Amending a Partnership Return Under the BBA: How Administrative Adjustment Requests Really Work

On this page: Which partnerships are affectedWhat an AAR isThe two possible outcomesPartnerships with partnership partnersState returnsThe mistakes we see most oftenWhen it is worth doing

For most of the history of the tax code, fixing a partnership return was simple: the partnership filed an amended return, issued amended K-1s, and each partner amended their own return. For tax years beginning after December 31, 2017, that path is closed for most partnerships. The Bipartisan Budget Act of 2015 replaced it with a centralized audit regime, and with it a far less intuitive process for correcting a filed return. This guide explains how that process works in practice.

Which partnerships are affected

The centralized audit regime, in Sections 6221 through 6241, applies to every partnership return for tax years beginning after 2017 unless the partnership validly elected out. The election under Section 6221(b) is available only to partnerships with 100 or fewer partners, all of whom are eligible partners such as individuals, C corporations and S corporations, and it must be made on a timely filed return for that specific year. A partnership with another partnership or a trust among its partners cannot elect out.

A partnership that elected out for a year, or a year that predates the regime, can still use Form 1065-X. Everyone else must use an administrative adjustment request.

What an AAR is

An administrative adjustment request is the partnership's formal request to adjust items on a previously filed return. It is filed by the partnership representative, the person or entity designated on the return with sole authority to act for the partnership under the regime, using Form 8082. The year being corrected is called the reviewed year; the year the AAR is filed is the adjustment year.

Two timing rules govern every AAR under Section 6227:

• The three-year window. An AAR must be filed within three years after the later of the date the partnership return was filed or its original due date, without extensions. For a calendar-year 2023 return filed on time, that window generally closes March 15, 2027.
• No AAR after an examination begins. Once the IRS mails a notice of administrative proceeding for the year, an AAR can no longer be filed for it.

The two possible outcomes

Every adjustment in an AAR is sorted by its effect, and the treatment differs sharply.

Adjustments that increase tax: the imputed underpayment

If the adjustments, netted under the rules of Section 6225, produce an imputed underpayment, the partnership either pays it in the adjustment year, generally computed at the highest individual or corporate rate unless modifications apply, or elects to push the adjustments out to the reviewed-year partners. A push-out shifts the liability to the people who were partners in the reviewed year, rather than the current partners.

Adjustments that reduce tax: a mandatory push-out

Adjustments that do not produce an imputed underpayment, such as additional deductions, reduced income or a newly claimed credit, cannot be refunded to the partnership. They must be pushed out to the reviewed-year partners on Form 8986, with the partnership filing Form 8985 as a transmittal. Each partner then takes the adjustments into account on their own return for the reporting year, the year in which the partnership furnished the statements, computing the effect on Form 8978. Partners do not amend their reviewed-year returns.

That timeline carries the most important planning point in the entire process. Because the benefit lands in the reporting year, partners need tax in that year to absorb it, and the timing of the filing should be chosen with that in mind. A credit pushed out to a partner with no tax liability that year simply becomes a carryforward.

Partnerships with partnership partners

When a reviewed-year partner is itself a partnership or other pass-through entity, the push-out does not stop there. The upper-tier entity must either pay an imputed underpayment or push the adjustments out to its own partners in turn, following the tiered rules in the regulations under Section 6226. Tiered structures are where AAR timelines most often slip, because each tier has its own deadlines.

State returns

States have not responded uniformly. Some have adopted their own versions of the federal partnership adjustment rules, others still expect amended state returns from the partnership or the partners, and deadlines to report a federal change vary. The state side should be planned at the same time as the federal AAR, not after it.

The mistakes we see most often

• Filing Form 1065-X for a partnership that is subject to the centralized audit regime.
• Letting partners amend their own reviewed-year returns, which the regime does not permit.
• Missing the three-year window, which runs from the original due date or filing date, whichever is later.
• Assuming a favorable adjustment produces a refund to the partnership.
• Furnishing push-out statements late, or to current partners instead of reviewed-year partners.
• Overlooking the state filing requirements that follow the federal change.

When it is worth doing

AARs are most often worth the effort to claim a missed credit, such as the FICA tip credit, to correct a materially overstated income figure, or to fix an error before it compounds into later years. Because the regime is still unfamiliar to many preparers, much of this work arrives as a referral from another firm, with the client relationship returning to that firm when the filing is complete.

Frequently asked questions

This article is general information as of October 6, 2026, not tax advice for any specific situation. Tax law changes frequently, and the right answer depends on your facts. Illustrative figures are examples, not projections.