Form 1065-X: Amended Returns, AAR, and Push-Out Elections

Form 1065-X is the form a partnership uses on paper to correct a previously filed Form 1065, but how it works depends entirely on the tax year and whether the partnership is subject to the Bipartisan Budget Act of 2015 (BBA) centralized audit regime. For tax years beginning after 2017, most partnerships must file Form 1065-X as an Administrative Adjustment Request (AAR), not as a straightforward amended return. The AAR route carries its own tax calculation, its own payment mechanics, and its own partner-notification rules, and getting the track wrong can mean paying tax at the highest individual rate at the entity level when the correction should have flowed through to the partners.

Fix It Before the Deadline and Skip 1065-X Entirely

If the original filing deadline, including extensions, has not yet passed, file a superseding Form 1065 instead. A superseding return is a complete replacement filing, with all schedules and attachments, submitted within the original filing period.¹ The IRS treats it as though the first return never existed, which means no AAR, no imputed underpayment, and no separate partner notifications. Partnerships that routinely extend their returns give themselves a wider window to catch errors this way before the harder process takes over.

Amended Return or Administrative Adjustment Request

Once the filing window has closed, Form 1065-X does one of two very different jobs. It is a traditional amended return in only two situations: the tax year began before January 1, 2018, or the partnership validly elected out of the BBA centralized audit regime for that year on its original, timely-filed Form 1065.² A traditional amended return behaves the way you’d expect: the partnership corrects the items, issues updated Schedules K-1 to the partners, and the partners amend their own individual returns for the same year.

Every other partnership with a tax year beginning after 2017 files Form 1065-X as an AAR. The AAR does not simply fix the old return. It creates an adjustment that is resolved in the current year, either by the partnership paying tax at the entity level or by pushing the corrections out to the people who were partners during the reviewed year. That two-year structure is the whole reason the AAR process is more complicated than an amended return.

When Form 1065-X Is Actually the Right Form

Form 1065-X is the paper option. The IRS now expects most partnerships to file electronically, and the electronic path uses different forms.

For BBA partnerships filing an AAR electronically, use Form 8082 together with Form 1065 rather than Form 1065-X. Form 1065-X is used only for paper AAR filings. If the AAR includes a push-out election or adjustments that do not produce an imputed underpayment, attach Forms 8985 and 8986 whether you file on paper or electronically.³

For non-BBA partnerships amending electronically, use Form 1065 itself with the instructions for electronically filed amended returns. Form 1065-X is the paper-only option on that track too.³ The IRS generally applies the same e-filing thresholds to amended returns and AARs as to original Form 1065 filings, so partnerships required to e-file their original return are expected to e-file their correction.² If you do file on paper, mail Form 1065-X to the service center where the original return was filed, and have the Partnership Representative sign it.

The Deadline for Filing

A partnership may file an AAR no later than three years after the later of the date the partnership return for the reviewed year was filed, or the last day for filing that return, determined without regard to extensions.⁴ The “without regard to extensions” phrase matters. Even if the partnership took the automatic six-month extension and filed on the extended due date, the three-year clock runs from the original unextended deadline or the actual filing date, whichever is later.

There is also an absolute cutoff. A partnership cannot file an AAR after the IRS has mailed a notice of administrative proceeding for that tax year under Section 6231.⁴ Once the IRS opens its own audit of the partnership for a given year, the window for voluntary corrections through an AAR closes.

The Imputed Underpayment and How to Reduce It

Filing an AAR means calculating an imputed underpayment (IU). Under Section 6225 of the Internal Revenue Code, the partnership determines the difference between the items as originally reported and the corrected amounts, groups and nets the adjustments by category, and multiplies the net positive adjustment by the highest tax rate in effect for the reviewed year under Section 1 (individuals) or Section 11 (corporations), whichever is higher.⁵ For recent years, that is 37%. Interest runs from the due date of the reviewed year return, and penalties, if any, are added. The partnership pays the IU when it files the AAR.

Applying the top individual rate to the full adjustment almost always overstates what the partners would actually have owed. Section 6225(c) lets the partnership request a lower IU by showing that certain partners would have owed less. The request is made on Form 8980, which must be submitted electronically; the Partnership Representative signs it with a five-digit PIN generated through the IRS submission process.⁶ Common grounds include:

Portions of the adjustment allocable to tax-exempt partners who would not have owed tax.⁷
Portions allocable to C corporation partners, recalculated at the 21% corporate rate rather than the 37% individual rate.
Reviewed year partners who file their own amended returns and pay the tax on their share of the adjustment, which reduces the partnership’s IU by that amount.
Partners entitled to reduced rates under a tax treaty.⁷

Each claimed reduction needs supporting documentation. For partnerships with meaningful C corporation or tax-exempt ownership, skipping modification and simply paying the default IU can be one of the most expensive errors in the whole process.

The Push-Out Election

Instead of paying the IU at the entity level, the Partnership Representative can elect under Section 6227(b)(2) to push the adjustments out to the reviewed year partners, who then take them into account under rules similar to Section 6226.⁴ The election is made on the AAR itself, not on a separate later filing. Because partners are then taxed at their own rates rather than the highest statutory rate, push-out often produces a lower total tax bill across the group.

Mechanics are strict. The partnership furnishes Form 8986 to each reviewed year partner on the same date the AAR is filed with the IRS, and files Form 8985 as a transmittal with copies of all Forms 8986 as part of the AAR submission.⁸ Form 8986 tells each partner their specific share of the adjustment. If the partnership fails to get Forms 8986 to reviewed year partners on the filing date, the push-out election may be invalidated, leaving the partnership on the hook for the full IU plus more interest.

Negative Adjustments Do Not Produce a Partnership Refund

Partnerships sometimes file an AAR expecting a check back from the IRS. That is not how the BBA framework works. A net negative adjustment does not generate a refund at the entity level. When the IU calculation produces zero or a negative number, the partnership must furnish Forms 8986 to the reviewed year partners and file Form 8985 with the AAR, even though no entity-level payment is due.⁸ The reviewed year partners then claim the benefit on their own returns for the adjustment year. The statute makes this treatment mandatory.⁴

What a Complete AAR Package Contains

The IRS can reject an incomplete filing, so every piece needs to be in the envelope or the electronic submission:

The AAR itself: Form 1065-X for paper filings, or Form 8082 with Form 1065 for electronic filings.⁸
A written explanation of each adjustment and why the original reporting was wrong.
A statement showing how the imputed underpayment was calculated, even when the partnership elects push-out or the adjustments produce no IU.
Form 8985 whenever the partnership elects push-out or the AAR contains adjustments that don’t result in an IU.
Forms 8986, one for each reviewed year partner, filed with the IRS as part of the AAR and furnished to partners on the same day.
Payment of the IU, if any, remitted when the AAR is filed to stop interest from accruing further.

Do not include amended Schedules K-1 or K-3 with a BBA AAR. The IRS has directed that Forms 8986 replace amended K-1s in the AAR context.⁸

What Partners Do After a Push-Out

Partners who receive Form 8986 report their share of the adjustments on their own return for the adjustment year, not the reviewed year. The partner recalculates what their reviewed year tax would have been with the corrected items, determines the difference, and reports that additional tax, plus interest running from the original due date of the reviewed year return, on the adjustment year return.

A former partner who held the interest during the reviewed year still carries the obligation, even if they sold out years earlier. That is why keeping current contact information for departed partners matters. And partners should not file amended returns for the reviewed year in response to a push-out; the BBA framework requires everything to go on the adjustment year return, and filing an amended reviewed year return creates confusion with the IRS without satisfying the reporting requirement.

1
Internal Revenue Service. Amended and Superseding Corporate Returns
2
Internal Revenue Service. Instructions for Form 1065-X
3
Internal Revenue Service. Instructions for Form 1065-X (10/2025)
4
Office of the Law Revision Counsel. 26 USC 6227 – Administrative Adjustment Request by Partnership
5
Internal Revenue Service. How to Figure an Imputed Underpayment
6
Internal Revenue Service. Publication 5346 – Partnership Request for Modification of Imputed Underpayments Under IRC Section 6225(c)
7
eCFR. 26 CFR 301.6225-2 – Modification of Imputed Underpayment
8
Internal Revenue Service. File an Administrative Adjustment Request for a BBA Partnership