IRS Form 8986 – IRS Form, Instructions, Pubs 2026)

IRS Form 8986 – The IRS Form 8986 is a critical document under the Centralized Partnership Audit Regime (also known as the BBA rules), enacted by the Bipartisan Budget Act of 2015. Partnerships, partners, and tax professionals must understand this form to handle audits and administrative adjustments properly.

This guide explains everything about Form 8986, including its purpose, who files it, how to complete it, what to do if you receive one, and related requirements. It draws from official IRS sources, including the latest December 2024 revisions.

What Is IRS Form 8986?

Form 8986, titled Partner’s Share of Adjustment(s) to Partnership-Related Item(s) (Required Under Sections 6226 and 6227), reports each partner’s allocable share of adjustments to partnership-related items (PRIs). These adjustments arise from:

  • A BBA partnership audit (under section 6226).
  • An administrative adjustment request (AAR) filed by the partnership (under section 6227).

The form “pushes out” these adjustments from the partnership level to the partners, who then report them on their own tax returns. This replaces the old TEFRA rules for partnerships with tax years beginning on or after January 1, 2018.

Key purposes:

  • Tracks the flow of adjustments through multi-tiered partnership structures.
  • Allows partners to calculate additional tax (or overpayments) for the reviewed year and intervening years.
  • Ensures compliance with the BBA’s centralized audit rules, where the IRS typically audits and collects at the partnership level unless a push-out election is made.

Download the latest form: IRS Form 8986 PDF (Rev. December 2024) (as provided in your query).

Who Must File or Furnish Form 8986?

Form 8986 is not filed by individual taxpayers in the traditional sense. Instead, specific entities prepare and distribute it:

Entity Type When They Issue Form 8986 Submission Requirements
Audited BBA Partnership (election under §6226) After adjustments are finally determined (e.g., FPA letter or court decision) Furnish to reviewed-year partners; submit with Form 8985 to IRS within 60 days.
Pass-Through Partner (e.g., upper-tier partnership, S corp, trust, estate) of an audited partnership If pushing out further to their partners Furnish to affected partners; submit with Form 8985 by the audited partnership’s adjustment year extended due date.
BBA Partnership Filing an AAR (§6227) If electing push-out or adjustments result in no imputed underpayment (IU) Include with AAR filing; furnish to reviewed-year partners on filing date.
Pass-Through Partner of an AAR Partnership If receiving adjustments that need further push-out Submit Form 8985 (with or without 8986s) via fax/mail.

Note: Non-pass-through partners (e.g., individuals, C corporations) do not issue Form 8986—they receive it and use Form 8978 to report.

Key Concepts: Reviewed Year, Adjustment Year, and Push-Out

  • Reviewed Year: The partnership’s tax year under audit or AAR.
  • Adjustment Year: The year the partnership (or partner) takes the adjustments into account.
  • Push-Out Election: Allows the partnership to shift the imputed underpayment (IU) to partners instead of paying it itself. Form 8986 is the vehicle for this.
  • Imputed Underpayment (IU): The tax amount due at the partnership level from adjustments (netted and modified where allowed).

In multi-tier structures, adjustments “flow through” via sequential Forms 8986, with Form 8985 tracking the totals.

How to Complete Form 8986: Line-by-Line Overview?

The December 2024 revision updated Part V columns for better tracking of modifications and corrected amounts. Here’s the structure:

Header:

  • Check “Original” or “Corrected.”
  • Enter Tracking Number (from Form 8985) and Audit Control Number (if applicable).

Part I: Entity Submitting the Form
Identify the issuer (audited partnership, pass-through partner, AAR filer, etc.) and return type (e.g., Form 1065).

Part II: Audited/AAR Partnership Details
Include name, address, TIN, reviewed year end, adjustment year, extended due date, and furnishing date.

Part III: Pass-Through Partner Details (if applicable)
For upper-tier entities pushing out further.

Part IV: Partner Receiving the Statement
Detailed partner info, entity type, profit/loss/capital shares (as reported, change, corrected), liabilities, and capital account analysis.

Part V: Partner’s Total Reviewed Year Items
The heart of the form. List adjustments by Schedule K-1 line (or “K3” for international items):

  • Columns: Line #, Title, Code, As Reported, Statement Check, Approved Modifications, Net Adjustments, As Corrected.
  • Include penalties if applicable.

Part VI: Statements
Detailed explanations, computations, and special items (e.g., section 199A QBI details, disguised sales, K-3 breakdowns).

Penalties Section (at bottom): Report any penalty adjustments.

Pro Tip: Use separate Forms 8986 for each reviewed year. For disregarded entities, report the beneficial owner but note the DE in Part VI.

What to Do If You Receive Form 8986?

Non-Pass-Through Partners (individuals, C corps, etc.):

  • Use Form 8978 (Partner’s Additional Reporting Year Tax) + Schedule A to recompute tax for the reviewed year and up to the adjustment year.
  • Attach to your reporting year return (the year you receive the form).
  • Prepay via EFTPS (select “BBA AAR/Exam Push Out”) to stop interest.

Pass-Through Partners:

  • Issue your own Forms 8986 to affected partners.
  • Submit Form 8985 to the IRS.
  • Deadline: Extended due date of the original partnership’s adjustment year return.

Foreign Partners: May trigger chapter 3/4 withholding—file Forms 1042/1042-S or 8804/8805 as needed.

Filing Deadlines and Electronic Requirements

  • Audited Partnerships & Their Pass-Through Partners: Electronic submission via IRS BBA e-Submit portal (register at IRS.gov/BBAeSubmit). Due within 60 days of final determination.
  • AAR Partnerships: Include with AAR (paper or electronic as required).
  • Corrected Forms: Within 60 days of original without permission; later requires IRS contact.

Penalties for Non-Compliance:

  • Failure to furnish/submit timely can make the recipient liable for the full IU plus interest and penalties.
  • Late furnishing penalties under section 6722 may also apply.
  • Form 8985: Transmittal and tracking report (required with all 8986 submissions).
  • Form 8978: For partners to report their share of adjustments.
  • Form 8988: Election for push-out (audited partnerships).
  • Form 8980: For certain payment elections.

For full details, see IRS Instructions for Form 8986 (Rev. December 2024).

Common Questions About Form 8986

Can I amend my return instead?
No—Form 8986 adjustments are reported in the “reporting year” via Form 8978. Do not file amended K-1s.

What if adjustments don’t create an IU?
Still use Form 8986 to push out non-monetary or netting-to-zero items.

Multi-tier partnerships?
Each tier must push out timely to avoid IU liability at their level.

Tax software support?
Most professional packages now handle BBA forms—verify with your provider for 2025 filings.

Final Tip: The BBA rules are complex—consult a tax advisor experienced in partnership audits for your specific situation. Staying compliant with Form 8986 helps avoid unexpected tax bills and penalties.

This article was last updated for tax year 2025 based on current IRS guidance as of February 2026. Always verify with the latest forms on IRS.gov.