How to Fill Out and File Form 8985: Parts, Deadlines, and Penalties

To file IRS Form 8985, the Partnership Adjustment Tracking Report, complete the parts that apply to your filer type, attach the related Forms 8986, and submit the package the way the rules require for your situation: electronically through the BBA portal if you’re an audited partnership or its pass-through partner, with the Administrative Adjustment Request itself if you’re an AAR partnership, or by fax to a dedicated IRS number if you’re a pass-through partner of an AAR partnership. The deadline, the submission channel, and even which parts of the form you complete all turn on how you arrived at Form 8985 in the first place, so the first step is identifying your role.

Which Filer Are You

Form 8985 exists to transmit and summarize Forms 8986 under the centralized partnership audit regime created by the Bipartisan Budget Act of 2015. Three scenarios put it on your desk, and each one sends you down a different track through the rest of the process.

The first is a push-out election after an IRS audit. When the IRS audits a partnership and proposes adjustments, the default is an imputed underpayment paid at the entity level. The partnership representative can instead elect under Section 6226 to push the tax consequences out to the partners who were involved during the reviewed year, and that election must be made within 45 days of the notice of final partnership adjustment.¹ Once the election is in, Form 8985 becomes the transmittal cover for the Forms 8986 going out to partners.

The second is an Administrative Adjustment Request. Partnerships don’t amend returns the way individuals do; they file an AAR under Section 6227 to correct a previously filed return.² If the AAR includes a push-out election, or if the adjustments produce no imputed underpayment, Form 8985 and the related Forms 8986 travel with the AAR submission.³

The third is a pass-through partner in a tiered structure. When the partner receiving a Form 8986 is itself a partnership or S corporation, that entity can pay the tax or push the adjustments down to its own owners. If it pushes out, it files its own Form 8985 as the transmittal, satisfying the statutory requirement that a pass-through partner file a partnership adjustment tracking report.⁴

Completing the Form, Part by Part

Form 8985 has five parts, and not every filer completes all of them. Download the form and instructions from irs.gov/forms-pubs/about-form-8985.

Part I: Entity Identification

Check the box for your filer type: audited partnership, AAR partnership, or pass-through partner. Enter the type of return you normally file (Form 1065 for partnerships, Form 1120-S for S corporations) and the number of Forms 8986 attached to this particular Form 8985. A pass-through partner of an audited partnership that chose to pay rather than issue Forms 8986 enters zero in the count.⁵

Items D and E apply only to audited BBA partnerships and their pass-through partners. In most cases, check box D and enter “1 of 1” in box E.

Part II: Information About the Audited or AAR Partnership

Every filer completes Part II, including pass-through partners. Enter the name, address, and taxpayer identification number of the partnership that was audited or filed the AAR, along with the partnership representative’s name, address, and phone number (or the designated individual’s information if the representative is an entity). Required dates include the reviewed year’s tax year end, the adjustment year ending date, the extended due date of the adjustment year return, and the date the partnership furnished Forms 8986 to its partners.⁵

Each reviewed year gets its own Form 8985. Prepare a separate form for each year the audit covered.

Part III: Pass-Through Partner Information

Only pass-through partners complete Part III. Enter your entity’s name, address, TIN, and tax year end, identify the entity that issued the Form 8986 you received, and indicate whether you’re making a payment or pushing out adjustments to your own partners.

Part IV: Adjustment Details

Part IV carries the financial substance. Instead of fixed line numbers, the form asks you to enter the Schedule K-1 line number that was adjusted in column (a), the title of that item in column (b), and the applicable code from the Schedule K-1 instructions in column (c). For Schedule K-3 adjustments, enter “K3” in column (a) and reference the specific part, section, line, and column in column (b).⁵

The remaining columns handle the math:

Column (d), As reported: the original aggregate amount from the partners’ Schedules K-1 or as previously corrected.
Column (f), Approved modifications: any IRS-approved reductions to the imputed underpayment for that line item.
Column (g), Net adjustments: reviewed year adjustments minus approved modifications. AAR-related modifications don’t go here.
Column (h), As corrected: column (d) plus column (g), the corrected total.

If any line item needs additional explanation, check the box in column (e) and provide the detail in Part V. Schedule K-3 adjustments always require a Part V explanation.

Part V: Supplemental Information

Part V holds anything that doesn’t fit in Part IV’s columns. Common entries include details about loans recharacterized as partner distributions, disguised sale adjustments, and Section 199A information broken out by trade or business.

Where and How to Submit

Submission method depends entirely on filer type, and getting it wrong can invalidate a push-out election.

Audited partnerships and their pass-through partners file Forms 8985 and 8986 electronically. Register and submit through the IRS BBA electronic submission portal at IRS.gov/BBAeSubmit.⁵
AAR partnerships include Form 8985 and the related Forms 8986 with the AAR itself and file them together the same way as the AAR.³
Pass-through partners of an AAR partnership fax Form 8985 (with or without Forms 8986) to the IRS at 888-981-6982. The fax number is reserved exclusively for Forms 8985 and 8986; the IRS will not process anything else sent to it. If the package exceeds 100 pages, print and mail it instead.⁵

Keep confirmation records for every submission. Save the BBA portal receipt for electronic filings and the fax transmission confirmation page for faxed submissions.

Deadlines

The 60-day window for audited partnerships is the deadline most likely to cause trouble, because missing it can strip the push-out election and leave the partnership responsible for the full imputed underpayment.

Audited partnerships submit Form 8985 and Forms 8986 to the IRS within 60 days after the partnership adjustments become final. Adjustments become final when the 90-day period to petition a court expires without a petition, or when a court issues its final determination. The 60-day window cannot be extended.⁶
AAR partnerships file Form 8985 at the same time as the AAR itself. There is no separate deadline; the forms travel together.⁵
Pass-through partners submit Form 8985 by the extended due date of the audited or AAR partnership’s adjustment year return.⁵

Form 8985-V for Pass-Through Partners Who Pay

When a pass-through partner chooses to pay the tax at the entity level rather than pushing adjustments to its own owners, it uses Form 8985-V to submit the payment. Mail the voucher with a check or money order to:⁵

Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0011

Form 8985-V is for pass-through partners only. An audited partnership that pays the imputed underpayment directly uses a different payment process.

Penalties and the Cost of a Missed Election

The IRS can impose penalties under Section 6721 for failing to file correct information returns. For returns due in 2026, the per-return amounts are:⁷

Corrected within 30 days of the due date: $60
Corrected after 30 days but by August 1: $130
Filed after August 1 or not filed at all: $340
Intentional disregard: $680

Each Form 8986 counts separately, so per-return amounts add up quickly for partnerships with many partners. Annual caps apply, at $4,098,500 for larger entities and $1,366,000 for those with average annual gross receipts of $5 million or less.⁸

The bigger risk is losing the push-out election. If the 60-day submission window is blown, the partnership owes the full imputed underpayment itself, calculated at the highest individual tax rate and with interest running from the original due date of the reviewed year return.

1
Office of the Law Revision Counsel. 26 USC 6226 – Alternative to Payment of Imputed Underpayment by Partnership
2
Office of the Law Revision Counsel. 26 US Code 6227 – Administrative Adjustment Request by Partnership
3
Internal Revenue Service. File an Administrative Adjustment Request for a BBA Partnership
4
Office of the Law Revision Counsel. 26 US Code 6226 – Alternative to Payment of Imputed Underpayment by Partnership
5
Internal Revenue Service. Instructions for Form 8985 and Form 8985-V
6
Internal Revenue Service. BBA Partnership Audit Process
7
Internal Revenue Service. Information Return Penalties
8
Internal Revenue Service. Rev Proc 2024-40