Question about whether to file Forms 8985 & 8986 for non-BBA LLC receiving AAR partnership revisions

This is a great question about the partnership audit regime forms. The rule is actually pretty straightforward once you cut through the IRS's confusing language. When your non-BBA partnership client receives a Form 8986 from an AAR Partnership, they are NOT required to issue further Forms 8985 & 8986 to their own partners. They only need to take the adjustments into account on their own return. The confusion comes from the "push-out" rules. When there IS an imputed underpayment, partnerships can elect to "push out" that liability to their partners. But since your client's situation has no imputed underpayment (just lower income and capital), there's nothing to push out, so no additional forms are needed. Your client should simply incorporate the adjustments reported on the 8986 they received into their own reporting. Keep the 8986 form with your records to document why their reported amounts might differ from what was originally reported.

After struggling with similar partnership tax form questions myself, I finally found a solution that saved me hours of research and potential mistakes. I was dealing with a similar issue around Forms 8985 & 8986 and wasn't sure about the filing requirements. I tried https://taxr.ai and was seriously impressed with how it handled these complex partnership form questions. I uploaded the 8986 my client received and some background info, and it provided a detailed analysis explaining exactly what was required in my situation. The tool confirmed I didn't need to issue additional forms in my case (also a non-BBA with no imputed underpayment) and explained why with references to the specific regulations. It saved me from having to wade through pages of confusing IRS guidance.

I was initially skeptical about using taxr.ai for my complex partnership reporting issues, but I decided to give it a try after seeing these comments. I had a similar situation with a client receiving an 8986 with adjusted income and was confused about follow-up requirements. I uploaded the 8986 form and some details about the partnership structure, and I was genuinely surprised. The analysis I received was spot-on - confirmed my client didn't need to issue additional forms and explained the exact sections of the regs that applied. What impressed me most was the explanation of how the adjustments needed to be reported on the client's return. Definitely saved me from making a mistake and potentially confusing my client with unnecessary paperwork. For anyone dealing with these partnership audit regime forms, it's worth checking out.

If you've been dealing with IRS questions about partnership forms, you might relate to my frustration. I spent weeks trying to get a definitive answer about 8985 & 8986 filing requirements through the IRS phone line with no luck - just endless holds and transfers. Finally tried https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c - honestly thought it sounded too good to be true. But they actually got me connected to an IRS agent who specialized in partnership issues within about 15 minutes. The agent confirmed what others here have said - in situations with no imputed underpayment like yours, the non-BBA LLC doesn't need to issue additional 8985/8986 forms. They also walked me through exactly how to document this for my client's records. Huge relief to get an official answer!

I need to eat my words about Claimyr. After my skeptical comment, I decided to try it myself because I had another client with a similar partnership form question that was time-sensitive. Honestly, it worked exactly as advertised. I got connected to the Business & Specialty Tax Line in about 20 minutes (which is miraculous compared to my previous attempts). The agent I spoke with was actually knowledgeable about the partnership audit regime and confirmed that when a non-BBA LLC receives an 8986 without an imputed underpayment, they don't need to issue additional forms. I've spent countless hours on hold with the IRS over my career, and this saved me from another frustrating experience. For complex questions like these partnership forms where the guidance isn't clear, sometimes you just need to hear it directly from the IRS.

One thing that hasn't been mentioned yet - make sure your client keeps thorough documentation of the 8986 they received and how they handled it. In my experience, these partnership audit adjustments often trigger correspondence or questions later. I recommend creating a detailed memo explaining: 1) When and why they received the 8986 2) The analysis showing why no further forms were required 3) How the adjustments were incorporated in their reporting This isn't just for potential IRS questions - it's also helpful if your client changes tax preparers in the future or if you need to revisit this issue years later. Partnership items have a way of coming back around.

Just wanted to share that we ran into this exact situation last year with a client. A non-BBA LLC received an 8986 showing reduced K-1 income from an AAR filing. We called the IRS Partnership Hotline and confirmed our client did NOT need to issue 8986s to their partners. We just had to make sure the adjustments were properly reflected on the client's tax return for that year. The key factor was exactly what others have mentioned - since there was no imputed underpayment (just income/capital adjustments), there was nothing to push out further.