Instructions for Form 8985

Instructions for Form 8985

and Form 8985-V

(Rev. December 2024)

Pass-Through Statement—Transmittal/Partnership Adjustment Tracking Report

(Required Under Sections 6226 and 6227)

Contents

Page

Reminders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Purpose of Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

General Instructions . . . . . . . . . . . . . . . . . . . . . . . . . 2

Who Should Prepare Form 8985 . . . . . . . . . . . . . 2

Who Must Sign Form 8985 . . . . . . . . . . . . . . . . . 2

Where To Submit Form 8985 . . . . . . . . . . . . . . . . 2

Due Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Pass-Through Partners That Make a Payment . . . . 3

Pass-Through Partners That Push Out

Adjustments to Their Partners . . . . . . . . . . . . . 4

Specific Instructions . . . . . . . . . . . . . . . . . . . . . . . . . 4

Part I—Information About Entity Submitting

This Form . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Part II—Information About the Audited

Partnership or the Partnership That Filed

an AAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Part III—Information About the Pass-Through

Partner Submitting This Form 8985 . . . . . . . . . 5

Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Part IV—Partners’ Total Reviewed Year

Income, Gain, Loss, Deduction, Credits,

and Other Items . . . . . . . . . . . . . . . . . . . . . . . 5

Part IV—Applicable Penalties . . . . . . . . . . . . . . . 6

Part V—Statements . . . . . . . . . . . . . . . . . . . . . . 6

Instructions for Form 8985-V (Tax Payment by a

Pass-Through Partner) . . . . . . . . . . . . . . . . . . . . 8

Purpose of Form 8985-V . . . . . . . . . . . . . . . . . . . 8

Specific Instructions for Form 8985-V . . . . . . . . . . 8

Where To Submit Form 8985-V . . . . . . . . . . . . . . 8

Section references are to the Internal Revenue Code unless

otherwise noted.

Future Developments

For the latest information about developments related to Forms

8985 and 8985-V and their instructions, such as legislation

enacted after they were published, go to IRS.gov/Form8985.

What’s New

The column headings in Part IV have been changed, and an "as

corrected" column has been added. These columns require

different figures than the Part IV columns in the previous revision

of Form 8985. See Part IV; columns (f), (g), and (h).

Reminders

This revision of the Instructions for Form 8985 includes an

update on using the Part V statements section for making a

correction to the amounts reported in Part IV. See Part V

Statements.

Dec 11, 2024

Purpose of Form

Form 8985 is used to summarize and transmit Forms 8986,

Partner's Share of Adjustment(s) to Partnership-Related Item(s),

by an audited partnership, administrative adjustment request

(AAR) partnership, or pass-through partner. Form 8985 is also

used to report payment made and related calculations by a

pass-through partner.

Form 8985-V is used by a pass-through partner to submit a

tax payment related to a BBA exam or BBA AAR.

Definitions

AAR partnership is a BBA partnership (see below) which has

filed an AAR under section 6227.

AAR partnership’s adjustment year is the partnership tax year

that includes the date the AAR was filed with the IRS.

Affected partner is a partner that held an interest in the

pass-through partner entity at any time during the tax year of the

pass-through partner to which the adjustments in the statement

relate.

Audited partnership, for purposes of Form 8985, is a BBA

partnership that made the election under section 6226 to have its

partners report their share of adjustments to partnership-related

items.

Audited partnership’s adjustment year is the year that

includes the date the court decision became final, if the

partnership filed a petition under section 6234. Otherwise, it is

the year that includes the date the final partnership adjustment

(FPA) letter was mailed, or the FPA waiver was executed by the

IRS.This revision of the Instructions for Form 8985 includes an

update on using the Part V statements section for making a

correction to the amounts reported in Part IV. See Part V

Statements.

Adjustments that do not result in an IU. A partnership

adjustment does not result in an imputed underpayment (IU) if

the result of netting with respect to any grouping or subgrouping

that includes the particular partnership adjustment is zero or less

than zero. Adjustments do not result in an IU if the calculation of

the IU on those adjustments results in an amount that is zero or

less than zero. Any adjustment to an item which is not a

monetary item (for example, an election made by the

partnership) is an adjustment that does not result in an IU.

BBA AAR is an administrative adjustment request filed by a BBA

partnership.

BBA partnership is a partnership that is subject to the

centralized partnership audit regime that was enacted into law by

section 1101 of the Bipartisan Budget Act of 2015 (BBA). The

BBA is generally effective for tax years beginning on or after

January 1, 2018.

Designated individual (DI) is the individual through whom an

entity partnership representative acts.

Extended due date of the partnership’s adjustment year

return is, for purposes of Form 8985, the extended due date of

the AAR or audited partnership’s adjustment year return

regardless of whether the partnership is required to file a return

for the adjustment year or timely filed a request for an extension.

Instructions for Form 8985 (Rev. 12-2024) Catalog Number 69666K

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

Finally determined. The partnership adjustment(s) become

finally determined upon the expiration of the time to file a petition

under section 6234 or, if a petition is filed under section 6234,

the date when the court’s decision becomes final or the date the

closing agreement is entered into between the IRS and the

partnership. The court decision becomes final at the date the

opportunity to appeal has passed as determined under section

7481.

First affected year is the partner’s tax year that includes the

end of the audited or AAR partnership’s reviewed year(s). Each

reviewed year of an audited partnership should have a

corresponding first affected year for each partner.

Imputed underpayment (IU) is the amount determined under

sections 6225, 6226, and 6227, and the regulations thereunder.

Partnership representative (PR) is the person designated by

the partnership or by the IRS under section 6223 and the

regulations thereunder to act on behalf of a BBA partnership.

Pass-through partner is a pass-through entity that holds an

interest, either directly or indirectly, in a partnership.

Pass-through entities include partnerships, S corporations,

trusts, and decedents’ estates. For purposes of Form 8985, a

pass-through entity is not a wholly owned entity disregarded as

separate from its owner for federal tax purposes or a trust that is

wholly owned by only one person.

Pass-through partner’s tax year end to which the

adjustments relate is the end of the pass-through partner's tax

year which includes the audited or AAR partnership’s reviewed

year end date.

Note. An entity partner can be both a non-pass-through partner

and a pass-through partner. To the extent the adjustments an

entity partner received on a Form 8986 relate to items that are

taxable at the entity level, it is considered a non-pass-through

partner. With regard to adjustments that pass through to its

owners/beneficiaries, it is considered a pass-through partner.

Reporting year is the partner’s tax year(s) that includes the date

the AAR or audited partnership furnished the Forms 8986,

Partner’s Share of Adjustment(s) to Partnership-Related Item(s),

to its partners.

Reviewed year is the AAR or audited partnership’s tax year to

which the partnership adjustment(s) relates.

Reviewed year adjustments are adjustments originating from

the AAR or audited partnership’s reviewed year(s).

Reviewed year partner is any person that held an interest in

the audited or AAR partnership at any time during the

partnership’s reviewed year.

General Instructions

Who Should Prepare Form 8985

The following persons or entities should prepare Form 8985.

• Audited partnerships that have made an election under

section 6226.

• Direct or indirect pass-through partners that receive a Form

8986 related to an AAR or audited partnership, regardless of

whether they furnish statements to their partners or choose to

pay in lieu of furnishing statements to their partners.

• Partnerships that file an AAR under section 6227 and either

elect to push out the resulting adjustments to their partners or

have adjustments that do not result in an IU.

Who Must Sign Form 8985

If prepared by an audited partnership or an AAR partnership,

Form 8985 should be signed by the authorized PR or DI for the

reviewed tax year. If prepared by a pass-through partner, Form

8985 should be signed by an individual who has the authority to

sign the partner’s information return. If the pass-through partner

is a BBA partnership, this should be signed by the pass-through

partner’s PR or DI for the first affected year.

2

Special instructions for pass-through partners. If the PR or

DI shown on the pass-through partner's first affected year tax

return has changed or you would like to make a change, submit a

Form 8979 authorizing the change. If the Form 8985 you are

submitting is related to an AAR filing, the Form 8979 should be

included with the Form 8985. However, if the Form 8985 is

related to a BBA audit, fax the Form 8979 separately to

888-981-6982, and in Part V of the Form 8985 (which must be

submitted electronically) include a statement indicating that the

PR or DI has changed and the date the Form 8979 was faxed.

Special instructions for a BBA partnership making a push

out election as a result of an examination. If a BBA

partnership makes a push out election, and the PR or DI for the

reviewed year has changed or you would like to make a change,

submit Form 8979 by attaching it to the push out election, Form

8988 (which must be submitted electronically). If the PR or DI for

the reviewed year changes between the time the push out

election is made and when the Form 8985 is submitted, fax the

Form 8979 separately to 888-981-6982, and in Part V of the

Form 8985 (which must be submitted electronically) include a

statement indicating that the PR or DI has changed and the date

the Form 8979 was faxed.

Where To Submit Form 8985

Audited partnerships and pass-through partners of audited partnerships. Section 6241(10) gives the IRS authority to

require electronic submission of anything required to be filed or

submitted under section 6226(a). Audited BBA partnerships and

their pass-through partners are required to submit Forms 8985

and 8986 electronically. See IRS.gov/BBAeSubmit for steps

required to register and submit electronically.

AAR partnerships. AAR partnerships that are electing to push

out adjustments to their partners or have adjustments that do not

result in an IU must include Form 8985 with their AAR along with

Forms 8986. The Forms 8985 and 8986 must be filed with, and

in the same manner as, the AAR.

Pass-through partners of an AAR partnership. Pass-through

partners of an AAR partnership must submit Form 8985 to the

IRS by fax at 888-981-6982, with or without Forms 8986, as

applicable. This fax number is not for general use. Taxpayers

should not use this for anything besides Forms 8985 and 8986.

Illegible or other submissions received at this fax number will not

be processed. If the 8985/8986 package is over 100 pages, it

must be printed and mailed. For more information, see the

submission chart at File an administrative adjustment request

under Bipartisan Budget Act of 2015 (BBA)

Due Dates

Audited partnerships. An audited partnership that has made

an election under section 6226 must submit Form 8985 and the

related Forms 8986 to the IRS no later than 60 days after the

date on which the partnership adjustments are finally

determined. Failure to submit Forms 8986 by the due date may

result in the audited partnership being liable for the IU.

An audited partnership can submit corrected Forms 8985 and

the related corrected Forms 8986 within 60 days of the due date

for the initially submitted forms without IRS permission. If

corrected statements need to be submitted after the 60-day

correction period, the audited partnership must contact the IRS

for permission to submit.

AAR partnerships. An AAR partnership that either elects to

push out the resulting adjustments to its partners or has

adjustments that do not result in an IU must include Forms 8985

and the related Forms 8986 with its AAR.

Instructions for Form 8985 (December 2024)

Pass-through partners. Direct and indirect pass-through

partners must submit Form 8985 by the extended due date of the

audited partnership’s adjustment year return (or the extended

due date of the AAR partnership’s adjustment year return). This

date can be found in Part II, item F, of the Form 8986 that was

received by the pass-through partner. Failure to submit by the

due date may result in a penalty. A pass-through partner who

receives a Form 8986 related to an audited partnership can

submit a corrected Form 8985 and the related Forms 8986, if

applicable, within 60 days of the due date for the initially

submitted forms without IRS permission. If corrected Forms

8985 need to be submitted after the 60-day correction period,

the pass-through partner must contact the IRS for permission to

submit.

Pass-Through Partners That Make a Payment

If a pass-through partner receives a Form 8986 as a result of an

audited partnership, it can take into account the adjustments

reflected in the Form 8986 by paying the IU, including all

applicable penalties and interest, and submitting Form 8985 by

the extended due date of the audited partnership’s adjustment

year return. A pass-through partner that chooses to pay an IU

should not issue related Forms 8986 to its partners, with one

exception noted in the next paragraph, but should still complete

Part IV of Form 8985.

If a pass-through partner receives a Form 8986 as a result of

an AAR partnership, it can take into account the adjustments

reflected in the Form 8986 by paying the IU, including all

applicable penalties and interest, and submitting Form 8985 by

the extended due date of the AAR partnership’s adjustment year

return. However, adjustments that do not result in an IU shown

on the Form 8986 that are related to an AAR must be pushed

out.

In Part III, item F, the appropriate box must be checked and

payment information must be reflected. In Part V, include a

statement or statements showing how the IU, penalties, and

interest were figured. See below for how to figure these amounts.

Pass-through partner’s calculation of the IU. If a

pass-through partner chooses to make a payment rather than

push out the adjustments to its partners, payment is figured in

the same manner as an IU is figured under Regulations section

301.6225-1 by treating all the adjustments reflected on the Form

8986 received by the pass-through partner as partnership

adjustments for the first affected year of the pass-through

partner. Any modifications approved by the IRS with respect to

an audited partnership involving partners of the pass-through

partner (which are indirect partners of the audited partnership)

should be taken into account in this calculation. Adjustments that

do not result in an IU are taken into account by the pass-through

partner in the tax year that includes the date of payment.

However, adjustments that do not result in an IU shown on the

Form 8986 that are related to an AAR must be pushed out. A

detailed calculation must be included in Part V of the Form 8985

filed with the IRS. Pass-through partners of an AAR partnership

cannot include modifications in the calculation.

Pass-through partner’s calculation of penalties and interest. Pass-through partners that make a payment must figure

and pay applicable penalties on the amounts due, treating such

amounts as IUs for the pass-through partner’s first affected year.

To find out which penalties apply, pass-through partners should

refer to the penalty sections of Part V of the Form 8986 that they

received.

Pass-through partners that make a payment must pay interest

on the IU (including all applicable penalties) as if the IU was due

on the due date of the return for first affected year. Interest is

figured from the due date of the pass-through partner’s return for

the first affected tax year and is compounded daily until it is paid.

Instructions for Form 8985 (December 2024)

The interest on the penalties is also figured from the same due

date unless the pass-through partner filed for an extension in the

first affected year, in which case it should be figured from that

date. The interest is figured at the underpayment rate under

section 6621(a)(2), but substituting “five percentage points” for

“three percentage points.” Pass-through partners that are making

a payment as part of an AAR should use the rate under section

6621(a)(2) without making this substitution.

Example calculation of amount due, penalty, and interest

by pass-through partner. On October 12, 2027, MJ, an

audited partnership, timely furnishes Forms 8986 to its partners

and submits them to the IRS. The Forms 8986 reflect the

partners’ share of partnership adjustments as finally determined

in the FPA it received from the IRS for reviewed year ending

December 31, 2024. The Forms 8986 sent to partners M (an

individual) and J (a partnership) each reflect a partnership

adjustment of $100,000 to ordinary income. The statements also

indicate that the substantial understatement penalty under

section 6662(d) applies and no modifications were approved.

The extended due date of MJ’s 2027 return is September 15,

2028.

M takes into account her share of the adjustments reflected

on the Form 8986 furnished by MJ on her reporting year 2027

individual tax return by completing and attaching Forms 8978

and 8978 Sch A.

J’s first affected year return was due on March 15, 2025. J did

not file for an extension. Assume the short-term federal interest

rate from March 15, 2025, to April 1, 2028, is 2.5%. J adds 5%

(3% from section 6621; 2% from section 6226) to this rate to

obtain 7.5% as its applicable interest rate which is compounded

daily. Also assume that the highest income tax rate for a U.S.

person as of December 31, 2024, is 37%. On April 1, 2028, J

decides to account for the adjustments by paying an IU and

submitting the Form 8985 to the IRS. J determines that because

the IU exceeds the threshold amount in section 6662(d), the

penalty must be included in its payment. On Form 8985, J

checks box 1 in Part III, item F, figures an IU, and includes a

statement with the calculation details in Part V. J figures the IU,

related penalty, and interest from March 15, 2025, as shown in

the following table.

Example Calculation of Amount Due, Penalty, and

Interest by Pass-Through Partner

Total reviewed year adjustments net

of approved modifications

$100,000

Multiplied by highest income tax rate

in effect on 12/31/2024

37%

Equals IU (additional tax)

Multiplied by penalty rate under

section 6662

$37,000

20%

Equals penalty on IU

$7,400

Total IU and penalty

$44,400

Interest at 7.5% from 03/15/2025 to

04/1/2028 on total IU and penalty

$11,408

Total amount due

$55,808

J makes a payment of $55,808 electronically at IRS.gov and

obtains a confirmation number which it enters in the space

provided in Part III, item F, of Form 8985, along with the amount

of additional tax, penalties, and interest. Since J has accounted

for its share of the audit adjustments by making a payment and

submitting Form 8985, it does not have to issue Forms 8986 to

its partners.

Payments by pass-through partners. Go to IRS.gov/

Payments for payment options. If submitting a check or money

order, use Form 8985-V. See the instructions for Form 8985-V at

the end of these instructions.

3

However you choose to pay, identify your payment by

checking the appropriate box on Form 8985-V.

• Payment submitted by a pass-through partner due to an

audited partnership should be identified as “BBA exam push

out.”

• Payment submitted by a pass-through partner due to an AAR

partnership should be identified as “BBA AAR push out.”

Pass-Through Partners That Push Out

Adjustments to Their Partners

If a pass-through partner pushes out the adjustment(s) to its

partners, it must push out all of the adjustment(s). The

appropriate box must be checked in Part III, item F, of Form

8985. It must also provide Forms 8986 to its partners and to the

IRS by the extended due date of the audited partnership’s (or

AAR partnership’s) adjustment year return. The push out

package submitted to the IRS should include the summary Form

8985 and all related Forms 8986 that were provided to the

partners. See the Instructions for Form 8986.

Note. The audit control number does not apply to partnerships

and pass-through partners submitting Form 8985 as part of an

AAR.

Specific Instructions

Original or corrected (This is a required field). At the top of

Form 8985, check the appropriate box to indicate if it’s an

original or corrected form. A corrected Form 8985 is required in

all situations. If Form 8985 is corrected, it must be submitted with

all of the Forms 8986 originally submitted, including forms that

did not change.

Withholding for foreign partners. A BBA partnership may

have withholding and reporting obligations if it furnishes a Form

8986 to a reviewed year partner that includes an adjustment

subject to withholding under chapter 3 (Withholding of Tax on

Nonresident Aliens and Foreign Corporations) or chapter 4

(Taxes to Enforce Reporting on Certain Foreign Accounts). See

the Instructions for Form 8986 for more information.

Incoming tracking number and outgoing tracking number.

These fields are to be filled out by a BBA partnership or a

pass-through partner of a BBA partnership. The incoming

tracking number is completed by a pass-through partner and is

the tracking number shown on the Form 8986 received by the

pass-through partner. The outgoing tracking number needs to be

completed by a BBA partnership or a pass-through partner of a

BBA partnership that is issuing Forms 8986 to its partners/

owners. A unique outgoing tracking number must be obtained for

each push out package submitted by an audited BBA

partnership or pass-through partner of an audited BBA

partnership. See IRS.gov/BBAeSubmit website for steps

required to register and submit electronically. AAR filers and

related pass-through partners should compute and enter unique

tracking numbers by following the instructions below.

AAR filers and pass-through partners (direct and indirect) of

AAR partnership filers that are electing to push out adjustments

to their partners should compute and complete the tracking

number field as follows:

• For an AAR partnership, the incoming tracking number field

should remain blank. The outgoing tracking number field should

contain eight numbers, and a dash, followed by another six

numbers in the format YYMM1234-0000XX. In the first four digits

enter the year and month the AAR partnership is reporting that

Forms 8986 were sent to its partners (use the same date used in

Form 8985/8986 Part II, G), and in next four digits enter the last

four digits of its EIN (that is, Part II, C). In the final six digits enter

000001 (or 000002 or 000003 and so forth if this is the second or

third AAR filed for the reviewed year).

4

Note. This outgoing tracking number will also be used as the

tracking number on Forms 8986 issued by the AAR partnership

filer to its reviewed year partners.

• For a pass-through partner (direct and indirect) of an AAR

partnership, the tracking number from the Form 8986 it received

is used as the incoming tracking number on Form 8985 in all

cases (whether the pass-through partner elects to pay or push

out). If the pass-through partner is required to push out

adjustments that do not result in an imputed underpayment or if

the pass-through partner elects to push out further to its affected

partners, it should determine and report the outgoing tracking

number using the same numbers before the dash as the tracking

number on the Form 8986 it received (date in 8986 Part II, G and

last four of the EIN Part II, C), and then after the dash, enter the

last four digits of its EIN (EIN in Part III, B), followed by 01 (or 02,

03 and so forth if the pass-through partner received more than

one Form 8986 originating from the same AAR partnership or

same pass-through partner, for example, YYMM1234-0000XX.

Audit control number. Enter the audit control number that is

provided on correspondence with the IRS. Pass-through

partners can locate this number at the top of the Form 8986 they

received.

Note. The audit control number doesn’t apply to partnerships

and pass-through partners submitting Form 8985 as part of an

AAR.

Part I—Information About Entity Submitting This

Form

Item A (This is a required field)—Indicate which entity is

issuing this form by checking the appropriate box.

Item B (This is a required field)—Check the box that

corresponds to the type of return normally filed by the entity

issuing this form. If Other, also indicate the type of return filed on

the line provided.

Item C (This is a required field)—Enter the number of Forms

8986 that are associated with only this Form 8985. Pass-through

partners of an audited BBA partnership that choose to make a

payment instead of issuing Forms 8986 must enter a zero in this

box.

Items D and E (This is a required field)—These fields are to

be filled out only by an audited BBA partnership or a

pass-through partner of an audited BBA partnership. Generally,

box D should be checked, and you should enter 1 of 1 in box E.

Note. Pass-through partners of an audited BBA partnership that

make a payment instead of issuing Forms 8986 will not need to

include any Forms 8986. They should also check box D and

enter 1 of 1 in box E.

Special instructions for audited BBA partnerships or

pass-through partners of audited BBA partnerships with

more than 500 partners submitting push out Forms 8985

and 8986 (batched submission). There is a limitation

regarding the size of files that can be filed electronically in a

single submission. If the submission exceeds that size, the

submission must be split into multiple batches. In this situation,

each batch of Forms 8986 must have an associated Form 8985.

The Form 8985 included in the first batch will be considered the

summary Form 8985, and for this Form 8985, box D should be

checked. In box E, enter 1 of X, with X being the total number of

batches submitted for the outgoing tracking number shown at

the top of the form. In the second batch submitted, do not check

box D; enter 2 of X in box E, and so forth for all subsequent

batches. Each batch must have the same outgoing tracking

number (and incoming tracking number, if applicable).

Instructions for Form 8985 (December 2024)

Part II—Information About the Audited

Partnership or the Partnership That Filed an

AAR

Item A (This is a required field)—On lines 1–6, enter the

name and address of the partnership. In the state field, enter the

two-letter abbreviation for the U.S. state or the full name of the

foreign province. U.S. partnerships leave the country code field

blank. Foreign partnerships enter the country code found at

Foreign Country Codes.

Item B (This is a required field)—On lines 1–7, enter the

name, address, city, in the state field, enter the two-letter

abbreviation for the U.S. state, ZIP code, and phone number of

the PR. If the PR is an entity, provide the name, address, city,

state, ZIP code, and phone number of the DI instead of the

information about the PR.

Item C (This is a required field)—Enter the partnership’s tax

identification number.

Item D (This is a required field)—Enter the tax year end date

of the reviewed year of the partnership. Each reviewed year

should have a separate Form 8985. This form must be

completed for reviewed years that have adjustments related to

an audit or an AAR.

Item E (This is a required field)—Enter the partnership’s

adjustment year ending date.

Item F (This is a required field)—Enter the extended due date

of the partnership’s adjustment year tax return, regardless of

whether the partnership has filed for an extension. For AAR

partnerships, this will be the extended due date of the tax year

the AAR was filed.

Item G (This is a required field)—Enter the date the audited or

AAR partnership furnished the Forms 8986 to its partners.

Part III—Information About the Pass-Through

Partner Submitting This Form 8985

Item A—On lines 1–6, enter the pass-through partner’s name

and address. In the state field, enter the two-letter abbreviation

for the U.S. state or the full name of the foreign province. U.S.

partnerships leave the country code field blank. Foreign

partnerships enter the country code found at Foreign Country

Codes.

Item B—Enter the pass-through partner’s tax identification

number.

Item C—Enter the pass-through partner’s tax year end to which

the adjustments relate.

Item D—Enter the name of the entity that issued the Form 8986

to the pass-through partner, if different from the audited

partnership or AAR partnership in Part II.

Item E—Enter the tax identification number of the entity that

issued the Form 8986 to the pass-through partner, if different

from the audited partnership or AAR partnership in Part II.

Item F—Indicate if the pass-through partner is making a

payment or issuing Forms 8986 to its partners by checking the

appropriate box 1 or 2. If the pass-through partner is making a

payment, a statement must be included in Part V with a detailed

calculation of the IU plus any applicable penalties and interest.

An IU calculation is not needed if pushing out all the

adjustments. If paying electronically, check box 3 and enter the

electronic payment confirmation number in the space provided. If

paying by check or money order, check box 4 and enter the

check number in the space provided.

Signature

Non-electronically submitted forms. If the form is prepared

by an audited partnership or an AAR partnership, the authorized

PR or DI for the reviewed year should sign and date Form 8985.

If the form is prepared by a pass-through partner, it should be

signed and dated by an individual who has the authority to sign

the pass-through partner’s tax return. If the pass-through partner

Instructions for Form 8985 (December 2024)

is a BBA partnership, it should be signed by its PR or DI for the

first affected year.

Electronically submitted forms. For audited BBA

partnerships and pass-through partners of audited BBA

partnerships that electronically submit forms, the PR or DI for the

first affected year e-sign the form by entering their five-digit PIN

in the signature block. The five-digit PIN is the number that is

self-selected during the PBBA Transmitter Control Code (PBBA

TCC) application step as described in the multi-step process for

electronic submission as described on the BBA website,

IRS.gov/BBAeSubmit. The five-digit PIN is a required field.

Name of person signing form (This is a required field).

The typed name of the person signing the form must exactly

match the name entered during the TCC application step for

electronic submission. For example, if the name entered during

the TCC application step is John T. Smith, the typed name on the

form must be John T. Smith, not John Smith, JT Smith, John T

Smith, etc.

Title & Date (This is a required field). Enter your title and

the date the form is being signed.

Telephone number. Enter a daytime telephone number.

Name of entity partnership representative (if applicable).

If the PR is an entity, enter the entity name.

Part IV—Partners’ Total Reviewed Year Income,

Gain, Loss, Deduction, Credits, and Other Items

Note. Adjustments that increase a Schedule K-1/K-3 (Form

1065) item as originally reported, or as corrected, must be

shown as positive numbers. Adjustments that decrease

Schedule K-1 (Form 1065) items should be shown as negative

numbers.

Part IV should include summary figures of the total amounts

of the Forms 8986 that are related to this Form 8985. For audited

partnerships and AAR partnerships, this part should include the

sum of all adjustments included in the Forms 8986 sent to the

partners. For pass-through partners, the amounts in this part

should equal the amounts shown on the Form 8986 that was

received by the pass-through partner. For columns (a)–(c), refer

to the relevant Schedule K-1/K-3 and instructions. See below for

special instructions for changes to Schedule K-2. For each item

that was adjusted, enter the following.

Column (a), Line number (This is a required field)—The

Schedule K-1 line number that was adjusted. If you have

changes to Schedule K-3, enter “K3” (no dash).

Column (b), Line title (This is a required field)—The title of

the Schedule K-1 item that was adjusted. For adjustments to

Schedule K-3 (Form 1065), enter the part, section (if applicable),

line, and column reference.

Column (c), Code (This is a required field)—Enter the code

letters listed in the Schedule K-1 instructions that correspond to

the line number shown in column (a). For adjustments to

Schedule K-3, if applicable, enter the country code. See the

Schedule K-3 instructions. If no specific code applies, enter

“NA.”

Column (d), As reported (This is a required field)—Enter the

original aggregate amount reported to the partners on their

Schedules K-1 or as previously corrected by the partnership.

Column (e), Check if statement in Part V—Check the box in

this column if the item shown in column (a) has a corresponding

statement in Part V. For adjustments to Schedule K-3, enter an

explanation of the adjustment on Part V of Form 8985 with

reference to the entry on Part IV, column (b).

Column (f), Approved modifications (if applicable)—Enter

the total modifications approved by the IRS corresponding to the

line item in column (a). Enter the totals at the bottom of Part IV.

Column (g), Reviewed year adjustments net of approved

modifications (This is a required field)—Enter the total

reviewed year adjustments net of approved modifications (from

5

column (f)). Modifications related to the filing of an AAR should

not be shown in this column. Enter the totals at the bottom of

Part IV.

Column (h), As corrected (This is a required field)—Enter

the amount in column (d) plus the amount in column (g). This is

the total corrected amount. Enter the totals at the bottom of Part

IV.

Loans and other items recharacterized as distributions to

partners. If a reviewed year adjustment has been made to

change a partner loan or other item to a partner distribution, this

adjustment should be reported with the column (a) line number

that corresponds to the Schedule K-1 “Distributions” category

and with column (c) code A for cash distributions if the partner

received money and as a code C if the partner received property

other than money.

Disguised sale adjustments. Distributions to a partner that

were changed as part of an audit proceeding to disguised sale

proceeds under section 707 should be reported with the column

(a) line number that corresponds to the Schedule K-1, Other

category, and with column (c) code DS. The partnership should

also include a statement in Part V describing the asset that was

sold, the proceeds, and the tax basis of the asset at the time of

the contribution.

Special instructions for changes to Schedules K-2 and K-3.

The Form 8985 is a summary of all adjustments on the related

Forms 8986. This is similar to Schedule K-2 with respect to the

related Schedules K-3. Adjustments to the Schedule K-2 should

be reflected on Form 8985 and to the Schedule K-3 on Form

8986.

See the Instructions for the Form 8986 for examples of how

Schedule K-3 adjustments should be reported. The related

Schedule K-2 (summary of Schedule K-3) adjustments should

be reported in the same manner on the Form 8985.

Part IV—Applicable Penalties

The applicability of penalties is determined at the audited

partnership or AAR partnership level. In the penalties section of

Part IV, enter the penalty code sections, descriptions, rates,

adjustment line numbers, and total adjustment amount to which

the penalty applies.

Part V—Statements

The purpose of this part is to provide additional space to add

statements where needed. In general, if a statement was

included to support the original Schedule K, the same statement

should be shown here if any item on that statement changed as

a result of the audit or the AAR filing. This part can also be used

by pass-through partners that choose to calculate and pay an IU,

and for adjustments that do not have a corresponding

Schedule K-1 line number.

Column (a), Line no./code—List the corresponding

Schedule K-1, Part IV, column (a), line number and column (c)

code (if applicable) for each item for which a statement is

included.

Column (b), Statement—Include a detailed explanation of the

amount(s) or calculation(s) that corresponds to the item in

column (a).

Supporting schedules and statements should be in a format

that shows the original amount, the net change, and the correct

amount for each item listed in the statement. If any column (b)

6

statements exceed the space allowable in one box, continue in

the next box with the same information in column (a).

This Part V should also be used if a pass-through partner is

choosing to figure and pay an IU. Pass-through partners that are

choosing to pay an IU should enter “Part III F” in column (a) and

a detailed calculation in column (b). For a change to liabilities or

other balance sheet items, enter "Part IV F" in the line number

field of Part V of the Form 8985 (statements section) and attach

a statement describing the original amounts reported,

adjustments, and corrected aggregate balance sheet items. For

a change to capital accounts, enter "Part IV G" in Part V and

attach a statement describing the aggregate original amounts

reported, adjustments, and corrected amounts.

Statements related to section 199A information.

Adjustments that increase or decrease section 199A information

reported to the partners must be shown in a separate statement

for each trade or business or each aggregated trade or business.

Partnerships may aggregate trades or businesses for purposes

of computing QBI, UBIA, and W-2 wages. The choice to

aggregate must be made on an originally filed tax return. See

below for an example of the information that should be included

in Part V of the Form 8985. These figures should reflect the

aggregate amount of section 199A items reported separately to

the partners on Forms 8986.

Note. Section 199A dividends are reported as a cumulative

amount and not per qualified trade or business. These should

only be included once in the first section 199A statement

attached to Form 8985, regardless of how many statements may

be necessary.

Each trade or business should indicate if it is a publicly traded

partnership (PTP), aggregated, or specified service trade or

business (SSTB). See the Instructions for Schedule K-1 (Form

1065) or the Instructions for Schedule K-1 (Form 1120-S).

If the partnership is a patron of a specified agricultural or

horticultural cooperative, the partnership must also include a

statement for each trade or business identifying the

adjustment(s) to qualified items of income, gain, deduction, and

loss and W-2 wages allocable to qualified payments. Section

199A(g) deductions are reported as a cumulative amount and

not per qualified trade or business. These should only be

included once in the first statement of adjustments to items

allocable to qualified payments attached to Form 8985,

regardless of how many statements may be necessary.

Balance sheet adjustments. Any adjustments to balance

sheet items (including changes to the type of a liability between

recourse and nonrecourse) made as a result of a BBA audit

should be shown in a separate statement in Part V using a

per-return, adjustment, and corrected amount format.

Examples

Example 1—Push out of section 199A-related audit

adjustments. Assume partnership ABC has one trade or

business that is an SSTB and is not a patron in a specified

agricultural or horticultural cooperative. On its filed return,

partnership ABC reported the items shown in Example 1.

Section 199A Related Amounts Generated by the Partnership as

a summary of all the section 199A related amounts generated by

the partnership.

Instructions for Form 8985 (December 2024)

Example 1. Section 199A Related Amounts Generated by the Partnership

EIN:

PTP

Aggregated

■ SSTB

Summary of section 199A items before audit adjustments:

QBI or qualified PTP items subject to partner-specific determinations:

Ordinary business income (loss)

$400,000

Rental income (loss)

$20,000

Royalty income (loss)

Section 1231 gain (loss)

$100,000

Other deductions

$160,000

W-2 wages

$100,000

UBIA of qualified property

$120,000

Section 199A dividends

$10,000

Assume the adjustments per audit increased ordinary income

by $20,000 and royalty income by $10,000, and decreased other

deductions by $40,000. Assume that all of the adjustments are

determined to be qualified items of income, gain, deduction, and

loss at the partnership level. Partnership ABC should include in

Part V of the Form 8985 the information shown in Example 1,

Part V of Form 8985.

Example 1. Part V of Form 8985

EIN:

As Reported

Summary of section 199A items before

audit adjustments:

Net Adjustments

As Corrected

PTP

PTP

Aggregated

■ SSTB

Aggregated

■ SSTB

QBI or qualified PTP items subject to

partner-specific determinations:

Ordinary business income (loss)

$400,000

Rental income (loss)

$20,000

Royalty income (loss)

$20,000

$20,000

$10,000

Section 1231 gain (loss)

$100,000

Other deductions

$160,000

$420,000

$10,000

$100,000

($40,000)

$120,000

W-2 wages

$100,000

$100,000

UBIA of qualified property

$120,000

$120,000

Section 199A dividends

$10,000

$10,000

Example 2—Pass-through partner’s calculation of IU

from Form 8986 received. Assume a pass-through partner

received the adjustments shown in Example 2, Part V of Form

8986 on a Form 8986 that showed its share of adjustments from

an audit.

Example 2. Part V of Form 8986

(a)

Line

number

(b)

Line title

(c)

Code*

(d)

As reported

(e)

Check If

statement

in Part VI

(g)

Reviewed year adjustments net of

approved modifications

1

Ordinary Income—Increase

$ 50,000

$100,000

13

Other Deductions—Decrease

$100,000

–$50,000

9a

Long-Term Capital

Gains—Decrease

$25,000

–$20,000

15

Line 15a, LIH Credit—Decrease

$3,000

–$2,000

15

Line 15e, Rental

Credits—Increase

$0

$1,000

The pass-through partner should figure an IU for these

adjustments as shown in Example 2. Worksheet for

Pass-Through Partner IU Calculation.

Instructions for Form 8985 (December 2024)

7

Example 2. Worksheet for Pass-Through Partner IU Calculation

Adjustments by Subgroup

Description

Ordinary Income, Schedule K-1, Line 1

Increase to Income

$100,000

Other Deductions, Line 13

Decrease to Other Deductions

$50,000

Long-Term Capital Gains,

Schedule K-1, Line 9a

Decrease to Long-Term Capital Gains

Adjustments Before Credits

Adjustments

that did not

result in an IU

–$20,000

$150,000

Applicable Tax Rate

37%

IU amount before credits

$55,500

Low Inc. Housing Credit, Schedule K-1,

Line 15a

Decrease to LIH Credits

Other Rental Credits, Schedule K-1,

Line 15e

Increase to Other Rental Credits

Total Adjustments to Credits

Adjustments to Creditable Expenditures

IU

Note. For the purposes of the Forms 8985 and 8986, increases

and (decreases) to the item as reported are reflected as

increases or (decreases) on the form. However, for the purposes

of the IU calculation, an adjustment is shown as a positive

amount if it would increase the income tax of any taxpayer, and

as a negative or an amount that not did not result in an IU if it

decreases tax. Any adjustment to a balance sheet item is treated

as a positive adjustment. Also note that separate Schedule K-1

line items are in separate subgroups that should not be netted

for the purposes of the calculation. See above for how

pass-through partners should report amounts that did not result

in an IU.

Special Instructions for Changes to

Schedule K-2 or Schedule K-3 (Form 1065)

Form 8985 is a summary of all adjustments on the related Forms

8986. This is similar to Schedule K-2 with respect to the related

Schedules K-3. Adjustments to Schedule K-2 should be

reflected on Form 8985 and adjustments to Schedule K-3 should

be reflected on Form 8986.

See the Instructions for the Form 8986 for examples of how

Schedule K-3 adjustments should be reported. The related

Schedule K-2 (summary of Schedules K-3) adjustments should

be reported in the same manner on Form 8985.

Instructions for Form 8985-V (Tax

Payment by a Pass-Through Partner)

Purpose of Form 8985-V

When paying an imputed underpayment as discussed in

Pass-Through Partners That Make a Payment, above, Form

8985-V should be included with a check or money order

submitted as payment made by a direct or indirect pass-through

partner of an audited partnership or an AAR partnership.

Specific Instructions for Form 8985-V

Type of payment—Check the appropriate box in the upper left

of Form 8985-V to indicate the type of payment being made. This

information can be found in Part I, item A, of Form 8985. If box 2

of Form 8985, Part I, item A, is checked, select “BBA exam push

out.” If box 4 is checked, select “BBA AAR push out.”

8

Positive

Adjustments

$2,000

–$1,000

$2,000

$0

$57,500

Payment due date—Enter the date shown in the corresponding

Form 8985, Part II, item F.

Imputed underpayment, penalties, and interest—Enter the

amounts shown on the Form 8985, Part III, item F, for additional

tax, penalties, and interest.

Amount you are paying—Enter the total that you are paying of

the additional tax, penalties, and interest from Form 8985, Part

III, item F.

Name of pass-through partner—Enter the name shown on

Form 8985, Part III, item A.

Pass-through partner’s applicable tax year ending date—

Enter the date shown on Form 8985, Part III, item C.

Audit control number—Enter the number, if any, shown at the

top of Form 8985. If this payment is related to an AAR, enter the

incoming tracking number from the Form 8985.

Partner’s TIN—Enter the partner’s tax identification number

from Form 8985, Part III, item B.

Type of return filed—Check the box that corresponds to the

box that is checked in Part I, item B, of Form 8985.

Address, city, state, ZIP code, and foreign country—Enter

the information shown on Form 8985, Part III, item A.

Partner’s representative—Enter the name and phone number

of the individual who signed Form 8985.

Where To Submit Form 8985-V

Mail Form 8985-V along with your check or money order to:

Department of the Treasury

Internal Revenue Service

Ogden, UT 84201-0011

Checks and money orders should be made payable to

“United States Treasury.”

Paperwork Reduction Act Notice. We ask for the information

on this form to carry out the Internal Revenue laws of the United

States. You are required to give us the information. We need it to

ensure that you are complying with these laws and to allow us to

figure and collect the right amount of tax.

You are not 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

Instructions for Form 8985 (December 2024)

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.

Instructions for Form 8985 (December 2024)

If you have comments concerning the accuracy of these time

estimates or suggestions for making this form simpler, we would

be happy to hear from you. See the instructions for the tax return

with which this form is filed.

9