IRS Form 8985 – IRS Form, Instructions, Pubs 2026

IRS Form 8985 – In the complex world of partnership taxation, staying compliant with IRS requirements is crucial for avoiding penalties and ensuring smooth operations. One key document that pass-through entities and partnerships must navigate is IRS Form 8985, officially titled the Pass-Through Statement – Transmittal/Partnership Adjustment Tracking Report. Required under Internal Revenue Code Sections 6226 and 6227, this form plays a vital role in handling adjustments related to imputed underpayments in BBA (Bipartisan Budget Act) partnerships. Whether you’re a partnership representative, tax professional, or business owner, understanding Form 8985 can help streamline your tax adjustment processes.

This comprehensive guide covers everything you need to know about IRS Form 8985, including its purpose, filing requirements, and step-by-step instructions. We’ll draw from official IRS sources to provide accurate, up-to-date information as of 2026.

What Is IRS Form 8985?

IRS Form 8985 serves as a transmittal and tracking document for partnerships dealing with adjustments under the centralized partnership audit regime established by the Bipartisan Budget Act of 2015 (BBA). It is primarily used to summarize and transmit Forms 8986 (Partner’s Share of Adjustment(s) to Partnership-Related Item(s)) from an audited partnership, an administrative adjustment request (AAR) partnership, or a pass-through partner.

The form helps track imputed underpayments (IUs) that are “pushed out” to partners under Section 6226, allowing partnerships to shift the responsibility for tax adjustments to individual partners rather than paying at the entity level. It also facilitates reporting payments made by pass-through partners and ensures proper documentation for IRS review.

Key features of Form 8985 include:

  • Tracking numbers for incoming and outgoing adjustments.
  • Details on the audited or AAR partnership, pass-through partners, and affected tax years.
  • Calculations for additional tax, penalties, and interest if a payment is made at the pass-through level.

For the latest version, download the PDF directly from the IRS website: Form 8985 PDF.

Purpose of Form 8985

The primary purpose of Form 8985 is to act as a cover sheet and summary for transmitting adjustment information to the IRS and partners. It is essential in scenarios involving:

  • Audited BBA Partnerships: When a partnership elects under Section 6226 to push out adjustments to partners instead of paying the IU at the partnership level.
  • Administrative Adjustment Requests (AARs): For partnerships filing an AAR under Section 6227 to correct previously reported items.
  • Pass-Through Partners: Direct or indirect partners (like S corporations or trusts) that receive adjustments and either pay them or push them further to their own partners.

Form 8985 also reports any payments made by pass-through partners, including calculations for IUs, penalties, and interest. This ensures transparency and compliance with the BBA’s centralized audit rules, which apply to partnership tax years beginning on or after January 1, 2018.

Additionally, the form handles non-monetary adjustments (e.g., changes to elections or balance sheets) and ensures that all adjustments, even those not resulting in an IU, are properly reported if pushed out.

Who Must File IRS Form 8985?

Filing Form 8985 is mandatory for specific entities under Sections 6226 and 6227:

  • Audited BBA Partnerships: Those electing to push out adjustments to partners.
  • AAR Partnerships: When pushing out adjustments via an AAR.
  • Pass-Through Partners: Including partnerships, S corporations, trusts, and estates that receive a Form 8986 and choose to either pay the IU or push it out to their affected partners.

Note that pass-through partners do not include disregarded entities or single-owner trusts. The form must be signed by the partnership representative (PR) or designated individual (DI) for the relevant year.

If you’re a pass-through partner making a payment instead of pushing out, you’ll still use Form 8985 to report the calculation and payment details.

When and How to File Form 8985?

Timing and submission methods vary based on the scenario:

  • For Audited Partnerships: File within 60 days after adjustments are finally determined (e.g., after an FPA or court decision). Submit electronically via the IRS’s BBA e-submit portal.
  • For AAR Partnerships: Include with the AAR filing.
  • For Pass-Through Partners: Due by the extended due date of the adjustment year return (as listed on the received Form 8986). For audited cases, submit electronically; for AARs, fax to 888-981-6982 or mail if over 100 pages.

Corrections must be filed within 60 days of the original submission. If paying by check or money order, include Form 8985-V. Electronic payments are encouraged and require a confirmation number on the form.

For batches exceeding 500 partners, submit a summary Form 8985 first, followed by additional forms.

Key Components and How to Fill Out Form 8985

Form 8985 is divided into several parts for organized reporting. Here’s a breakdown:

Part I: Information About the Submitting Entity

  • Indicate if it’s an original or corrected form.
  • Provide tracking numbers, audit control number (if applicable), entity type (e.g., audited partnership), return type (e.g., Form 1065), and number of Forms 8986 attached.

Part II: Information About the Audited or AAR Partnership

  • Include the partnership’s name, address, PR/DI details, TIN, reviewed year, adjustment year, extended due date, and date Forms 8986 were furnished.

Part III: Information About the Pass-Through Partner (If Applicable)

  • Detail the pass-through entity’s name, address, TIN, tax year, and whether it’s making a payment or issuing Forms 8986. If paying, include totals for additional tax, penalties, and interest, plus payment method.

Part IV: Partners’ Total Reviewed Year Items and Applicable Penalties

  • List adjustments by Schedule K-1 line numbers, codes, original amounts, modifications, net adjustments, and corrected amounts.
  • Include penalties with code sections, rates, and totals.

Part V: Statements

  • Provide explanations for calculations, such as IU determinations, balance sheet changes, or Section 199A details.

Always use the most recent version (Rev. December 2024) and follow the instructions PDF for detailed guidance.

Form 8985 often works in tandem with:

  • Form 8986: Details each partner’s share of adjustments; must be attached to Form 8985.
  • Form 8985-V: Payment voucher for checks or money orders.
  • Form 8979: For changing the PR or DI.
  • Form 8980: Used in electronic submissions for elections.

For international aspects, adjustments may involve Schedules K-2 and K-3.

Recent Updates to Form 8985

As of December 2024, revisions include updated column headings in Parts IV and V, and new requirements for electronic submissions in BBA AARs. Check IRS.gov for the latest developments, as legislation can impact forms post-publication.

Tips for Compliance and Avoiding Common Mistakes

  • Double-Check Tracking Numbers: Use the format YYMM1234-0000XX for uniqueness.
  • Calculate IUs Accurately: Follow Reg. 301.6225-1; include modifications for audits but not AARs.
  • Handle Payments Properly: Add 5% to the interest rate for audited adjustments; use electronic methods to avoid delays.
  • Furnish to Partners Timely: Provide Forms 8986 by the due date to avoid penalties.
  • Consult Professionals: For complex adjustments, work with a tax advisor familiar with BBA rules.

By adhering to these guidelines, you can minimize errors and ensure efficient processing.

Conclusion

IRS Form 8985 is a cornerstone for managing partnership adjustments under Sections 6226 and 6227, helping entities push out or pay imputed underpayments effectively. Staying informed through official IRS resources ensures compliance and reduces the risk of audits or penalties. For personalized advice, consult the full instructions or a tax expert. Download the form and instructions from IRS.gov to get started today.