Instructions for Form 1065-X

Instructions for Form 1065-X

(Rev. October 2025)

Amended Return or Administrative Adjustment Request (AAR)

Section references are to the Internal Revenue Code

unless otherwise noted.

General Instructions

Future Developments

Purpose of Form

For the latest information about developments related to

Form 1065-X and its instructions, such as legislation

enacted after they were published, go to IRS.gov/

Form1065X.

For information on partnerships filing Form 1065-X under

the Bipartisan Budget Act (BBA) of 2015, go to IRS.gov/

BBAAAR.

What’s New

Which revision of Form 1065-X to use. For tax years

beginning after 2024, use the October 2025 revision of

Form 1065-X. For tax years beginning after 2022 and

before 2025, use the August 2023 revision of Form

1065-X, available at IRS.gov/pub/irs-prior/

f1065x--2023.pdf. For tax years beginning after 2020 and

before 2023, use the December 2021 revision of Form

1065-X, available at IRS.gov/pub/irs-prior/

f1065x--2021.pdf. For tax years beginning before 2020,

use the September 2018 revision of Form 1065-X,

available at IRS.gov/pub/irs-prior/f1065x--2018.pdf.

Tax Equity and Fiscal Responsibility Act (TEFRA) of

1982 and electing large partnerships (ELPs).

References to TEFRA and ELPs were removed because

they are no longer applicable. Section 1—TEFRA/

NonTEFRA Determination was removed, and subsequent

sections were renumbered.

Domestic research or experimental expenditures.

P.L. 119-21, commonly known as the One Big Beautiful

Bill Act, added section 174A, domestic research or

experimental expenditures. This new section allows

certain taxpayers to deduct current-year domestic

research and experimental (R&E) expenses. The new

section also allows taxpayers to elect to charge the

expenditures to a capital account and amortize over a

period of not less than 60 months. For additional

information regarding elections for previously capitalized

domestic R&E expenditures paid or incurred after 2021

and before 2025, see Rev. Proc. 2025-28.

Reminder

Unless otherwise noted, references to sections 6221

through 6241 are to Internal Revenue Code (the Code)

sections, as amended by the BBA.

Nov 25, 2025

Use Form 1065-X, if you aren’t filing electronically, to

complete one of the following.

• Correct items on a previously filed Form 1065, U.S.

Partnership Return of Income; or Form 1066, U.S. Real

Estate Mortgage Investment Conduit (REMIC) Income Tax

Return.

Note: Throughout these instructions, references to

partnership and partners also apply to REMICs and

residual interest holders unless specific instructions are

provided for REMICs and residual interest holders.

• Make an AAR for a previously filed Form 1065 or Form

1066.

• File a partnership-partner modification amended return

related to modification of an audited BBA partnership’s

imputed underpayment (IU).

Form 1065-X can’t be used to file a notice of

inconsistent treatment under section 6222. Continue to

use Form 8082, Notice of Inconsistent Treatment or

Administrative Adjustment Request (AAR), to make such

changes.

Bipartisan Budget Act (BBA). All partnerships with tax

years beginning after 2017 are subject to the centralized

partnership audit regime unless eligible partnerships elect

out by making a valid election under section 6221(b). For

purposes of these instructions (unless otherwise noted),

the centralized partnership audit regime proceedings

under sections 6221 through 6241 will be referred to as

“BBA proceedings.”

If you’re a non-BBA partnership (defined under

Definitions, later) filing an amended return electronically,

use Form 1065 and see the related instructions. If you

aren’t filing electronically, use Form 1065-X.

If you’re a BBA partnership filing an AAR, Form 1065-X

should only be used to make a paper filing. For electronic

filing, use Form 8082 in conjunction with Form 1065.

Generally, the criteria used to determine whether the

original Form 1065 is required to be filed electronically are

also used to determine if the amended return or AAR must

be filed electronically.

For information regarding when Form 1065 is required

to be filed electronically, and how to electronically file an

amended return or AAR for a partnership, see the

Instructions for Form 1065.

Caution: Form 1065-X isn’t used to elect out of BBA. An

election out can only be made on a timely filed original

return. See the Instructions for Form 1065 for electing out

of BBA.

Instructions for Form 1065-X (Rev. 10-2025) Catalog Number 57876S

Department of the Treasury Internal Revenue Service www.irs.gov

Who Must File

Amended return. Partnerships and real estate mortgage

investment conduits (REMICs) that become aware of

incorrect items of income, deductions, etc., use Form

1065-X to correct their previously filed paper partnership

or REMIC return. See Specific Instructions, later, for

information on completing Form 1065-X as an amended

return.

Note: To make adjustments to partnership-related items,

partnerships under BBA must file an AAR instead of an

amended return unless there is specific guidance allowing

for the filing of an amended return. For information on BBA

partnerships filing Form 1065-X, go to IRS.gov/BBAAAR.

AAR under BBA. File Form 1065-X if you’re the

partnership representative (PR) or the designated

individual (DI) (if the PR is an entity) requesting an

administrative adjustment to correct a previously filed

partnership return on behalf of the BBA partnership. See

Partnership representative (PR), later, for the definition of

a PR. Go to IRS.gov/BBAAAR for additional information.

AAR-REMICs. For tax years beginning after 2017,

REMICs that had more than one residual interest holder at

any time during the tax year and didn’t elect out of the

centralized partnership audit regime use Form 1065-X to

file an AAR. See Specific Instructions, later, for information

on completing Form 1065-X as an AAR.

Tip: When a partnership’s or REMIC’s federal return is

changed for any reason, it may affect its state return. For

more information, contact the state tax agency with which

the state return is filed.

When To File

Generally, a pass-through entity may file an amended

return or AAR to change items on its return:

• Within 3 years after the later of the date on which the

partnership return for that year is filed, or the last day for

filing the partnership return for that year (excluding

extensions); and

• In the case of a BBA partnership, before a notice of an

administrative proceeding with respect to the tax year is

mailed under section 6231; or

• In the case of a partnership that is a partner in a BBA

partnership which is filing an amended return for purposes

of BBA partnership modification under section 6225(c)(2),

in the time period specified under section 6225(c).

What To Attach

If the corrected amount involves an item that must be

supported with a schedule, statement, or form, attach the

appropriate schedule, statement, or form to Form 1065-X.

Include the entity’s name and employer identification

number (EIN) on any attachments. See the instructions for

Form 1065 or 1066 (as applicable) for a list of forms that

may be required.

If the attachments needed to support the corrected

amount include copies of forms or schedules from

previously filed tax returns, write at the top of each

previously filed form or schedule, “Copy Only—Do Not

Process.”

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If a BBA partnership doesn’t make the election under

section 6227(b)(2) to have the adjustments taken into

account by the reviewed year partners but would like to

modify per section 6227(b)(1), it must attach Form 8980,

Partnership Request for Modification of Imputed

Underpayments Under IRC Section 6225(c), to support

any modifications made to the imputed underpayment

(IU), as described in sections 6225(b) and (c), and as

applied to a BBA AAR under section 6227(b)(1). See

Modifications to an Imputed Underpayment Included in an

Administrative Adjustment Request in Pub. 5346,

Instructions for Form 8980.

In addition, if a REMIC requests that the IRS

electronically deposit a refund of $1 million or more, attach

Form 8302, Electronic Deposit of Tax Refund of $1 Million

or More.

Who Must Sign

Non-BBA partnerships. Any partner or limited liability

company (LLC) member must sign the return. Form

1065-X isn’t considered to be a return unless it is signed.

When a return is made for a partnership by a receiver,

trustee, or assignee, the fiduciary must sign the return

instead of the partner or LLC member. Returns and forms

signed by a receiver or trustee in bankruptcy on behalf of

a partnership must be accompanied by a copy of the order

or instructions of the court authorizing the signing of the

return or form.

BBA partnerships. When filing an AAR, Form 1065-X

must be signed by the PR (or the DI if the PR is an entity)

for the reviewed year.

REMICs with a startup day after November 9, 1988.

For these REMICs, Form 1065-X may be signed by any

person who could sign the return of the entity in the

absence of the REMIC election. Thus, the return of a

REMIC that is a corporation or trust would be signed by a

corporate officer or a trustee, respectively. For REMICs

with only segregated pools of assets, the return would be

signed by any person who could sign the return of the

entity owning the assets of the REMIC under applicable

state law.

Note: If the REMIC is subject to BBA for the tax year and

is using Form 1065-X to file an AAR, the PR or DI, as

applicable, must sign Form 1065-X.

REMICs with a startup day before November 10,

1988. These REMICs may elect to apply the rules for

REMICs with a startup day after November 9, 1988 (as

described in Regulations section 1.860F-4(c)(2)(iii)).

Otherwise, Form 1066 must be signed by a residual

interest holder or, as provided in section 6903, by a

fiduciary, as defined in section 7701(a)(6), who is acting

for the REMIC and who has furnished adequate notice, as

described in Regulations section 301.6903-1(b).

In the prior paragraph, the term “startup day” means

any day selected by a REMIC that is on or before the first

day on which interests in such REMIC are issued.

Otherwise, the startup day is the day on which the REMIC

issued all of its regular and residual interests. However, a

sponsor may contribute property to a REMIC in exchange

for regular and residual interests over any period of 10

Instructions for Form 1065-X (Rev. 10-2025)

consecutive days and the REMIC may designate any 1 of

those 10 days as the startup day. The day so designated

is then the startup day, and all interests are treated as

issued on that day.

Note: If the REMIC is subject to BBA for the tax year and

is using Form 1065-X to file an AAR, the PR or DI, as

applicable, must sign Form 1065-X.

Where To File

Form 1065-X must be filed with the service center where

the original return was filed.

Definitions

AAR partnership. An AAR partnership is a BBA

partnership that has filed, or is filing, an AAR under

section 6227.

Adjustment year. For BBA partnerships, the adjustment

year is the partnership tax year in which:

• An adjustment pursuant to the decision of a court in a

proceeding brought under section 6234, such decision

becomes final;

• An AAR is filed under section 6227; or

• A notice of final partnership adjustment is mailed under

section 6231 or, if the partnership waives the limitations

on assessments under section 6232(b), the waiver is

executed by the IRS.

Audited partnership. For purposes of these instructions,

an audited partnership is a BBA partnership that made an

election under 6226 and issued Forms 8986 to its

partners. The partners of an audited BBA partnership are

bound by the adjustments and cannot file a Form 8082 to

treat the adjustments inconsistent with the results of the

audit.

BBA partnership. A partnership subject to the

centralized partnership audit regime is referred to as a

“BBA partnership.” All partnerships with tax years

beginning after 2017 are BBA partnerships unless, under

section 6221, they make a valid election out of the

centralized partnership audit regime. A partner in a BBA

partnership is referred to as a “BBA partner.” REMICs

subject to the centralized partnership audit regime are

also considered BBA partnerships for purposes of these

instructions. An AAR filed by a BBA partnership is referred

to as a “BBA AAR” and, if one is filed, it must be filed by

the PR or the DI if the PR is an entity. Go to IRS.gov/

BBAAAR for additional information.

Designated individual (DI). Where the PR is an entity,

the DI is the sole individual appointed by the partnership

at the time of the designation of the PR through whom the

entity PR acts.

Form 8985, Pass-Through Statement—Transmittal/

Partnership Adjustment Tracking Report. Form 8985

is used by a BBA partnership to summarize and transmit

Forms 8986 (by an audited partnership, a partnership

filing an AAR, or a pass-through partner) in situations

where the partners are taking into account the

adjustments. Form 8985 is also used to report payments

made and related calculations by a pass-through partner

of a BBA partnership, if applicable. See the instructions for

these forms for further information.

Instructions for Form 1065-X (Rev. 10-2025)

Form 8986, Partner’s Share of Adjustment(s) to Partnership-Related Item(s). Form 8986 was created for

BBA partnerships and pass-through partners of BBA

partnerships to show each partner’s share of adjustments

to a PRI as a result of a BBA audit or BBA AAR for

situations where the partners are taking into account the

adjustments.

Imputed underpayment (IU). An IU is the amount a

partnership is potentially liable for as a result of an

adjustment to a partnership-related item (PRI). Whether

an adjustment results in an IU is determined in

accordance with the rules under Regulations section

301.6225-1, with that amount subject to possible

modification under Regulations section 301.6227-2.

Non-BBA partnership. Under BBA, certain partnerships

with 100 or fewer eligible partners for the tax year can

elect out of the centralized partnership audit regime. For

additional information, see the Instructions for Form 1065.

A partnership that elects out of the centralized partnership

audit regime is referred to as a “non-BBA partnership.”

Partnership-related item (PRI). For BBA partnerships,

under section 6241(2)(B), a PRI is any item or amount

with respect to the partnership that is relevant in

determining the income tax liability of any person without

regard to whether the item or amount appears on the

partnership’s return. An item or amount is with respect to

the partnership if it is shown or reflected, or required to be

shown or reflected, on the partnership return or the forms

and instructions prescribed by the IRS for the

partnership’s tax year or is required under the Internal

Revenue laws and related regulations to be maintained in

the partnership’s books or records. This includes an IU

and an item or amount relating to any transaction with,

basis in, or liability of the partnership.

Partnership representative (PR). Under section 6223,

BBA partnerships must designate a partner or other

person with a substantial presence in the United States as

the PR who shall have the sole authority to act on behalf

of the partnership. If the designated PR is an entity, the

partnership must also appoint a DI to act on behalf of the

entity PR. The appointed DI must be an individual and

may not be an entity. The partnership and all partners are

bound by the actions of the PR in dealings with the IRS

under BBA. Go to IRS.gov/BBAAAR for additional

information. A REMIC that’s a BBA partnership (hasn’t

elected out of BBA) would need to designate a PR.

Pass-through entity. A partnership, S corporation,

estate, trust, or REMIC.

Reporting year. Reporting year is applicable to partners

of BBA partnerships. It’s the partner’s tax year(s) that

includes the date the AAR partnership furnished Forms

8986 to its partners.

Reviewed year. For BBA partnerships, the reviewed year

is the partnership’s tax year to which a partnership

adjustment relates. For example, if the BBA AAR is filed to

make an adjustment to income for the 2023 tax year, 2023

is the reviewed year.

Reviewed year pass-through partner. For purposes of

these instructions, under BBA, a reviewed year

pass-through partner is a pass-through entity that held an

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interest in a BBA partnership at any time during the

reviewed year, which is the partnership tax year to which

the partnership adjustment relates.

Schedule K-1. Schedule K-1 is an annual schedule

reporting the partner’s, shareholder’s, or beneficiary’s

share of income, deductions, credits, etc., from a

partnership, S corporation, estate, or domestic trust.

Schedule K-2. Schedule K-2 is an extension of Form

1065, Schedule K, used to report items of international tax

relevance from the operation of a partnership.

Schedule K-3. Schedule K-3 is an extension of

Schedule K-1 (Form 1065) generally used to report to

partners their shares of the items reported on

Schedule K-2.

Schedule Q. Schedule Q is a quarterly schedule

reporting the residual interest holder’s share of taxable

income or net loss from the REMIC.

Paid Preparer’s Information

If a partner or an employee of the partnership or REMIC

completes Form 1065-X, the Paid Preparer Use Only

section should remain blank. In addition, anyone who

prepares Form 1065-X but doesn’t charge the partnership

or REMIC shouldn’t complete this section.

Generally, anyone who is paid to prepare Form 1065-X

must do the following.

• Sign the return in the space provided for the preparer’s

signature.

• Fill in the other blanks in the Paid Preparer Use Only

area of the return. A paid preparer can’t use a social

security number in the Paid Preparer Use Only section.

The paid preparer must use a preparer tax identification

number (PTIN).

• Give the partnership or REMIC a copy of the return in

addition to the copy to be filed with the IRS.

Tip: A paid preparer may sign original or amended

returns by rubber stamp, mechanical device, or computer

software program.

Interest and Penalties

Interest. Generally, interest is charged on taxes not paid

by the due date of the reviewed year return, even if an

extension of time to file is granted. Interest is also charged

on penalties, such as the penalties imposed for

negligence, fraud, substantial valuation misstatements,

substantial understatements of tax, and reportable

transaction understatements. The interest is charged from

the due date (including extensions) to the date of

payment. The interest charge is figured at a rate

determined under section 6621.

Late payment penalty. The penalty for not paying the

tax when due is usually 1/2 of 1% of the unpaid tax for

each month or part of a month that the tax remains

unpaid. The penalty can’t exceed 25% of the unpaid tax.

Other penalties. Penalties can also be imposed for

negligence, disregard of rules or regulations, substantial

understatements of tax, reportable transaction

understatements, and fraud. See sections 6662, 6662A,

and 6663.

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Interest and penalties applicable to the IU. Except

when the partnership elects to have its partners take into

account the adjustments, BBA partnership interest and

penalties are the following.

• The interest figured for an IU is the interest that would

be determined under chapter 67 for the period beginning

on the day after the return due date for the reviewed year

and ending on the return due date for the adjustment year,

as defined under section 6225(d)(2) or, if earlier, the date

the IU is paid.

• Any penalty, addition to tax, or additional amount shall

be determined at the partnership level and is applied as if

that BBA partnership had been an individual subject to tax

under chapter 1 for the reviewed year and the IU were an

actual underpayment (or understatement) for that year for

purposes of part II of subchapter A of chapter 68.

Election to apply the alternative to payment of the IU.

If the partners must take into account the adjustments

because the BBA partnership filed an AAR and there are

adjustments that don’t result in an IU, or if a BBA

partnership elects the alternative to payment of the IU

under sections 6227(b)(2) and 6226(c), interest shall be

determined:

• At the partner level;

• From the due date of the return for the tax year to which

the increase is attributable (determined by taking into

account any increases attributable to a change in tax

attributes for a tax year under section 6226(b)(2)), until the

date of payment; and

• At the section 6621(a)(2) underpayment rate.

Making a Payment

The IRS recommends paying electronically whenever

possible. Options to pay electronically include the

payment options listed below. Go to IRS.gov/Payments to

see all your payment options.

• IRS Direct Pay.

• Debit card, credit card, or digital wallet.

• Electronic Federal Tax Payment System (EFTPS).

• Same-day wire.

If you qualify for one of the following exceptions, you

may still be permitted to pay using check, money order, or

cash.

• Those who don’t have access to U.S. banking services

or electronic payment systems.

• Certain emergency payments where electronic

disbursement would cause undue hardship, as

contemplated in 31 CFR Part 208.

• National security- or law enforcement-related activities

where non-EFT transactions are necessary or desirable.

• Other circumstances as determined by the Secretary of

the Treasury, as reflected in regulations or other guidance.

Paying by check. Make checks payable to “United

States Treasury” and include the name of the partnership

or REMIC, taxpayer identification number (TIN), and year.

Specific Instructions

If, after reading the instructions, you’re unable to complete

an item in Part I or Part II, enter “See Part V” in the entry

space for that item and provide the information there.

Instructions for Form 1065-X (Rev. 10-2025)

Name and Identifying Number

Enter the legal name of the entity and identifying number

on the appropriate lines. Include the suite, room, or other

unit number after the street address. If the post office

doesn’t deliver mail to the street address and the entity

has a P.O. box, show the box number instead.

If the entity receives its mail in care of a third party

(such as an accountant or attorney), enter on the street

address line “C/O” followed by the third party’s name and

street address or P.O. box.

If the entity’s address is outside the United States or its

territories, enter the information on the lines for “City or

town,” “State,” and “ZIP code” in the following order: city,

province or state, and foreign country. Follow the foreign

country’s practice in placing the postal code in the

address. Don’t abbreviate the country name.

Part I. Check the Appropriate Box

An AAR can be filed by a partnership subject to BBA

proceedings (BBA AAR) or a REMIC subject to BBA

proceedings.

If you’re a BBA partnership that has received a notice of

administrative proceeding, you may not file an AAR. Also,

a partner may not file an AAR on behalf of the BBA

partnership in which it is a partner unless doing so in its

capacity as the PR for that partnership.

For Partnership Tax Years Beginning After 2017

BBA AAR. All partnerships with tax years beginning after

2017 are subject to the centralized partnership audit

regime unless an eligible partnership makes a valid

election under section 6221(b) to elect out of the

centralized partnership audit regime. Partnerships that are

subject to the centralized partnership audit procedures of

sections 6221 through 6241 are referred to as “BBA

partnerships.” An AAR filed by a BBA partnership is a BBA

AAR.

Note: REMICs with two or more residual interest holders

and that didn’t make a valid election under section

6221(b) are also defined as “BBA partnerships.”

Non-BBA. A partnership with a tax year beginning after

2017 that isn’t subject to BBA proceedings because it has

made a valid election under section 6221(b) is referred to

as a “non-BBA partnership.”

Note: REMICs with one residual interest holder or that

made a valid election under section 6221(b) are also

defined as “non-BBA partnerships.”

Partnership-Partner Modification Amended Return

Related to Modification of Audited BBA

Partnership’s IU

A partner that is itself a partnership (partnership-partner)

that is filing an amended return as part of modification of

the IU under section 6225(c)(2) should check this box.

Section 1—BBA AAR

For additional information on filing BBA AARs, go to

IRS.gov/BBAAAR.

Instructions for Form 1065-X (Rev. 10-2025)

Item A

If “Yes” is checked, complete Form 8979 and attach it to

the AAR. See the Instructions for Form 8979, Partnership

Representative Designation or Resignation, for more

information.

Note: If you’re a BBA partnership, you may not file an

AAR solely for the purpose of changing the PR.

Item B

BBA partnerships filing an AAR will need to determine if

the partnership adjustments result in an IU. See Figuring

the Imputed Underpayment (IU), later, for information as to

how to figure the IU. The BBA partnership should consider

all available guidance issued by the IRS in making a

determination of whether or not the AAR results in an IU.

Also, see Part IV, later, for discussion of the IU.

Item C1

If the adjustments contained in the BBA AAR result in an

IU, the partnership must pay the IU at the same time the

AAR is filed. However, under section 6227(b)(2), the

partnership can elect to have its reviewed year partners

take the adjustments into account. This is an election to

push out the adjustments to the partners as an alternative

to payment of the IU. See section 6226(a)(2) for details. If

this valid election is made, the partnership is no longer

liable for the IU.

Caution: If the partnership’s election under section

6227(b)(2) to push out the adjustments to the partners is

determined to be invalid, the partnership will still remain

liable for the IU.

Item C2

The partnership will need to furnish a Form 8986 to each

reviewed year partner reflecting the partner’s share of

adjustments for when the adjustments don’t result in an IU

(for example, the adjustments in the BBA AAR result in an

IU of zero or less than zero; or there is a net negative

adjustment). The partnership is also required to file with

the AAR all Forms 8986 furnished to partners and Form

8985. See the instructions for these forms for further

information.

Note: The BBA partnership doesn’t furnish Schedules

K-1 to its partners when filing a BBA AAR. Instead, it will

provide Forms 8986.

Note: A partnership that makes an election under section

6227(b)(2) to push out adjustments to its partners must

nevertheless pay any taxes, penalties, additions to tax,

additional amounts, or the amount of any adjustments to

any IU previously reported by the partnership (for

example, when correcting an IU previously reported on an

AAR) for which the partnership is liable under chapter 1 of

the Code or the BBA (subchapter C of chapter 63) at the

time the partnership furnishes statements to its partners.

Any adjustments to such items aren’t included in the

statements the partnership furnishes to its partners and

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files with the IRS. These items aren’t allocable to partners;

rather, they are entity-level liabilities of the partnership and

shouldn’t be pushed out to partners but paid by the

partnership.

Item D

Each reviewed year partner is required to take into

account its share of adjustments requested in a BBA AAR

if the partnership adjustments result in a positive IU and

the partnership makes the alternative to payment election

discussed under Item C1, earlier. Additionally, each

reviewed year partner is required to take into account its

share of any adjustments requested in a BBA AAR

resulting in an IU of zero or less than zero, or that don’t

result in an IU. The determination of whether or not an

adjustment results in an IU amount is discussed under

Item B, earlier.

The partnership is required to furnish each reviewed

year partner with a Form 8986 reporting its share of the

BBA AAR adjustments. See Forms 8985 and 8986, later,

for more information. The PR must attest to the

partnership’s compliance with this requirement. The PR

will sign Form 1065-X under item D to declare, under

penalties of perjury, that all statements have been

provided to the reviewed year partners, as required by

these instructions.

Item E

Under section 6227(b)(1), the partnership may modify the

IU resulting from adjustments reported in a BBA AAR in

accordance with the provisions under section 6225(c),

disregarding the provisions under paragraphs (2), (7), and

(9). Any modification made to the IU under section

6227(b)(1) must be disclosed and fully explained on Form

8980 and included with the AAR.

Note: If the partnership makes a valid election to push out

the adjustments to the partners as an alternative to

payment of the IU, any modifications applied to the IU are

disregarded.

Caution: However, if the partnership’s election to push

out the adjustments rather than pay an IU is determined to

be invalid, the partnership will still be liable for the IU. In

such a case where the partnership filed Form 8980 to

request permitted modifications be applied to the IU

calculation, those modifications will be considered in

determining the IU.

Section 2—Partnership-Partner Modification

Amended Return Filed as Part of Modification of

an IU for an Audited BBA Partnership

Section 6225(c)(2) allows a BBA partnership under

examination to request specific types of modifications of

an IU proposed by the IRS. One type of modification

applies when a partner or indirect partner, including a

partnership-partner, files an amended return for the tax

year of the partner which includes the end of the reviewed

year of the BBA partnership under examination. See Form

8980, Item E, Part I; and Pub. 5346.

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A BBA partnership under examination will be assigned

a unique audit control number. A partnership-partner

using Form 1065-X to file an amended return as part of a

modification under section 6225(c)(2) must include in

Section 2 of Form 1065-X the name, EIN, reviewed year,

and audit control number of the BBA partnership under

examination to which the amended return relates. In

addition, the partnership-partner shouldn’t furnish

amended Schedules K-1 or K-3, or Forms 8986, to its

partners, but instead must pay an amount computed like

an IU on the adjustments allocable to it, plus any penalties

and interest. See Part IV, later, for payment instructions.

Part II—Amended or Administrative

Adjustment Request (AAR) Items for

Partnerships Filing Form 1065 Only

(REMICs Use Part III)

For information on income, deductions, credits, etc., see

the instructions for Form 1065, Schedules K, K-1, K-2,

and K-3 for the tax year being amended or otherwise

adjusted. See the Instructions for Form 1065 for a list of

forms that may be required.

Note: In Part II of Form 1065-X, “see instructions” refers

to the instructions for Form 1065 and Schedule K-1, not

the Instructions for Form 1065-X.

BBA partnerships filing AARs. A BBA partnership filing

an AAR to change items that were reported on its original

return must do the following.

1. Determine the required changes to be made.

2. Complete Form 1065-X to identify the changes

being made.

a. On Form 1065-X, check the “BBA AAR” box under

Part I.

b. See instructions later in this Part II for how to

complete columns (a) through (c).

3. Figure an IU and determine if there are any

adjustments that don’t result in an IU. If there are

adjustments that don’t result in an IU, complete Forms

8985 and 8986.

4. Determine if it will pay the IU or push out the

adjustments to the partners.

a. If any modifications are applied to the IU, include a

completed Form 8980 with the filing of the AAR.

Complete Forms 8985 and 8986 pertaining to the

adjustments that don’t result in an IU (if applicable).

Note: Schedules K-1 shouldn’t be included with the

AAR. Any information required to be reported is done

so on Form 8986 and not Schedule K-1.

b. If pushing out the adjustments to the reviewed year

partners, complete Forms 8985 and 8986.

Note: Schedules K-1 shouldn’t be included with the

AAR. Any information required to be reported is done

so on Form 8986 and not Schedule K-1.

Caution: If the partnership pushes out the adjustments,

but the election is determined to be invalid, the

partnership remains liable for the IU and such IU

Instructions for Form 1065-X (Rev. 10-2025)

potentially may be assessed. In such a case where the

partnership filed Form 8980 to request permitted

modifications be applied to the IU calculation, those

modifications will be considered in determining the IU.

5. File Form 1065-X and attach any other supporting

documents required, including copies of Forms 8985 and

8986 (if applicable).

6. If applicable, distribute the Forms 8986 to reviewed

year partners according to the Form 8986 instructions.

Amended Schedules K-1—Non-BBA

Partnerships Only

Column (a). Enter the amounts from Form 1065,

Schedule K, as originally filed or as previously adjusted. If

the return was changed or audited by the IRS (non-BBA

partnership only), enter the amounts as adjusted.

Non-BBA partnership filing an amended return.

Attach the amended Schedule K-2 with the “Amended

K-2” box checked on line D or (for years prior to 2025) with

“As Amended” written at the top of the Schedule K-2.

Attach the amended Schedules K-3 with the amended box

checked on each. The partnership must furnish the

amended Schedules K-3 to its partners.

Column (b). Enter the net increase or decrease for each

line being changed. Enter as a positive the amount by

which column (c) exceeds column (a) or enter as a

negative the amount by which column (a) exceeds column

(c). Use parentheses around all amounts that are

negative. Positive amounts are increases and negative

amounts are decreases. Explain the increase or decrease

in Part V.

Column (c). Enter the correct amount. This will be the

sum of column (a) and column (b).

Forms 8985 and 8986

BBA partnerships filing an AAR must furnish a Form 8986

to each reviewed year partner if:

• It makes an election under section 6227(b) to have the

adjustments taken into account by the reviewed year

partners,

• The adjustments result in an IU of zero or less than

zero, or

• The adjustments don’t result in an IU.

Caution: Use Form 8986 to notify partners of their

allocable shares of adjustments, don’t use an amended

Schedule K-1.

Form 8986 reflects a partner’s share of an adjustment

to a PRI. Form 8985 summarizes the information reported

on the Forms 8986. Forms 8985 and 8986 are required to

be filed with the AAR. For partnerships making an election

under section 6227(b)(2), adjustments shown in column

(b) of Form 1065-X, Part II, should tie to the adjustments

reported in column (g) of Form 8985, Part IV. See the

instructions for these forms for further information.

Note: A partnership that makes an election under section

6227(b)(2) to have the reviewed year partners take into

account adjustments resulting in an IU doesn’t push out

any taxes, penalties, additions to tax, additional amounts,

or the amount of any adjustments to any IU previously

reported by the partnership for which the partnership is

liable under chapter 1 of the Code or the BBA (subchapter

C of chapter 63). Instead, the partnership must pay any of

these amounts for which the partnership is liable at the

time the partnership furnishes statements to its partners.

Instructions for Form 1065-X (Rev. 10-2025)

Non-BBA partnerships must file amended Schedules K-1

with Form 1065-X and furnish copies of the amended

Schedules K-1 to the partners.

Amended or Corrected Schedules K-2 and K-3

for Tax Years Beginning on or After January 1,

2021

BBA partnerships filing AARs. When a BBA

partnership files an AAR and needs to make its partners

aware of their allocable share of adjustments, it shouldn’t

file an amended Schedule K-2 or Schedules K-3. Instead,

it must file Forms 8985 and 8986 with the AAR to report

the changes to the Schedules K-2 and K-3. The BBA

partnership must also furnish Forms 8986 to its partners.

See the instructions for Forms 8985 and 8986. Also see

the Instructions for Form 8986 for examples of how

Schedule K-3 adjustments should be reported. The

related Schedule K-2 adjustments should be reported in

the same manner.

Part III—Amended or AAR Items for

REMICs Only

Identify in Part III the amount and treatment of any item the

REMIC is changing from the way it was reported on the

original return.

Column (a). Enter a description of the item that the

REMIC is adjusting or amending.

Column (b). Enter the amounts from the REMIC’s return

as originally filed or as it was later adjusted. If the return

was changed or audited by the IRS, enter the amounts as

adjusted.

Column (c). Enter the net increase or net decrease for

each line being changed. Use parentheses around all

amounts that are decreases. Explain the increase or

decrease in Part V.

Column (d). Enter the correct amount. This will be the

sum of column (b) and column (c).

Line 9. Total tax. Add the amounts on lines 6 through 8

and enter the total for each column on line 9.

Line 10. Tax paid with Form 7004. Enter the amount of

tax paid with Form 7004, Application for Automatic

Extension of Time To File Certain Business Income Tax,

Information, and Other Returns.

Line 13. Overpayment, if any, as shown on original

return or as later adjusted. Enter the amount from the

“Overpayment” line of the original return, even if the

REMIC chose to credit all or part of this amount to the next

year’s estimated tax. This amount must be considered in

preparing Form 1065-X because any refund due from the

7

original return will be refunded separately from any

additional refund claimed on Form 1065-X. If the original

return was changed by the IRS and the result was an

additional overpayment of tax, also include that amount on

line 13.

Line 15. Tax due. See Making a Payment, earlier, for

ways to pay your tax obligation.

Line 16. Overpayment. If the REMIC is entitled to a

refund larger than the amount claimed on the original

return, line 16 will show only the additional amount of

overpayment. This additional amount will be refunded

separately from the amount claimed on the original return.

The IRS will figure any interest due and include it in the

refund.

Amended Schedules Q

If the REMIC is filing Form 1065-X for an AAR, don’t

furnish the amended Schedules Q (Form 1066) to the

residual interest holders. If filing an AAR, and the

adjustments result in an IU, the REMIC will either pay the

IU or elect the alternative to payment of the IU under

section 6227(b)(2) to push out the adjustments.

Irrespective of an election under section 6227(b)(2), the

REMIC must push out adjustments that result in an IU of

zero or less than zero or those adjustments that don’t

result in an IU. In such cases, the REMIC will furnish to

each residual interest holder for the reviewed year a Form

8986 reflecting the residual interest holder’s share of the

adjustments. The REMIC is also required to file with the

AAR all Forms 8986 furnished to residual interest holders

and Form 8985. See Forms 8985 and 8986, earlier.

If the REMIC isn’t filing an AAR but is instead filing an

amended return, the REMIC must furnish the amended

Schedules Q (Form 1066) to its residual interest holders.

When furnishing amended Schedules Q (Form 1066), the

REMIC should check the “Amended Schedule Q” box on

line E.

Part IV—Imputed Underpayment (IU)

Under the Centralized Partnership

Audit Regime

Caution: BBA AARs must always include a computation

of the IU (even when the IU is zero or less than zero, or the

adjustments don’t result in an IU), as determined under

section 6225(b) or when the partnership elects under

section 6227(b)(2) to have its reviewed year partners take

all the adjustments into account. See Figuring the Imputed

Underpayment (IU), later, for information on how to figure

the IU. Also, go to IRS.gov/Businesses/Partnerships/HowTo-Figure-an-Imputed-Underpayment.

If the adjustments don’t result in an IU, the IU should be

shown as zero. Documentation should be included with

the AAR that supports the computation of the IU amount.

If the resulting IU amount is zero or less than zero, or the

adjustments don’t result in an IU, or if the partnership is

making an election under section 6227(b)(2) to have the

adjustments taken into account by the reviewed year

partners, Part IV, line 1, should be shown as zero.

Otherwise, the IU amount should be reported on Part IV,

line 1.

8

If the adjustments requested in the AAR result in an IU,

generally the partnership takes the adjustments into

account and must pay the IU. Adjustments requested in

the AAR that result in zero or less than zero, or that don’t

result in an IU must be taken into account by each

reviewed year partner as if the partnership had made an

election under section 6227(b)(2) but only with regard to

those adjustments that don’t result in an IU. In this

instance, see Forms 8985 and 8986 and their related

instructions for reporting amounts not included in the IU.

The partnership may elect under section 6227(b)(2) to

have the reviewed year partners take into account

adjustments resulting in an IU. If the partnership makes

the election, the partnership isn’t liable for, nor required to

pay, the IU related to the adjustments. Additionally, if the

IU calculation results in an amount that is zero or less than

zero, or the adjustments don’t result in an IU, then all

adjustments are taken into account by the reviewed year

partners. However, the partnership may have withholding

and reporting obligations under chapter 3 or chapter 4

with respect to the adjustments taken into account by the

reviewed year foreign partners. See the instructions for

Form 8985 and Form 8986.

If the partnership validly elects under section 6227(b)

(2) to have its reviewed year partners take all the

adjustments into account, any modifications applied to the

IU submitted on Form 8980 will be disregarded.

Under section 6227(b)(1), the partnership may modify

the IU in accordance with the provisions under section

6225(c), disregarding the provisions under sections

6225(c)(2), (7), and (9).

If modifications are applied to the IU, complete and

attach Form 8980 and report the modified IU amount on

Part IV, line 1. See Part I, Section 1, Item E, earlier, for

more information on modification.

Caution: If the partnership makes an election to push out

the adjustments rather than pay an IU but the election is

determined to be invalid, the partnership remains liable for

the IU and such IU potentially may be assessed. In such a

case where the partnership filed Form 8980 to request

permitted modifications be applied to the IU calculation,

those modifications will be considered in determining the

IU.

The applicability of interest and penalties is discussed

under Interest and penalties applicable to the IU, earlier.

The BBA AAR may include a prepayment for interest and

penalties. If making such prepayments, the AAR should

include documentation that supports the calculations. A

payment made with Form 1065-X should detail the

portions of the payment that are for the IU, prepaid

estimated interest, and prepaid estimated penalties. The

total of all three should be reported on Part IV, line 2.

Under section 6232(a)(2), partnerships filing a BBA

AAR that has adjustments resulting in an IU, and that don’t

elect the alternative to payment of the IU, must pay the IU

at the time of filing the AAR. The IU should be shown on

Form 1065-X, Part IV, line 1. When making an electronic

payment, choose the payment description “BBA AAR

Imputed Underpayment” from the list of payment types.

The payment amount, including any amount paid toward

Instructions for Form 1065-X (Rev. 10-2025)

the IU, prepaid estimated interest, and penalties, should

be reported on Part IV, line 3. If you qualify for an

exception to paying electronically, include the notation

“BBA AAR Imputed Underpayment” with your payment.

See Making a Payment, earlier.

Figuring the Imputed Underpayment (IU)

For an example of how to figure an IU, go to IRS.gov/

Businesses/Partnerships/How-To-Figure-an-ImputedUnderpayment.

Definitions

Adjustments not resulting in an IU. If, after grouping,

subgrouping, and netting, the amount in any grouping or

subgrouping is a net negative or the calculation of the IU is

zero or less than zero, then the adjustments in those net

negative groups or in the calculation of the IU are

adjustments that don’t result in an IU. Any adjustments

that don’t result in an IU are taken into account by the

reviewed year partners in accordance with Regulations

section 301.6227-3.

Credit grouping. Any adjustment to a PRI that is

reported or could be reported by a partnership as a credit

on the partnership’s return, including a reallocation

adjustment to such PRI, is placed in the credit grouping.

Creditable expenditure grouping. Any adjustment to a

PRI where any person could take the item that is adjusted

(or item as adjusted if the item wasn’t originally reported

by the partnership) as a credit, including a reallocation

adjustment to a creditable expenditure, is placed in the

creditable expenditure grouping.

Negative adjustment. A negative adjustment is any

adjustment that is a decrease in an item of gain or income;

an increase in an item of loss or deduction; an increase in

an item of credit or creditable expenditure; a decrease in

an item of tax, penalty, addition to tax, or additional

amount for which the partnership is liable under chapter 1;

or a decrease to an IU calculated by the partnership for

the tax year.

Net negative adjustment. Any amount which results

from netting adjustments within a grouping or subgrouping

that isn’t a net positive adjustment. A net negative

adjustment includes a negative adjustment that wasn’t

netted with any other adjustment.

Net positive adjustment. An amount that is greater than

zero which results from netting adjustments within a

grouping or subgrouping. A net positive adjustment

includes a positive adjustment that wasn’t netted with any

other adjustment. A net positive adjustment includes a net

decrease in an item of credit (or creditable expenditure).

Positive adjustment. A positive adjustment is any

adjustment that isn’t a negative adjustment.

Reallocation grouping. In general, any adjustment that

allocates or reallocates a PRI to and from a partner or

partners is a reallocation adjustment, except for an

adjustment to a credit or to a creditable expenditure. Each

reallocation adjustment generally results in at least two

separate adjustments, each of which becomes a separate

subgrouping.

Instructions for Form 1065-X (Rev. 10-2025)

Residual grouping. Any adjustment to a PRI that

doesn’t belong in the reallocation, credit, or creditable

expenditure grouping is placed in the residual grouping.

This grouping also includes any adjustment to a PRI that

derives from an item that wouldn’t have been required to

be allocated by the partnership to a partner under section

704(b), such as an adjustment to a liability amount on the

balance sheet.

Subgrouping. Each adjustment is subgrouped

according to how the adjustment would be required to be

taken into account separately under section 702(a). In

general, a subgrouping follows Schedules K, K-1, K-2,

and K-3 line items, including any alpha codes related to a

Schedule K-1 line item.

Total netted partnership adjustments (TNPA). The

sum of all net positive adjustments in the reallocation

grouping and the residual grouping.

Formula for Figuring the IU

Figuring the IU

TNPA x rate* =

+ Sum of net positive adjustments

to creditable expenditure and

credit groupings:

= Total IU

* Highest rate in effect for the reviewed year under section 1 or 11.

The process of taking the adjustments shown on the

AAR and inputting them into the formula above requires

an understanding of the concepts of grouping,

subgrouping, and netting. There are seven steps

necessary in figuring an IU. The first three steps focus on

grouping, subgrouping, and netting.

Steps in Figuring the IU

Step 1—Grouping

Place each adjustment into one of the following four

groupings: reallocation, credit, creditable expenditure, or

residual grouping.

Note: Under Regulations section 301.6225-1(b)(4), a

partnership that files an AAR may treat a positive

adjustment as zero (solely for purposes of calculating any

IU) if the positive adjustment is related to, or results from,

a positive adjustment to another item. The IRS may later

determine that the adjustment should not have been

treated as zero by the partnership in its calculation of the

IU. Go to IRS.gov/Businesses/Partnerships/How-ToFigure-an-Imputed-Underpayment.

Reallocation grouping. A reallocation adjustment

generally consists of at least two adjustments, one

positive and one negative, with each in a separate

subgrouping.

• One part of the reallocation adjustment reverses the

effect of the improper allocation of a PRI.

9

• The other part of the adjustment makes the proper

allocation of the PRI.

• Under Regulations section 301.6227-2(d), if one of the

reallocation adjustments is negative, such negative

adjustment must be pushed out to the proper partner(s).

Caution: Don’t net reallocation adjustments. Because

each part of a reallocation adjustment is placed in a

separate subgrouping within the reallocation grouping,

those adjustments can’t be netted in accordance with the

netting rules.

Example. $100 of ordinary income is being

reallocated from Partner A to Partner B. For purposes of

figuring the IU, there will be two adjustments, each in a

separate subgrouping: a negative adjustment of $100

(reversing improper allocation to Partner A) and a positive

adjustment of $100 (making proper allocation to Partner

B). These two adjustments can’t be netted. As a result, the

total net positive adjustment in the reallocation grouping is

$100 and will be included in the TNPA. The net negative

adjustment of $100 is an adjustment that doesn’t result in

an IU and will be pushed out to the proper partner(s).

Credit grouping.

• Generally, a decrease in credits is treated as a positive

adjustment, and an increase in credits is treated as a

negative adjustment.

• A reallocation adjustment relating to the credit grouping

is placed into two separate subgroupings and won’t be

netted together nor will they be netted with other credit

adjustments.

Note: A change made to a previously reported IU (for

example, an IU reported on a prior AAR by the

partnership) is placed in the credit grouping and isn’t

permitted to be pushed out to the partners as it’s a liability

of the partnership.

Creditable expenditure grouping.

• Generally, a decrease in creditable expenditures is

treated as a positive adjustment, and an increase in

creditable expenditures is treated as a negative

adjustment.

• A reallocation adjustment relating to a creditable

expenditure grouping is placed into two separate

subgroupings and won’t be netted together.

• A creditable expenditure is treated in this manner even

if the partners claimed a deduction in lieu of a credit.

• Each adjustment to a creditable expenditure is

subgrouped based on the separate category of income to

which the creditable expenditure relates and to account

for any different allocation of the creditable expenditure

between partners. Two or more adjustments to creditable

expenditures are included within the same subgrouping

only if each adjustment relates to creditable expenditures

in the same separate category, and each adjusted PRI

would be allocated to the partners in the same ratio had

those items been properly reflected on the originally filed

partnership return.

Residual grouping. The residual grouping contains all

adjustments that don’t fit into one of the other groups.

Recharacterization adjustments. A recharacterization

adjustment may result in two separate adjustments within

the residual grouping.

10

• One adjustment reverses the improper characterization

of the PRI.

• The other adjustment makes the proper

characterization of the PRI.

• The adjustments that result from a recharacterization

are placed into separate subgroupings.

Step 2—Subgrouping

Determine if any adjustment, within one of the four

groupings, needs to be subgrouped. Subgrouping is

generally required within a grouping if there’s a negative

partnership adjustment within that grouping. Each

adjustment is subgrouped according to how the

adjustment would be required to be taken into account

separately under section 702(a). If any adjustment could

be subject to any preference, limitation, or restriction

under the Code (or not allowed, in whole or in part,

against ordinary income) if taken into account by any

person, the adjustment is placed in a separate

subgrouping from all other adjustments within the

grouping.

Generally, each separate line item of Schedules K, K-1,

K-2, and K-3 or return schedule (for example, Schedule L)

represents a separate and distinct subgrouping.

Example. Adjustments to ordinary income must be

placed in a different subgrouping than capital gain income

or interest income because each of those items is

required to be separately stated under section 702(a).

• Subgroupings generally reflect a line item from

Schedules K, K-1, K-2, and K-3, including any

subcategories of those lines (for example, alpha codes

per the Schedule K-1 instructions or activities broken out

via attached statements). If any line item on Schedules K

and K-1 or other schedules consists of multiple items and

the components are required to be taken into account

separately under the Code, regulations, forms,

instructions, or other IRS guidance, then such line item

must be further subgrouped.

Example. 2019 Schedule K-1, box 13, code A (cash

contributions 60%), and box 13, code B (cash

contributions 30%), are two separate subgroupings.

• The ordinary income (loss) amount reported on

Schedule K, line 1, and in box 1 of Schedule K-1 is

sourced from Form 1065, page 1, and is a net amount

consisting of various page 1 line items of income and

expenses. Although those separate page 1 line items are

distinct items of income and expenses, if they are

appropriately netted and included on Schedule K, line 1,

and in box 1 of Schedule K-1, the net amount will be

considered a single subgrouping, except when such

amount is required to be separately allocated, such as

when the partnership has more than one trade or

business. If the partnership has more than one trade or

business reported on Form 1065, page 1, the net income

(loss) from each trade or business must be separately

reported on Schedule K-1. Each separate activity will

constitute a separate subgrouping and it must be

determined which activity an adjustment to the page 1

Instructions for Form 1065-X (Rev. 10-2025)

item of income and expense relates to for subgrouping

purposes.

• If you have a negative adjustment along with a positive

adjustment in the same line item of Schedules K and K-1,

you must consider whether they may be properly netted at

the partnership level or whether they are required to be

taken into account separately by any partner. The

adjustments may be subject to a limitation or preference

under the Code before you can place them in the same

subgrouping (for example, passive and nonpassive

activities).

• A negative adjustment that isn’t otherwise required to

be placed in its own subgrouping must be placed in the

same subgrouping as another adjustment if the negative

adjustment and the other adjustment would have been

properly netted at the partnership level or such netted

amount would have been required to be allocated to the

partners of the partnership as a single item for purposes

of section 702(a) or other provision of the Code and

regulations.

Step 3—Netting

Net all adjustments within each of the groupings and

subgroupings.

• Positive adjustments may be netted with other positive

adjustments only if they are in the same grouping.

• Negative adjustments may be netted with other

negative adjustments only if they are in the same

subgrouping.

• Positive and negative adjustments may only be netted

against each other if they are in the same subgrouping.

• An adjustment in one grouping or subgrouping may not

be netted against an adjustment in any other grouping or

subgrouping.

• All adjustments within a subgrouping are netted to

determine whether there is a net positive adjustment or

net negative adjustment for that subgrouping.

• Net positive adjustments from subgroupings or positive

adjustments within a grouping (if subgroupings are

unnecessary) are netted to determine the net positive

adjustment for that grouping. Net negative adjustments

from subgroupings within a grouping are netted to

determine the net negative adjustment for that grouping.

Step 4—Figure the Total Netted Partnership

Adjustments (TNPA)

• Each net positive adjustment in a grouping or

subgrouping in the residual or reallocation grouping that

results after netting the adjustments is included in the

calculation of the TNPA.

• Each net negative adjustment in a grouping or

subgrouping that results after netting the adjustments is

excluded from the calculation of the TNPA because those

adjustments don’t result in an IU.

Note: Under Regulations section 301.6225-1(b)(4), a

partnership that files an AAR may treat a positive

adjustment as zero (solely for purposes of calculating any

IU) if the positive adjustment is related to, or results from,

a positive adjustment to another item. The IRS may later

determine that the adjustment should not have been

Instructions for Form 1065-X (Rev. 10-2025)

treated as zero by the partnership in its calculation of the

IU. Go to IRS.gov/Businesses/Partnerships/How-ToFigure-an-Imputed-Underpayment.

Step 5—Determine the Highest Tax Rate in Effect

Under Section 1 or 11 in the Reviewed Year

Step 6—Determine the Sum of Net Positive

Adjustments to Creditable Expenditures and

Credit Groupings That Will Increase the Product of

the TNPA Multiplied by the Highest Rate in Effect

• A net decrease to creditable expenditures is treated as

a net positive adjustment and increases the product of the

TNPA multiplied by the highest tax rate in effect. A net

increase to creditable expenditures is treated as a net

negative adjustment, including net negative adjustments

resulting from a creditable expenditures reallocation

adjustment, and is excluded from the calculation of the

TNPA and is an adjustment that doesn’t result in an IU.

• For the credit grouping, a net positive adjustment will

increase the product of the TNPA multiplied by the highest

tax rate in effect. A net negative adjustment, including net

negative adjustments resulting from a credit reallocation

adjustment, will be treated as an adjustment that doesn’t

result in an IU.

Step 7—Figure the IU Based on the Results of

Steps 4 Through 6 and Insert Those Results Into

the IU Formula

Figuring the IU

TNPA x rate* =

+ Sum of net positive adjustments

to creditable expenditure and

credit groupings:

= Total IU

* Highest rate in effect for the reviewed year under section 1 or 11.

Partnership-Partner Modification Amended

Return Related to Modification

Partnership-partners who are filing amended returns as

part of the modification of the IU during examination under

section 6225(c)(2) will report the applicable payment of

tax on Part IV, line 1. The pass-through partner will

compute the amount like an IU on the adjustments

allocated to it and make the payment with the filing of

Form 1065-X. A payment made with Form 1065-X should

detail the portions that are for the payment of the IU, the

interest, and the penalties. The partnership should

consider all available guidance issued by the IRS when

figuring the amount due. In general, the partnership

should compute its amount due in accordance with the IU

computation in these instructions. See Steps in Figuring

the IU, earlier. The total of the IU, penalties, and interest

should be reported on Part IV, line 2. When making an

electronic payment, choose the payment description

“Partner Pymnt for BBA Modification” from the list of

payment types. The payment amount, including any

11

amount paid toward the IU, interest, and penalties, should

be reported on Part IV, line 3. If you qualify for an

exception to paying electronically, include the notation

“Partner Payment for BBA Modification” with your

payment. See Making a Payment, earlier.

Partnership-Partners Who Are Allocated

Adjustments That Don’t Result in an IU

If a partnership-partner is paying an amount due as part of

an amended return submitted for purposes of modification

during examination under section 6225(c)(2), any

adjustments that don’t result in an IU must be taken into

account in the tax year that the amount is paid by the

partnership-partner. However, if there are only

adjustments that don’t result in an IU, those adjustments

are subject to modification by the ultimate taxpayers who

reported the original amounts and not by the

partnership-partner itself. See Regulations section

301.6225-2(d)(2)(vi)(B) for further guidance.

Part V—Explanation of Changes to

Items in Part II and Part III

For each amended item, explain in detail the reasons for

the change. Include any computations necessary to

support the amended item.

Changes in allocations. If there is a change in the

allocation of income, gain, loss, deduction, or credit to a

partner, specify the nature and reasons for the changes.

laws of the United States. You’re required to give us the

information. We need it to ensure that you’re complying

with these laws and to allow us to figure and collect the

right amount of tax.

You aren’t required to provide the information requested

on a form that is subject to the Paperwork Reduction Act

unless the form displays a valid OMB control number.

Books or records relating to a form or its instructions must

be retained as long as their contents may become

material in the administration of any Internal Revenue law.

Generally, tax returns and return information are

confidential, as required by section 6103.

The time needed to complete and file this form will vary

depending on individual circumstances. The estimated

burden for business taxpayers filing this form is approved

under OMB control number 1545-0123 and is included in

the estimates shown in the instructions for their business

income tax return.

If you have suggestions for making this form simpler,

we would be happy to hear from you. You can send us

comments through IRS.gov/FormComments. Or you can

write to: Internal Revenue Service, Tax Forms and

Publications Division, 1111 Constitution Ave. NW,

IR-6526, Washington, DC 20224. Don’t send Form

1065-X to this address. Instead, see Where To File,

earlier.

Paperwork Reduction Act Notice. We ask for the

information on this form to carry out the Internal Revenue

12

Instructions for Form 1065-X (Rev. 10-2025)