IRS Form 8978 (Schedule A) – Partner’s Additional Reporting Year Tax (Schedule of Adjustments)

IRS Form 8978 (Schedule A) – If you’re a partner in a partnership and have received adjustments from an audit or administrative request, navigating IRS Form 8978 (Partner’s Additional Reporting Year Tax) and its attached Schedule A (Schedule of Adjustments) is crucial. This form helps partners recalculate their tax liabilities based on partnership-related changes, ensuring compliance under the centralized partnership audit regime. In this comprehensive guide, we’ll break down everything you need to know about IRS Form 8978 Schedule A, including its purpose, who must file it, step-by-step filing instructions, and recent updates as of 2026. Whether you’re dealing with BBA audits or AAR filings, this article will equip you with the knowledge to handle your additional reporting year tax effectively.

What Is IRS Form 8978?

IRS Form 8978 is a tax document used by partners to report and calculate any additional tax owed—or potentially refunded—due to adjustments in partnership-related items. These adjustments typically stem from partnership audits under the Bipartisan Budget Act of 2015 (BBA) or administrative adjustment requests (AARs). Partners who receive Form 8986 (Partner’s Share of Adjustment(s) to Partnership-Related Item(s)) from their partnership must use Form 8978 to refigure their tax liabilities for affected years, including intervening years up to the adjustment year.

The form is essential for non-pass-through partners, such as individuals or corporations, but not for pass-through entities like other partnerships or S corporations. It computes the “additional reporting year tax,” which is the net change in Chapter 1 income tax after accounting for adjustments to income, deductions, credits, and related tax attributes. This amount is then reported on the partner’s income tax return for the reporting year.

Key features of Form 8978 include:

  • Part I: Computation of Additional Reporting Year Tax – This section uses columns (a) through (d) to handle up to four tax years, calculating corrected income, deductions, taxes, and credits.
  • Penalties and Interest – Lines for reporting applicable penalties (e.g., under section 6662) and interest on underpayments.

If adjustments span more than four years, you’ll need to attach supplemental statements or use additional forms.

The Role of Schedule A in IRS Form 8978

Schedule A, officially titled “Partner’s Additional Reporting Year Tax (Schedule of Adjustments),” is an integral attachment to Form 8978. It details the specific adjustments across affected tax years, breaking them down into income, deductions, and credits. This schedule ensures all changes from Form 8986 are accurately listed and carried over to the main form for tax computation.

Structure and Fields of Schedule A

Schedule A is designed with a header for basic information and columnar sections for up to four tax years. Here’s a breakdown:

  • Header:
    • Name of partner(s)
    • Partner tax ID number
    • Source of review year adjustments (check boxes for BBA Audit or AAR Filing)
    • Tracking Number
  • Adjustments Sections:
    • Income (Lines 1a–1g): Spaces for up to seven specific income adjustments, such as ordinary business income or capital gains. Total on Line 2.
    • Deductions (Lines 3a–3g): Similar lines for deduction adjustments, like section 179 expenses. Total on Line 4.
    • Credits (Lines 5a–5g): For credit changes, such as foreign tax credits. Total on Line 6.

Each section uses columns (a) through (d) for different tax years, allowing for precise reporting of adjustments per year. If you have more adjustments than lines allow, attach statements describing them (e.g., “Schedule K-1, line 1, Ordinary business income”).

For a visual reference, here’s an example of how IRS Form 8978 and its Schedule A might appear in practice:

Who Must File IRS Form 8978 and Schedule A?

Not every partner needs to file this form. It’s required for:

  • Non-pass-through partners (e.g., individuals, C corporations) who receive Form 8986 from a partnership electing to “push out” adjustments under section 6226.
  • Affected partners in cases of BBA audits or AARs where adjustments impact their tax liabilities.

Pass-through partners (like S corporations or trusts) do not file Form 8978; instead, they pass adjustments to their own partners via additional Forms 8986. Foreign partners may need separate forms for effectively connected income (ECI) or fixed, determinable, annual, or periodical (FDAP) income.

You must file if there’s any additional reporting year tax, even if it’s negative (which can reduce your current year’s tax liability to zero or create a refund). File it with your federal income tax return for the reporting year—the year you receive Form 8986.

When Is IRS Form 8978 Required?

Form 8978 is triggered by:

  • BBA Audits: When a partnership is audited and elects to push out imputed underpayments to partners.
  • AAR Filings: When a partnership files an administrative adjustment request under section 6227, correcting prior returns.

The “reviewed year” is the partnership’s tax year under adjustment, while the “first affected year” is the partner’s corresponding year. Intervening years may also be impacted if tax attributes (e.g., carryforwards) change.

As of February 2026, the latest revision of the instructions is December 2024, with no major changes noted from prior years. Always check the IRS website for updates, especially if dealing with complex attributes like passive activity losses or at-risk limitations.

How to Fill Out IRS Form 8978 and Schedule A: Step-by-Step Guide?

Filling out these forms requires careful attention to detail. Follow these steps based on official IRS guidance.

Step 1: Gather Necessary Documents

  • Form 8986 from the partnership.
  • Original or amended returns for affected years.
  • Schedules K-1/K-3 for reviewed years.
  • Calculations for tax attributes (e.g., suspended losses).

Step 2: Separate Adjustments by Source

Use separate Forms 8978 and Schedules A for BBA audits and AARs. Process AARs first, as they may affect audit calculations.

Step 3: Complete Schedule A

  • Enter adjustments from Form 8986, Part V (net of modifications in column g for audits; no modifications for AARs).
  • Include partner-level changes (e.g., freed-up passive losses).
  • Describe each adjustment (e.g., “Schedule K-1, line 1”).
  • Total lines for income (Line 2), deductions (Line 4), and credits (Line 6).
  • Use only relevant columns for affected years.

If inconsistencies exist between your original reporting and the partnership’s, report them here to align with the final treatment.

Step 4: Fill Out Form 8978 Part I

Use this table for a quick reference to key lines:

Line Description Input Source
1a Total income per original/amended return Prior returns
1b Income adjustments Schedule A, Line 2
2 Corrected income 1a + 1b
3a Total deductions per original/amended Prior returns
3b Deduction adjustments Schedule A, Line 4
4 Corrected deductions 3a + 3b
5 Corrected taxable income 2 – 4 (attach statement if attributes differ)
6 Corrected income tax Recalculate as if adjustments were original
7 Corrected AMT (if applicable) Attach statement
8 Total corrected tax 6 + 7
9a Total credits per original/amended Prior returns
9b Credit adjustments Schedule A, Line 6
10 Corrected credits 9a + 9b
11 Corrected liability 8 – 10
12 Tax as originally reported/amended Prior returns
13 Increase/decrease per year 11 – 12
14 Total additional reporting year tax Sum of Line 13 across columns

Attach statements for complex calculations, such as using a mock Form 3800 for credits (labeled “for Form 8978 Calculation Only”).

Step 5: Calculate Penalties and Interest

  • Line 15 (Penalties): If indicated on Form 8986, compute and attach details (e.g., accuracy-related penalties).
  • Line 17 (Interest): Apply to increases only, using short-term federal rate +5% (or +3% for certain AARs). Start from the original due date of the affected year’s return.

Step 6: Attach and File

Include Schedule A, statements, and adjusted schedules (e.g., for section 199A). Report Line 14 on your return—positive as additional tax, negative as a reduction.

For visual aid in filling out the form, refer to this sample layout:

Examples of Using IRS Form 8978 Schedule A

Example 1: Simple Income Adjustment from Audit

A partner receives Form 8986 showing a $15,000 income increase for 2022 (reviewed year). On Schedule A, enter $15,000 on Line 1a, Column (a). Carry to Form 8978, recalculate tax (say, $3,300 increase), and report on 2025 return if 8986 received in 2025.

Example 2: Multi-Year Adjustments with Attributes

For a 2021 adjustment freeing $10,000 in suspended losses (affecting 2021 and 2022), list on Schedule A Lines 3 (deductions). Compute tax decrease for 2022 on Form 8978, netting the additional reporting year tax.

Example 3: Combined AAR and Audit

Process AAR first ($5,000 deduction increase, $1,200 tax decrease), then incorporate into audit form ($10,000 income increase, $2,400 tax increase). Net: $1,200 additional tax, with interest only on audit portion.

Recent Updates and Tips for 2026 Tax Year

As of February 2026, the form remains revised January 2023, with instructions updated December 2024—no significant changes from prior years. However, always download the latest from IRS.gov, especially if TCJA provisions or inflation adjustments affect calculations.

Tips:

  • Use tax software like TaxSlayer for automatic reporting of Line 14.
  • Consult a tax professional for complex attributes or foreign income.
  • Retain all records, as inconsistencies require Form 8082 if disputing partnership treatment.

Conclusion

IRS Form 8978 and Schedule A are vital tools for partners managing tax adjustments from partnerships. By understanding their purpose and following the filing steps, you can ensure accurate reporting of your additional reporting year tax. For the official blank Schedule A PDF, download it here: https://www.irs.gov/pub/irs-pdf/f8978sa.pdf. Stay compliant and avoid penalties by filing on time—your tax future depends on it.

This article is for informational purposes only and not tax advice. Consult the IRS or a professional for personalized guidance.