Administrative Adjustment Requests (AARs): Typical Scenarios, Push-Out and Pull-In Elections, Completing Related Forms

Amending partnership returns has always been complicated. Under the Bipartisan Budget Act of 2015 (BBA) guidelines, the complexities of correcting prior partnership returns have increased substantially. A tax professional must understand when an amended return can be filed as opposed to an AAR, which additional forms are required to be filed, and the impact of filing an AAR on the partnership and its partners.

For years prior to BBA, and for partnerships eligible to elect out of the BBA, partnerships and LLCs can file a 1065-X to amend the prior year return. For partnership taxable years subject to the BBA, Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request, along with an amended Form 1065, is used to revise prior returns. Alternatively, and adding to the complexity of these rules, Form 1065-X may be used to file an AAR under certain circumstances. In addition, the partnership could be required to file and issue to its partners a Form 8986, Partner's Share of Adjustment(s) to Partnership-Related Item(s) (Required Under Sections 6226 and 6227) if it decides (or is required to) to push-out the AAR adjustments to its partners.

Filing an AAR resets the statute of limitation for the IRS to make additional partnership adjustments. Whether the adjustments requested on the AAR results in an "imputed underpayment" for the partnership also must be considered. Tax professionals working with partnerships and LLCs must thoroughly grasp the new reporting responsibilities for partnership adjustments and understand the impact of filing an AAR has on both the partnership and its partners.

Listen as our panel of partnership procedural experts systematically works through correcting prior partnership returns under current guidelines by providing examples of AARs, including preparing each required form and addressing the potential effects on partners' returns.