Form 1065-X (Rev. December 2021) Paper-Filing Checklist
Year Audit: 2021 Applicability
2021 is the inaugural tax year for amended Schedules K-2 and K-3 (Form 1065). The IRS Instructions for Form 1065-X (Rev. Dec. 2021) explicitly require that for tax years beginning on or after January 1, 2021, filers of Form 1065-X may need to include amended Schedules K-2 and K-3 to report international tax items, replacing and supplementing former lines 16 and 20c. The IRS provided penalty relief under Notice 2021-39 for incomplete or incorrect reporting on Schedules K-2 or K-3 for 2021 if the filer establishes a good-faith compliance effort.
Form Audit: 1065-X Applicability
Form 1065-X applies exclusively to paper-filed amended returns and AARs for Form 1065 (U.S. Return of Partnership Income), Form 1065-B (Electing Large Partnerships), and Form 1066 (REMICs). Form 1065-X cannot be used to file a notice of inconsistent treatment under section 6222 or a partner-level AAR under section 6227(d); use Form 8082 instead. Signature authority, attachment requirements, and AAR procedures vary by entity classification (BBA partnership, TEFRA partnership, ELP, REMIC, non-BBA partnership, non-TEFRA partnership). Partnerships subject to the BBA centralized audit regime (tax years beginning after 2017) must follow different AAR procedures than non-BBA partnerships.
10-Step Paper-Filing Checklist For 2021 Form 1065-X
1. Determine Partnership Classification and AAR Eligibility
Determine whether the partnership is subject to TEFRA proceedings (tax years beginning before January 1, 2018), BBA proceedings (tax years beginning after December 31, 2017), an ELP, or a REMIC. If a BBA partnership, confirm it has not received a notice of administrative proceeding with respect to the reviewed tax year; if notice has been mailed, an AAR cannot be filed. Complete Part I, Section 1 (TEFRA/NonTEFRA Determination) for pre-2018 returns or Part I, Section 2 (BBA AAR) for post-2017 returns.
2. Gather Documentation and Prior-Year Return
Obtain a copy of the original Form 1065, Form 1065-B, or Form 1066 filed for the tax year being amended. Collect all supporting documentation: corrected K-1 schedules, amended financial statements, depreciation recalculations, charitable contribution substantiation, rental activity documentation, and foreign transaction records if applicable.
3. Identify All Items Requiring Amendment
For 2021 tax years, separately identify whether amendments involve ordinary business income, rental income, foreign transactions, or international tax items requiring Schedules K-2 or K-3. If foreign-source income, foreign tax credits, FDII deductions, GILTI inclusions, controlled foreign corporation income, or passive foreign investment company transactions are affected, amendments to Schedules K-2 and K-3 are required.
4. Calculate Net Changes and Imputed Underpayment (BBA partnerships only)
For BBA partnerships filing an AAR, group adjustments (reallocation, residual, creditable expenditure, and credit groupings) determine if adjustments result in an imputed underpayment and are calculated using the formula (Total Netted Partnership Adjustments × Highest applicable tax rate) + Net positive creditable expenditure and credit adjustments. If no imputed underpayment results, indicate this in Section 2, item C2.
5. Prepare Part II (Partnerships) or Part III (ELPs/REMICs)
For partnerships filing Form 1065-X as an amended return: complete columns (a) As initially reported, (b) Net change (increase or decrease), and (c) Correct amount for each affected line. List specific line numbers from Form 1065, Schedule K. Enter the box number and code from Schedule K-1 in Part V explanations. For ELPs and REMICs, use Part III with an identical three-column format, referencing the original Schedule K-1 or Schedule Q reporting.
6. Prepare and Attach Amended Schedules K-1 and K-2/K-3 (if applicable)
Prepare amended Schedule K-1 for each partner affected by Form 1065-X amendments; do not provide amended Schedules K-1 if filing as BBA AAR with push-out election or if adjustments do not result in imputed underpayment (use Form 8986 instead). For the 2021 tax year with foreign activity: prepare amended Schedule K-2 (Form 1065), Partners’ Distributive Share Items—International, and amended Schedule K-3 for each partner, unless the entity qualifies for the domestic filing exception. Attach copies to Form 1065-X; include the partnership name and EIN on all attachments.
7. Complete Part V – Explanations
Enter the Part II or Part III line number before each item being changed. Provide a detailed reason for each change; show box number and code used to report the item on Schedule K-1. Show all computations in detail; if filing as BBA AAR, show the calculation of imputed underpayment and any modifications applied. If BBA AAR results in alterations to imputed underpayment, attach Form 8980 (Partnership Request for Modification of Imputed Underpayments Under IRC Section 6225(c)) with supporting documentation.
8. Determine and Execute Signature Authority
Non-BBA and non-TEFRA partnerships: Any partner or LLC member must sign Form 1065-X; the form is not considered a return unless signed.
BBA partnerships: The Partnership Representative (PR) or Designated Individual (DI, if PR is an entity) must sign Form 1065-X.
TEFRA partnerships: The Tax Matters Partner (TMP) must sign Form 1065-X.
ELPs: Partner With Authority (PWA) must sign.
REMICs (post-2017): If subject to BBA, PR, or DI, must sign; otherwise, the residual interest holder or fiduciary must sign.
9. Prepare Payment (if Imputed Underpayment or Tax Due)
For BBA AAR with imputed underpayment, the partnership must pay the imputed underpayment by the return due date of the adjustment year. Form 8980 is filed after the IRS issues a Notice of Proposed Partnership Adjustments (NOPPA) to request modifications to the imputed underpayment amount; Form 8980 does not change the payment due date of the initial AAR. Interest accrues from the return due date to the payment date. For non-BBA partnerships or TEFRA partnerships, calculate tax due using corrected amounts; prepare a check payable to “United States Treasury” with partnership name, EIN, form number (1065), tax year, and reference “Amended Return” or “TEFRA AAR.” Enter payment information in Part IV (Tax and Payments) if applicable.
10. File Signed Form 1065-X with the Service Center and Maintain Records
Sign Form 1065-X and date; include preparer information if applicable (PTIN, firm EIN, signature, date). File Form 1065-X with the IRS Service Center where the original return was filed. Attach all schedules (amended K-1, K-2, K-3, Form 8980 if applicable, and Form 8979 if designating a new PR). Retain copies for partnership records; if amended Schedules K-1 and K-2/K-3 are provided to partners, retain proof of furnishing by the due date required by instructions (generally within the timeline for delivering Schedule K-1).
2021 Line/Schedule Changes For Form 1065-X
Part II, Line 16 – Foreign Transactions / Schedules K-2 and K-3 (Redesigned for 2021)
Prior year instruction (2020): Line 16 combined Partners’ Distributive Share Items for all foreign transaction codes on Schedule K; Line 20c included remaining international and other items.
Current year instruction (2021): Line 16 indicates attachment of new Schedule K-2 (Form 1065), Partners’ Distributive Share Items—International; new Schedule K-3 serves as an extension of Schedule K-1 to report partners’ distributive share of Schedule K-2 items; a separate line 21 (Total foreign taxes paid or accrued) has been added.
Change type: Redesigned mandatory separation of international-related items into new standardized schedules for 2021 forward, with new IRS notice relief for incomplete 2021 filings.
NOTE: The Line 13 Contributions Breakdown (Cash contributions vs. Noncash contributions split) was implemented for the 2023 Form 1065, not the 2021 version. This change does not apply to 2021 Form 1065-X filings.
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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.
