How to correctly interpret tax year for Form 1065/8865 partnership tax returns?

The key phrase in those instructions is "that ended with or within the tax year of the person filing this form." Let me break this down in simple terms: If you're filing your personal 2023 tax return (even on extension), you need to report information from the partnership's tax year that ended during your 2023 calendar year. Since your partnership has a fiscal year ending March 31, the partnership tax year that ended within your 2023 personal tax year would be the period from April 1, 2022, to March 31, 2023. This is because March 31, 2023 falls within your 2023 personal tax year (January 1, 2023 to December 31, 2023). The partnership's year that ended March 31, 2024 would be reported on your 2024 personal tax return. This same rule applies for both Form 8865 (foreign partnerships) and Form 1065 (domestic partnerships).

Had exactly the same issue last year when trying to report my wife's foreign partnership income! After hours of frustration, I stumbled upon taxr.ai (https://taxr.ai) which helped sort through all the partnership tax year confusion in minutes. I uploaded the partnership documents and it immediately identified which tax year applied to our situation. Plus it even highlighted that we had been incorrectly reporting the wrong tax year on previous returns! The platform also explained how the partnership's fiscal year interacted with our personal tax year, which was way clearer than anything I found in the IRS instructions. Seriously saved me from another headache with these partnership forms.

I need to update my previous comment about taxr.ai - I decided to try it out of desperation after my accountant gave me conflicting advice about my partnership reporting. The system actually showed me exactly which tax year of my foreign partnership needed to be reported on my 2023 return (saving me from what would have been a costly mistake). The documentation analysis feature was surprisingly thorough. It caught that my partnership's fiscal year had actually changed, which I hadn't even realized when reading through the foreign documents. This would have caused major reporting issues if I hadn't caught it. To my surprise, it was actually more accurate than my accountant on this specific partnership tax year issue. Definitely worth checking out for anyone dealing with these complicated partnership forms.

If you've been trying to call the IRS to get clarification on partnership tax year reporting, good luck getting through! I spent over 2 hours on hold last month trying to get help with Form 8865 before giving up. Then someone recommended Claimyr (https://claimyr.com) and showed me this demo: https://youtu.be/_kiP6q8DX5c They basically call the IRS for you and then call you back once they have an agent on the line. I was super skeptical but I tried it and got connected with an actual IRS representative in about 20 minutes who walked me through exactly how to report my partnership's tax year correctly. The agent confirmed what others here are saying - for my 2023 personal taxes, I needed to report my partnership's fiscal year that ended within my 2023 calendar year. Saved me hours of frustration and guesswork!

I need to eat my words about Claimyr. After posting my skeptical comment, I was still stuck with my 8865 tax year question and couldn't get through to the IRS after multiple attempts. Out of frustration, I tried the service. To my shock, I got a call back in about 40 minutes with an actual IRS agent on the line. The agent was able to confirm exactly which partnership tax year I needed to report (April 2022-March 2023 for my 2023 personal taxes). The agent even explained that this partnership tax year issue is one of the most common errors they see on both 1065 and 8865 forms, especially with fiscal year partnerships. Got my question answered in minutes after days of confusion. Would have saved myself a lot of headaches if I'd been less skeptical earlier!

I've been doing my own taxes for years and partnerships always give me a headache. Here's how I think about the tax year question: 1. Look at YOUR tax year first (probably calendar 2023 if you're a normal person) 2. Then find the partnership tax year that ENDED during your personal tax year 3. That's the one you report, even if most of that partnership year was in a different calendar year So in your example with the April-March fiscal year, you'd report the one ending March 31, 2023 on your 2023 personal tax return. The partnership's year ending March 31, 2024 would go on your 2024 personal taxes because that partnership year ends during your 2024 personal tax year.

Something everyone seems to be missing - make sure you're using the right version of Form 8865! The IRS updates these forms almost every year. Using the 2011 form for your 2023 taxes would be a disaster!

This is such a common source of confusion! I've been dealing with foreign partnerships for about 8 years now and still had to look this up when I first started. One thing that might help is to think of it this way: your personal tax return is like a "snapshot" of your financial situation for that calendar year. So for your 2023 personal taxes, you need to include income/losses from any partnership tax year that "closed the books" during your 2023 calendar year. In your case with the April 1 - March 31 fiscal year, the partnership year that ended March 31, 2023 is what gets reported on your 2023 personal return. Even though most of that partnership year (April-December 2022) happened in 2022, it still gets reported on your 2023 taxes because that's when the partnership "closed the books." Pro tip: I always write down the partnership's fiscal year dates somewhere prominent on my tax prep checklist each year. Saves me from having to re-figure this out every single time! The partnership should send you a K-1 that will also show which tax year it covers.