What Form 1065-X (2023) Is For
Form 1065-X (2023) is the document used by partnerships to correct mistakes on previously filed partnership returns. It replaces or adjusts Form 1065, Form 1065-B, or Form 1066 when income, deductions, or partner allocations were misreported. This form allows partnerships to amend their tax returns or request an Administrative Adjustment Request (AAR) under the Bipartisan Budget Act (BBA) rules.
Most partnerships operating under the BBA regime are required to file an AAR instead of a standard amended return. This ensures that any changes to partnership-related items are processed through the IRS’s centralized partnership audit system. The distinction between an amended return and an AAR determines how corrections are processed, who pays additional tax, and whether partners must file their own amended returns.
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 2023.
When You’d Use Form 1065-X
Partnerships file Form 1065-X when they identify an error or omission on a previously filed return, such as unreported income, overstated deductions, or incorrect partner allocations. Filing this form ensures that all partnership-related items are accurately reflected in the IRS records and among the partnership’s partners.
A partnership generally has three years from the later of the return’s due date or the date it was filed to submit Form 1065-X. Partnerships under the Bipartisan Budget Act cannot file after the IRS issues a Notice of Administrative Proceeding; therefore, filing promptly is critical to maintaining compliance and minimizing interest or penalties.
Key Rules or Details for 2023
Important 2023 Updates
- The 2023 form includes a checkbox that identifies whether adjustments result in an imputed underpayment. This determines if the partnership must pay additional tax or pass the change through to the partners.
- Partnerships are automatically subject to the BBA system unless they properly elect out. To elect out, a partnership must have 100 or fewer eligible partners who are individuals, C corporations, or estates of deceased partners. If the partnership includes an S corporation, another partnership, or a trust, it cannot elect out of S corporation status.
- Partnerships that were required to e-file their original Form 1065 must also e-file their amended or adjusted returns using Form 8082 with an amended Form 1065.
- Only the Partnership Representative (PR) or the appointed Designated Individual can sign and file the Administrative Adjustment Request. Partners without this designation cannot act on behalf of the partnership.
These updates ensure that all partnership filings comply with BBA standards and electronic filing requirements.
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: Identify the Filing Type
Determine whether the partnership is filing under BBA, TEFRA, or non-BBA rules. The filing type determines which sections of Form 1065-X apply and which additional forms are required.
Step 2: Calculate the Imputed Underpayment
If the partnership is subject to the BBA regime, it must determine whether adjustments result in an imputed underpayment. This amount represents the tax that would be owed if the partnership were a single taxpayer. Income increases are taxed at the highest rate, currently 37 percent.
Step 3: Choose the Correction Method
Partnerships may either pay the imputed underpayment directly or elect to push adjustments to the reviewed year partners. When choosing the push-out election, the partnership must file Forms 8985 and 8986 along with the Administrative Adjustment Request.
Step 4: Complete the Form
Complete each required part of Form 1065-X:
- Part I identifies the partnership’s filing category.
- Part II lists each amended or adjusted item.
- Part IV shows the imputed underpayment calculation.
- Part V explains the reason for each change.
Each correction must include the original amount, the corrected amount, and the difference, along with documentation that supports the adjustment.
Step 5: Furnish Partner Forms
If adjustments are passed through, the partnership must provide each partner with a Form 8986 showing the partner’s share of the changes. These forms must be sent to partners on the same date the AAR is filed with the IRS.
Step 6: File and Make Payment
File the completed form with the same IRS service center where the original return was submitted. If there is an imputed underpayment, the payment must accompany the filing and should be identified as “BBA AAR Imputed Underpayment.”
Common Mistakes and How to Avoid Them
- Some partnerships file a paper Form 1065-X when electronic filing is required, and they can avoid rejection by confirming their e-file obligation before submitting.
- Some partnerships allow the wrong person to sign the form, and they can prevent this error by ensuring only the Partnership Representative or Designated Individual signs and submits the amendment.
- Some partnerships omit the imputed underpayment calculation in Part IV, and they can avoid delays by completing the calculation even when the amount is zero.
- Partnerships under the BBA regime sometimes issue amended Schedules K-1 instead of Forms 8986, and they can avoid compliance errors by issuing the correct form for partner-level adjustments.
- Many partnerships miss the three-year amendment deadline, and they can prevent this by tracking the statute of limitations and submitting Form 1065-X before it expires.
What Happens After You File
After submission, the IRS reviews Form 1065-X to verify calculations and supporting schedules. For non-BBA partnerships, the IRS processes adjustments and issues refunds or requests clarification if needed. For BBA partnerships, the IRS confirms whether the imputed underpayment or push-out election was applied correctly.
If the partnership paid the imputed underpayment, the IRS may adjust the amount before finalizing the review. Partners who receive Form 8986 must report their share of adjustments on Form 8978 during the adjustment year. Interest and penalties may apply for late or incorrect filings, and the IRS typically does not issue a formal acceptance letter unless additional information is required.
FAQs
What is IRS Form 1065-X (2023) used for?
IRS Form 1065-X (2023) allows partnerships to correct errors on a previously filed tax return. It serves as both an amended return and an Administrative Adjustment Request under the Bipartisan Budget Act system.
Who can sign and file Form 1065-X?
Only the designated Partnership Representative or authorized Designated Individual may sign and file Form 1065-X. This ensures that all adjustments, payments, and submissions comply with IRS procedures and partnership law for the reviewed tax year.
How does a BBA partnership handle reviewed year partners?
Under the BBA regime, reviewed year partners are responsible for reporting their share of adjustments during the adjustment year. Each partner receives Form 8986, which shows the partner’s share of partnership-related items and any imputed underpayment.
What happens when a partnership files an Administrative Adjustment Request?
When a partnership files an Administrative Adjustment Request, the IRS reviews all submitted forms and supporting schedules. The process determines whether adjustments create additional tax, interest, or refund opportunities for partnerships or reviewed year partners.
Can a partnership elect to push adjustments to partners?
Yes, a partnership may elect to push adjustments to reviewed year partners rather than pay the imputed underpayment directly. This election must be made on Form 1065-X and submitted adequately within the three-year filing deadline.
For more resources on filing or understanding prior-year IRS forms, visit our Form Summaries and Guides Library.
