What each form does
The Form 8986 instructions describe it as the form “used by BBA partnerships to furnish and transmit each partner’s share of adjustments to partnership-related items.” It is the push-out statement IRC 6226(a)(2) and IRC 6227(b) call for. The Form 8985 instructions describe their form as one that 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 the partnership adjustment tracking report a pass-through partner files under IRC 6226(b)(4), and the report of its payment if it pays an IU. Form 8985-V accompanies a pass-through partner's check.
Form 8986 replaces amended K-1s in the BBA context. The Form 8082 instructions caution: “Use Form 8986 to notify partners of their allocable shares of adjustments, don’t use an amended Schedule K-1.” Treas. Reg. 301.6226-2(a) requires the statements to be filed and furnished separately from any other statements, including Schedules K-1.
Who prepares them
| Preparer | When | Signer |
|---|---|---|
| Audited partnership | After a valid push-out election on Form 8988 | PR or DI for the reviewed year |
| AAR partnership | When it elects push-out, or has adjustments that do not result in an IU | PR or DI for the reviewed year |
| Pass-through partner (direct or indirect) | Whenever it receives a Form 8986, whether it pushes out further or pays | Person authorized to sign its information return; for a BBA partnership, its PR or DI for the first affected year |
A pass-through partner that pays an IU still files Form 8985 (with the calculation in Part V) but generally does not issue Forms 8986, except that adjustments from an AAR that do not result in an IU must still be pushed out. A pass-through entity here does not include a disregarded entity or a trust wholly owned by one person (Form 8985 instructions). See tiered partnerships.
Due dates
| Filer | Due date | Source |
|---|---|---|
| Audited partnership | 60 days after the adjustments are finally determined (end of the 90-day petition period, a final court decision, or a closing agreement) | Treas. Reg. 301.6226-2(b) and (c); Form 8985 instructions |
| AAR partnership | With the AAR; Forms 8986 furnished to partners on the date the AAR is filed | IRM 4.31.9.7.7.1; IRS AAR page |
| Pass-through partner | Extended due date of the audited or AAR partnership's adjustment-year return (Form 8986, Part II, item F) | Treas. Reg. 301.6226-3(e); Form 8985 instructions |
For audited partnerships, the instructions warn: “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.” The IRS's audit page adds that the 60-day period cannot be extended, and that the partnership must wait for the countersigned Form 8988 before submitting Forms 8985 and 8986. IRM 4.31.13.11.2 says a package received before the final determination date is held until that date.
For pass-through partners, the extended due date applies regardless of whether the audited partnership must file or extends its adjustment-year return. Missing it can make the tier liable for an IU, and the Form 8985 instructions note that failure to submit by the due date may result in a penalty.
How to submit
- Audited partnerships and their pass-through partners must submit electronically. The instructions state: “Audited BBA partnerships and their pass-through partners are required to submit Forms 8985 and 8986 electronically.” Registration and steps are at the IRS BBA electronic submission page (IRS.gov/BBAeSubmit).
- AAR partnerships include Forms 8985 and 8986 with the AAR, filed with and in the same manner as the AAR (Form 8082 with an e-filed Form 1065, or Form 1065-X on paper).
- Pass-through partners of an AAR partnership fax Form 8985, with or without Forms 8986, to 888-981-6982. Packages over 100 pages are mailed to Ogden - Internal Revenue Submission Processing Center, M/S 4705, 1973 N Rulon White Blvd., Ogden, UT 84201. Submissions cannot be split into multiple Forms 8985 to stay under 100 pages, and the fax number is not for other use (IRS AAR page).
- Payments by a pass-through partner go by EFTPS or card, or by check with Form 8985-V to Internal Revenue Service, Ogden, UT 84201-0011.
If the PR or DI changed, the Form 8985 instructions explain how to submit Form 8979: with the Form 8985 for an AAR, or faxed separately to 888-981-6982 with a statement in Part V for an audit, or attached to Form 8988 for a push-out election.
What goes on the forms
Form 8986 has six parts. Part I identifies the entity submitting it. Part II identifies the audited or AAR partnership: its name and TIN exactly as on the related Form 8985, the reviewed year end, the adjustment year end, the extended due date of the adjustment-year return (item F), and the date the Forms 8986 were furnished (item G). Part III identifies a pass-through partner issuing the form and the entity that issued a Form 8986 to it. Part IV identifies the recipient partner: name, address, TIN, general or limited and domestic or foreign status, entity type, and original, changed and corrected profit, loss and capital percentages, liabilities and capital account components. Part V lists each adjusted Schedule K-1 or K-3 item by line, title and code, with the amount as reported, any approved modifications, the adjustment net of modifications, and the amount as corrected, plus a penalties section showing each applicable penalty's code section, rate, adjusted lines and amount. Part VI holds supporting statements. A separate Form 8986 is required for each reviewed year.
The December 2024 revisions changed the column headings in Form 8985 Part IV and Form 8986 Part V and added an “as corrected” column. The IRS's audit page instructs anyone who received a December 2019 revision Form 8986 to prepare their own Forms 8985 and 8986 on the December 2024 revision. The Form 8986 instructions also address specific adjustment types: loans recharacterized as distributions use the Schedule K-1 distributions line and code, and disguised sale adjustments use the Other category with code DS and a Part VI statement.
Form 8985 reports the totals of the related Forms 8986 in Part IV, any applicable penalties, and statements in Part V, including a pass-through partner's IU, penalty and interest computation if it pays. Both forms carry a tracking number linking each Form 8986 to its Form 8985, and the audit control number from IRS correspondence for audit push-outs.
Corrections
An audited partnership or pass-through partner can submit corrected Forms 8985 and 8986 within 60 days of the original due date without IRS permission, and only with permission after that (Form 8985 instructions; Treas. Reg. 301.6226-2(d)). Every corrected Form 8986 must be accompanied by a corrected Form 8985.
A wrong partner TIN requires two corrected forms. The Form 8986 instructions say “If submitting a corrected form due to an incorrect TIN on a previously submitted and accepted original Form 8986, you will need to submit two corrected forms”: one with the correct TIN, and one with the incorrect TIN and zeros in Part IV, sections E through G, and in Part V.
The IRS can also require corrections. Failure to correct when required can be treated as a failure to furnish and file correct statements, which can invalidate a push-out election, and a failure to furnish a correct statement is subject to the IRC 6722 penalty (Treas. Reg. 301.6226-2(a) and (d)(3)).
What recipients do
Partners that are not pass-through entities (generally filers of Forms 1040, 1120, 990-T, or a taxable trust or estate) report their Form 8986 amounts on Form 8978, Partner's Additional Reporting Year Tax, with the return for the reporting year: the year that includes the date the audited or AAR partnership furnished the Form 8986 to its partners. They can prepay to stop interest using the payment type Prepayment on BBA AAR/Exam Push Out; Direct Pay is available for Form 1040 filers. An entity that is partly pass-through reports entity-level items on Form 8978 and passes the rest through.
Pass-through partners push out further on their own Forms 8986 or pay an IU, by the extended due date in item F.
Disagreeing is limited. A partner can file Form 8082 for a Form 8986 received from an AAR, attaching it to the reporting-year return with a copy of the Form 8986. It cannot for an audit: “A partner is bound to finally determined adjustments on Form 8986 resulting from a BBA partnership audit and may not use Form 8082 to report the items differently.” Inconsistent reporting of audit push-out amounts is assessed as a math error (IRM 4.31.9.8.2.2).
If a Form 8986 includes adjustments subject to chapter 3 or 4 withholding for a foreign partner, the audited partnership must pay the withholding and file Forms 1042 and 1042-S or 8804 and 8805 for the year that includes the date the Form 8986 was furnished (Form 8986 instructions). For payee reporting on Form 1042-S generally, see Form 1042-S on tincompliance.com.
How the IRS reviews them
BBA Operations compares the adjustments on Form 15027, Form 8985 Part IV and Forms 8986 Part V. A timely, consistent package closes the case as a push-out. A late package is rejected and the IU assessed against the partnership. A timely package with discrepancies prompts a call to the PR for a corrected package; if none arrives, the IRS revokes the push-out election by Letter 5940 and assesses the IU (IRM 4.31.13.11.2). For tiers, BBA Operations starts completeness checks within 60 days after the extended due date and compares filings to a chain-of-ownership report (IRM 4.31.13.11.4). Form 8985 is treated as a return for IRC 6501(a), so a pass-through partner's share of the IU must be assessed within the normal period after it files, and there is no limitation period if it never files (IRM 4.31.13.5.1). See the push-out election and Form 8985 and Form 8986 pages.
Questions practitioners ask
Do we send amended Schedules K-1 after a BBA audit push-out?
No. Partners receive Forms 8986 showing their share of the adjustments, and the IRS receives the Forms 8986 with a Form 8985 transmittal. The Form 8082 instructions say not to use an amended Schedule K-1 for this purpose.
When are Forms 8985 and 8986 due after an audit?
For the audited partnership, 60 days after the adjustments are finally determined: the end of the 90-day petition period, or the date a court decision becomes final. The period cannot be extended.
Can Forms 8985 and 8986 be filed on paper?
Not for audit push-outs; audited partnerships and their pass-through partners must submit electronically. AAR partnerships file them with the AAR, and pass-through partners of an AAR partnership fax or mail them.
We sent a Form 8986 with the wrong partner TIN. How do we fix it?
Submit two corrected Forms 8986, one with the correct TIN and one with the incorrect TIN and zeros in the required sections, plus a corrected Form 8985. Corrections within 60 days of the due date need no IRS permission.
What does an individual partner do with a Form 8986?
Report it on Form 8978 attached to the return for the year that includes the date the partnership furnished the Form 8986, and pay any additional tax, penalties and interest. Partners can prepay to stop interest.