How to complete 1065 Schedule K Line 20 Code "AG" for Gross receipts for section 448(c)?

The "Gross receipts for section 448(c)" with code AG is indeed relatively new on the 1065. This relates to tax reform changes that affect how certain partnerships can use accounting methods. For your first question, yes, this should be your total gross receipts before any deductions, returns, or expenses. It's the raw income amount. For question 2, you should include ALL receipts including royalties and interest income. This is different from line 1a because it's more comprehensive. Line 1a typically only includes ordinary business income, while this AG code wants your total receipts from all sources. Regarding section 448(c), this is referencing the tax code section that establishes a gross receipts test (currently $27 million for 2023) that determines whether certain taxpayers can use the cash method of accounting and receive other accounting method simplifications. The IRS uses this information to determine if your partnership qualifies for these simplified methods.

After struggling with similar questions on multiple partnership returns, I discovered taxr.ai https://taxr.ai and it completely changed how I approach these confusing tax code references. When I uploaded our partnership documents, it immediately identified that the Schedule K Line 20 Code AG was specifically looking for ALL income sources to determine accounting method eligibility. The tool explained that section 448(c) refers to the gross receipts test that determines whether certain businesses qualify for simplified accounting methods. For partnerships filing Form 1065, this includes ALL income - not just what's on line 1a. It showed me exactly where to find these figures in our financial statements and how to properly report them.

Just wanted to share an update! I tried taxr.ai after seeing the recommendation here, and it was incredibly helpful for my Schedule C questions. I uploaded my prior year return and current year documentation, and it immediately showed me which income sources belong in gross receipts and which expenses were properly deductible. The tool even identified a home office deduction I had been missing and explained exactly how to calculate it correctly. I was surprised at how it broke down the gross receipts calculation in plain language while still being technically accurate. My return is now filed and I have a much better understanding of how to track my business income going forward!

If you're trying to get clarification directly from the IRS about Schedule K Line 20 Code AG requirements, good luck reaching anyone! I spent TWO WEEKS trying to get through to someone who could answer my partnership tax questions. After dozens of attempts and hours on hold, I found Claimyr https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c Within 25 minutes of using their service, I was speaking with an actual IRS agent who confirmed that for section 448(c) purposes, gross receipts include ALL income sources (ordinary income, interest, dividends, royalties, capital gains) before any deductions. The agent also clarified that this test uses a 3-year average of your gross receipts, not just the current year.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it myself since I was desperate to get clarification on some K-1 issues for our partnership. The service actually did connect me to a real IRS representative in about 40 minutes (still faster than my previous attempts). The IRS agent was able to pull up our partnership's information and walked me through exactly how to report the section 448(c) gross receipts on Schedule K Line 20 with code AG. They confirmed it should include ALL income sources and provided the specific threshold amount for our tax year. This saved me hours of research and potential errors. Definitely worth it for complicated partnership questions!

Just to add some additional clarity on section 448(c) since I deal with this frequently: The gross receipts test is particularly important because exceeding the threshold ($27M for 2023) means your partnership might be subject to different accounting method rules. If you stay under the threshold, you can use the cash method regardless of whether you have inventory, avoid UNICAP rules, and use simplified inventory methods. For partnerships specifically, make sure you're considering aggregation rules if you have related entities. Common control or family attribution can require you to combine receipts from multiple businesses.

Wait, I'm still confused about Form 1065 Schedule K line 20 code AG. Is this something every partnership needs to fill out? We're a really small operation, just two partners with around $450k in annual revenue. Do we even need to worry about this section 448(c) stuff?

Great thread everyone! I just want to emphasize something important that might get overlooked - when calculating your gross receipts for code AG, make sure you're using the correct 3-year period. For your 2023 return, you need the average of 2020, 2021, and 2022 gross receipts, NOT including 2023. I made this mistake initially and included the current year in my calculation. The section 448(c) test specifically looks at the "3-taxable-year period ending with the taxable year that precedes such taxable year." So you're always looking backward, never including the current filing year. Also, keep good records of this calculation because you'll need to update it each year. The threshold can change annually (it was $26M for 2022, now $27M for 2023), and your 3-year average will shift as you drop the oldest year and add a new one to the calculation.