U. S. Business Income Tax Return

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they are no longer applicable.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.
4

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.

6

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)