Filing Requirements

Tax Year

• The partnership's tax year is determined with respect to the partners' tax years.
  • Unless an exception applies, the partnership must use a required tax year.
    • The required tax year is the first of the following that applies:

Majority Interest

• Majority interest tax year is the tax year of partners owning more than 50% of partnership capital and profits if they have the same tax year as determined on the first day of the partnership's tax year.

Principal Partner

• Principal partners' tax year is the same tax year of all principal partners, i.e., partners owning 5% or more in capital or profits, if they all have the same tax year.

Least Aggregate Deferral

• Least aggregate deferral tax year is determined by multiplying each partner's ownership percentage by the number of months of income deferral for each possible partnership tax year and then selecting the tax year that produces the smallest total tax deferral.
  • The deferral period begins with the possible partnership tax year-end date and extends to the partner's tax year-end date.
  • If two year-ends tie, the partnership may choose either; if one of the qualifying years is the partnership's existing tax year, it must keep its existing year.

• Any time there is a change in partners or a partner changes his or her tax year, the partnership may be required to change its tax year.
• A year other than one required may be adopted for a business purpose with IRS approval. Income deferral is not a business purpose.
• A partner who joins a fiscal-year partnership keeps his or her own tax year and reports the partnership's items in the partner's year that includes the end of the partnership's year.

Natural Business Year

• Accounting for a natural business year, e.g., in a seasonal line of business, can be an acceptable business purpose.

Fiscal Year

• Under Sec. 444, a partnership may elect a tax year that is neither the required year nor a natural business year. The year elected may result in no more than 3 months of deferral (between the end of a tax year elected and the end of the required tax year).
  • Under Sec. 444, the partnership may make the election only if the partnership is not a member of a tiered structure and it did not previously make a Sec. 444 election other than to change to a shorter deferral period.
  • A partnership whose partners all have the same year as the partnership has no deferral to elect and is not eligible.
  • A Sec. 444 partnership makes a required payment (Form 8752) that approximates the tax deferred.

Existing Tax Year

• If one or more than one qualifying tax year is also the partnership's existing tax year, the partnership must maintain its existing tax year.

Return Due Date

• Partnership returns are due by the 15th day of the 3rd month following the close of the partnership's tax year: March 15 for a calendar year; January 15 for a year ending October 31.
  • An application for an extension of a partnership tax return is filed on Form 7004. The extension is for 6 months after the original due date of the return (September 15 for a calendar year).

Domestic Partnership

• Every domestic partnership must file Form 1065, unless it neither receives income nor incurs any expenses treated as deductions or credits for federal income tax purposes.
• Schedules K-1 are filed with the return and furnished to the partners on or before the due date (including extensions) for the partnership return. A Schedule K-1 contains the partner's distributive share of partnership income and separately stated items to be reported on the partner's tax return.

Reporting Requirements of a Partnership

• A partnership, as a conduit, is not subject to federal income tax. But it must report information that includes partnership items of income, loss, deduction, and credit to the IRS.
  • A partnership is required to file an initial return for the first year in which it receives income or incurs expenditures treated as deductions for federal income tax purposes.
  • Form 1065 is used for the partnership's information return.
  • Signature by any partner is evidence that the partner was authorized to sign the return. Only one partner is required to sign the return.
  • Any partnership item that may vary tax liability of any partner is separately stated on Schedule K.
  • A Schedule K-1 is prepared for each partner and contains the partner's distributive share of partnership income and separately stated items to be reported on the partner's tax return.
  • There are penalties for not filing correct information returns and/or not furnishing correct payee statements.
  • The partners, not the partnership, make any estimated tax payments.
• Inadequate filing. The penalty is the number of persons who were partners at any time during the year, multiplied by $255 (for 2025 returns filed in 2026) for each of up to 12 months (including a portion of one) that the return was late or incomplete. The amount is indexed each year. updated 2026
  • added 2026 Rev. Proc. 84-35: a partnership with 10 or fewer partners, all individuals (other than nonresident aliens) or estates, in which every partner timely reported his or her share, is presumed to have reasonable cause and the penalty is abated on request. Married partners filing jointly count as one. An LLC, corporation or trust partner disqualifies the partnership.
• added 2026 Schedule K-1 reporting changes since the exam: item L capital accounts must use the tax-basis method (2020 forward); item K splits liabilities into recourse, qualified nonrecourse and nonrecourse; item N reports the partner's share of net unrecognized Sec. 704(c) gain or loss; Schedules K-2 and K-3 report international items (with a domestic-filing exception for partnerships with no foreign activity and only U.S. partners); box 20 code Z carries the Sec. 199A information.
• added 2026 Form 8308 is filed by the partnership for any sale or exchange of an interest involving Sec. 751 property, with the statement to the transferor due by January 31 of the following year. Form 7217 is filed by a partner who receives a distribution of property other than money (tax years beginning in 2024 and later).

Partnership Representative

• The IRC provides for designation of a partnership representative who has sole authority to commit the partnership to tax and litigation matters.
  • All partnerships must designate a partnership representative who
    • May be a partner in the partnership,
    • Must have a substantial presence in the U.S., and
    • Has sole authority to act on behalf of the partnership for purposes of the centralized audit rules.
  • The partnership representative's exclusive authority also includes acting on the partnership's behalf in all matters involving examination of the partnership's tax return, conducting administrative practice before the IRS, and conducting matters of litigation regarding disputed tax adjustments.
    • A partner (other than the designated partnership representative) does not have the statutory right to notification of an audit or updates on its progress and does not have the right to participate in the audit or resulting litigation.
    • The partnership representative is designated annually on the partnership's tax return, and the effective date is the date of filing the return.
  • A partnership with 100 or fewer partners may opt out of the centralized audit regime as long as all partners are "qualifying partners."
    • Qualifying partners are individuals, estates of deceased partners, and corporations (both C and S corporations). An S corporation partner's shareholders count toward the 100.
    • A partnership, LLC, or trust partner makes the partnership ineligible to opt out.
    • If the partnership elects to opt out, the IRS will proceed with an audit of each individual partner.
  • Affirmative action of electing a partnership representative or opting out must occur on each year's tax return (Schedule B).
  • added 2026 Under the centralized regime, an audit adjustment is assessed against the partnership as an imputed underpayment at the highest individual rate for the year under audit, unless the partnership makes a push-out election (Sec. 6226, Forms 8985 and 8986) within 45 days of the final adjustment, sending the adjustment to the partners who were partners in the reviewed year.

Consistent Treatment Rules

• The partner's treatment of partnership items must be consistent with the treatment of that item by the partnership in all respects, including the amount, timing, and characterization of the item. Form 8082 is filed to report an inconsistent position.

Reporting for Qualified Business Income Deduction (QBID)

• In regards to a partnership, the qualified business income (QBI) deduction is determined at the partner level. To allow partners to correctly figure the deduction on the partner's Form 1040 return, the partnership must report QBI related items on the partner's Schedule K-1.
  • Identify each trade or business that is a specified service trade or business (SSTB). The SSTBs are subject to special limitations, not applicable to the qualified trades or businesses, and generally include a trade or business where the principal asset is the reputation or skill of one or more of its employees.
  • The QBI (e.g., income, gain, deduction, and loss) from the trade or businesses.
  • The W-2 wage totals paid to employees by each trade or business.
  • The unadjusted basis immediately after acquisition (UBIA) of qualified property.
• Each partner must report his or her share of items consistently with their treatment on the partnership return.
• updated 2026 The 20% deduction is permanent under the 2025 act; the 2026 thresholds are $201,750 single and $403,500 joint, with phase-in ranges of $75,000 and $150,000, and a $400 minimum deduction for a partner with at least $1,000 of QBI from an active business. Guaranteed payments are not QBI.
• When a partner dies, his or her distributive share of self-employment income is figured through the end of the month in which the death occurs.

Private reference, not client advice. Original notes written 2022–2023 while studying for the SEE Part 2; figures updated October 2026 (Rev. Proc. 2025-32, Rev. Proc. 2026-15, P.L. 119-21). Verify current-year amounts before relying on them.