step-by-step instructions, see Form 1065-X: Amended Return or Administrative Adjustment Request (AAR) – A Complete Guide for 2021.
When You’d Use Form 1065-X
A partnership uses Form 1065-X to correct mistakes or report changes on a previously filed Form 1065. It may be needed to fix errors in partnership income, deductions, or a partner’s share of items.
Typical situations include filing an Administrative Adjustment Request under the BBA regime, adjusting Schedule K-1 information, or complying with new IRS guidance. The form must generally be filed within three years of the original due date or filing date, whichever is later.
Key Rules or Details for 2021
For the 2021 tax year, most partnerships were required to follow the Bipartisan Budget Act (BBA) centralized audit rules. These rules make the partnership, rather than individual partners, responsible for corrections and tax adjustments. Only partnerships that elected adequately out of the BBA regime could file a traditional amended return.
Form 1065-X must include complete explanations, supporting schedules, and a computation of the imputed underpayment, even if no tax is due. The partnership representative or designated individual must sign the form. Partnerships must mail it to the same IRS address used for the original Form 1065 and either pay any tax due or elect to push the adjustments to the reviewed year partners using Forms 8985 and 8986.
For complete details on wage reporting, withholdings, and unemployment tax filings, see our guide for Business Income Tax Forms.
Step-by-Step (High Level)
Step 1: Determine the filing type
Determine whether the partnership is subject to the BBA regime and whether the filing will be an amended return or an Administrative Adjustment Request. Most partnerships for the 2021 tax year will submit an AAR.
Step 2: Gather documentation
Collect all records supporting the changes, including income, deductions, credits, and partner allocations. Confirm that the partnership’s income and each partner’s share are correctly reported.
Step 3: Complete the form
In Part I, select whether the return is amended or an AAR. Fill in Parts II through V with the corrections, showing original amounts, net changes, and final corrected figures.
Step 4: Calculate imputed underpayment
If filing under the BBA regime, determine the imputed underpayment by grouping partnership adjustments and applying the appropriate tax rate. The total represents the tax that the partnership owes.
Step 5: Decide payment method
Choose whether to pay the tax at the partnership level or push adjustments to the reviewed year partners. If electing push-out, file Forms 8985 and 8986 and provide each partner’s share of the changes.
Step 6: Notify partners
Non-BBA partnerships must issue amended Schedules K-1. BBA partnerships that push out adjustments must furnish Form 8986 to reviewed year partners on or before the filing date of Form 1065-X.
Step 7: Explain the changes
Use Part V to describe the nature and reason for each correction. Include relevant calculations, references, and supporting documentation.
Step 8: Sign and mail
The partnership representative or authorized individual must sign the form. Attach all supporting documents, including payment if required, and mail the completed form to the same IRS service center as the original return.
Common Mistakes and How to Avoid Them.
- The partnership files Form 1065-X after receiving a Notice of Administrative Proceeding: Confirm whether the BBA procedures prohibit amended returns once an administrative proceeding begins to avoid rejection.
- The partnership forgets to include the imputed underpayment computation: Calculate the imputed underpayment and attach the required adjustment when applicable to prevent delays.
- The wrong individual signs the return: Ensure that only the designated partnership representative signs Form 1065-X.
- Supporting documentation or explanations are missing: Attach all required schedules and provide detailed statements for each change to prevent processing issues.
What Happens After You File
After Form 1065-X is filed, the IRS reviews it for completeness, accuracy, and proper authorization. The agency verifies that the partnership representative signed the form, the correct IRS address was used, and all supporting documentation is included. If any additional tax is owed, the IRS processes the payment and may contact the partnership for clarification or further information.
For partnerships that elect to push adjustments to reviewed year partners, the IRS confirms that Forms 8985 and 8986 were filed correctly. Refunds or balance due notices are issued once the review is complete. Processing times vary but can take several months, depending on the complexity of the changes and IRS workload.
FAQs
What is IRS Form 1065-X (2021) used for?
IRS Form 1065-X (2021) allows partnerships to correct errors or make changes to their previously filed Form 1065, U.S. Return of Partnership Income. It applies to partnerships filing under the Bipartisan Budget Act centralized audit regime.
Who must sign the amended return under the BBA partnership rules?
Only the partnership representative or designated individual may sign the amended return. This person represents the partnership in all dealings with the IRS, including Administrative Adjustment Requests and any potential audit proceedings.
When should a partnership file Form 1065-X?
A partnership should file Form 1065-X within three years of the later of the filing date or the original due date. Filing earlier helps avoid interest or penalties if additional taxes are due.
How is the imputed underpayment calculated?
The imputed underpayment is determined by grouping partnership items, applying the highest applicable tax rate, and calculating the aggregate amount owed at the partnership level. The partnership must pay taxes or elect to push adjustments to the reviewed year partners.
Can a partnership elect to push adjustments to partners?
Yes, under the BBA regime, a partnership may elect to push out adjustments to reviewed year partners using Forms 8985 and 8986. Each partner reports their share on their own tax return for the adjustment year.
What happens if a partnership fails to file its tax return correctly?
If a partnership fails to file Form 1065-X properly, the IRS may assess penalties or interest. Reasonable cause may reduce penalties, but failure to sign, provide explanations, or pay taxes promptly can delay processing or result in rejection.
Does an S corporation file Form 1065-X?
No, S corporations use Form 1120-S to amend their returns. Form 1065-X applies only to partnerships, including calendar year partnerships and those under the Bipartisan Budget Act that must file an Administrative Adjustment Request.
