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טופס 8978 הוראות כולל לוח זמנים

הוראות טופס 8978 (כולל לוח זמנים A), Partners דוחות נוספים על מס השנה (לשימוש עם טופס 8978 (Dec. 2019) ולוח זמנים A (Form 8978)

ינואר 2024

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Department of the Treasury  
Internal Revenue Service  
Instructions for Form 8978  
(Including Schedule A)  
(Rev. January 2024)  
Partner’s Additional Reporting Year Tax  
For use with Form 8978 (Rev. Jan. 2023)  
Note: An entity such as a trust or an estate can be both a  
taxable partner and pass-through partner. For adjustments to  
items that are taxable to the entity partner, it should use Form  
8978; and for adjustments to items that pass through to the  
partner's owners or beneficiaries, it should follow the Forms  
8985 and 8986 instructions for pass-through partners.  
Contents  
Page  
What’s New . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1  
Purpose of This Form . . . . . . . . . . . . . . . . . . . . . . . . 1  
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2  
General Instructions . . . . . . . . . . . . . . . . . . . . . . . . . 2  
Who Must File . . . . . . . . . . . . . . . . . . . . . . . . . . 2  
Where and When To File . . . . . . . . . . . . . . . . . . . 2  
Completing Form 8978 and Schedule A . . . . . . . . 2  
Specific Instructions for Form 8978 . . . . . . . . . . . . . . 4  
Specific Instructions for Schedule A (Form 8978) . . . . 5  
The Schedule A (Form 8978) lists all the adjustments a  
partner receives on Form 8986. Schedule A is also used to  
report any related amounts and adjustments not reported on  
Form 8986 which may result from changes to partner-level tax  
attributes as a result of adjustments from Form 8986.  
Form 8978 should only be used for changes to a partner’s  
income tax. Any non-income tax changes that are related to the  
income tax adjustments on Form 8986 received by the partner,  
such as self-employment tax changes, should be reflected on an  
amended return for the partner’s first affected year. The  
amended return should include a statement that explains how  
the change to non-income tax was calculated, and the source of  
the adjustment. See Instructions for Form 1040-X for further  
information.  
Inconsistent Positions . . . . . . . . . . . . . . . . . . . . . . . . 5  
Section references are to the Internal Revenue Code unless  
otherwise noted.  
Future Developments  
For the latest information about developments related to Form  
8978 and its instructions, such as legislation enacted after they  
were published, go to IRS.gov/Form8978.  
Non-pass-through partners reporting credit amounts on  
Form 8978. Partners other than pass-through partners (such as  
partnerships or S corporations) use Form 8978 and Schedule A  
(Form 8978) to calculate the tax in their reporting year from  
adjustments shown on Forms 8986 (pushout statement)  
originating from a BBA partnership because of a BBA  
examination or a BBA partnership AAR filing. The partner's  
reporting year is the partner's tax year that includes the date the  
audited BBA partnership or BBA partnership that filed an AAR  
furnished the Forms 8986 to its partners.  
These partners do not report on Form 3800 any changes to  
credits reported on the pushout statement. Instead, Form 8978  
is used to calculate the change in tax for the first affected year  
and any intervening years of the partner that result from the  
adjustments included on the pushout statement (including  
adjustments to credits). The first affected year is the partner's tax  
year that includes the end of the audited partnership's reviewed  
year or the year for which the AAR was filed. The intervening  
years are the partner's tax years that end after the first affected  
year and before the reporting year. The total change of tax for  
these years is then reported on Form 8978 as an increase/  
decrease to the reporting year tax.  
Because the total tax change is reported on Form 8978,  
which is then used to change the reporting year tax, a refund  
claim is not made by the partner and the adjustments to credits  
reported on Form 8978 should not be duplicated on Form 3800.  
See Exception below pertaining to “Form 3800 for Form 8978  
Calculation Only,” which will not duplicate reported credits but  
only support the calculation contained on the Form 8978.  
However, any carryforward credit amounts after the first affected  
year and any intervening years are reported on Form 3800 for  
the reporting year and reported as carryforwards (if appropriate)  
on Form 3800 in years after the reporting year.  
What’s New  
In general, adjustments from multiple Forms 8986 received from  
partnerships can be reported by a partner on one Schedule A  
(Form 8978) as long as the adjustments are from the same  
source type. Totals from the Schedule A are carried by the  
partner to Form 8978. However, adjustments from Forms 8986  
related to administrative adjustment requests (AARs) must be  
separated from adjustments from audits under the centralized  
partnership audit regime of the Bipartisan Budget Act of 2015  
(BBA). For this reason, check boxes have been added to Form  
8978 and its Schedule A to indicate the source of the  
adjustment(s) being reported: AAR filing or BBA audit.  
If a partner has adjustments from more than one source (AAR  
filing or BBA audit), each source type must be reported on a  
separate Form 8978 and Schedule A. The partner indicates the  
source of adjustment using the check boxes. Schedule A  
adjustments related to an AAR filing are carried to a Form 8978  
with the “AAR Filing” box checked. Schedule A adjustments  
related to a BBA audit are carried to a Form 8978 with the “BBA  
Audit” box checked.  
Because each Form 8978 and its Schedule A only provide for  
4 years of reporting, if there are more than 4 years of  
adjustments for either source, the partner must file multiple  
Forms 8978 and Schedules A relating to that source. Schedule A  
adjustments related to a BBA audit are carried to a Form 8978  
with the “BBA Audit” box checked. See Reporting adjustments  
Purpose of This Form  
Partners (other than pass-through partners such as partnerships  
or S corporations) use Form 8978 and Schedule A (Form 8978)  
to report adjustments shown on Forms 8986 received from  
partnerships that have elected to push out adjustments to  
partnership-related items to their partners.  
Jan 9, 2024  
Cat. No. 69657Z  
   
Exception: In preparing Form 8978, the partner may  
attach Forms 3800 to support the applicable first  
affected year or intervening year(s) calculations by  
General Instructions  
Who Must File  
Every partner (except pass-through partners) that receives a  
Form 8986 from a pass-through entity must file Form 8978 to  
report any additional reporting year tax as a result of taking into  
account the partner’s share of the reviewed year(s) adjustments.  
TIP  
labeling each Form 3800 attachment in each header with: “Form  
3800 for Form 8978 Calculation Only.”  
Definitions  
AAR partnership is a BBA partnership (see below) which has  
filed an administrative adjustment request (AAR) under section  
6227.  
Where and When To File  
A reviewed year partner or affected partner must file Form 8978  
Additional reporting year tax is the partner’s change in  
chapter 1 tax for the reporting year after taking into account the  
adjustments.  
with a federal income tax return for the partner’s reporting year.  
Example 1. Where and when to file. On March 1, 2023, an  
audited partnership furnishes Forms 8986 to its two partners.  
One of these reviewed year partners is a calendar year individual  
and the other is a pass-through partner. On January 15, 2024,  
the pass-through partner, in turn, furnishes Forms 8986 to its two  
partners who are calendar year individuals. The reporting year  
for all three individuals is the tax year that includes March 1,  
2023. Because the partners all have a calendar year end, the  
reporting year is the 2023 tax year. The partners must each  
attach a completed Form 8978 to their individual income tax  
returns which are due April 15, 2024 (without regard to  
extensions).  
Affected partner is a partner that held an interest in a  
pass-through partner at any time during the tax year of the  
pass-through partner to which the adjustments in the statement  
relate.  
Applicable tax year is any tax year that is impacted by the audit  
adjustments shown on Form 8986. For example, if the  
adjustments are from tax year 2020 (first affected year), that year  
would be impacted as well as any year between the first affected  
year and the reporting year that had related changes to  
partner-level tax attributes.  
Audited partnership, for purposes of Form 8978, is a BBA  
partnership that made the election under section 6226 to have its  
partners take into account their share of adjustments for  
partnership-related items.  
Completing Form 8978 and Schedule A  
What to report on Form 8978 and Schedule A (Form 8978).  
The specific adjustments listed on Form 8986 received by a  
reviewed year or affected partner, and other adjustments from  
partner-level tax attributes that have changed as a result of  
taking into account the adjustments, should be listed on the  
partner’s Schedule A under lines 1, 3, and 5 for income,  
deductions, and credits, respectively, for the applicable tax year.  
The totals on lines 2, 4, and 6 of Schedule A are reported on  
lines 1b, 3b, and 9b, respectively, of Form 8978.  
BBA AAR is an administrative adjustment request filed by a BBA  
partnership.  
BBA partnership is a partnership that is subject to the  
centralized partnership audit regime that was enacted into law by  
section 1101 of the Bipartisan Budget Act of 2015 (BBA).  
First affected year is the partner’s tax year that includes the  
end of the audited partnership’s reviewed year(s). Each reviewed  
year of an audited partnership should have a corresponding first  
affected year for each partner.  
Intervening years include the partner’s tax years that end after  
the first affected year and before the reporting year.  
Non-pass-through partner is a partner that is other than a  
pass-through partner.  
Note. Tax attribute schedules should be adjusted to the extent  
adjustments to non-income items were received. For example, if  
the partner’s Form 8986 reflected a decrease to the partner’s  
share of recourse liabilities, this could change the partner’s  
amount at risk, which in turn could result in an adjustment on  
Schedule A to reduce the allowable loss from the partnership. In  
this example the partner's at risk schedule should be adjusted  
and an increase to income should be reported on Schedule A to  
reflect the decrease to the previously reported loss from the  
partnership.  
Pass-through partner is a pass-through entity that holds an  
interest, either directly or indirectly, in a partnership.  
Pass-through entities include partnerships required to file a  
return under section 6031(a), S corporations, trusts (other than  
wholly owned trusts disregarded as separate from their owners  
for federal tax purposes), and decedents’ estates. For this  
purpose, a pass-through entity is not a wholly owned entity  
disregarded as separate from its owner for federal tax purposes.  
Tax calculations. Taxes should be figured and shown on a  
separate statement. In general, non-pass-through partners that  
receive adjustments from a Form 8986 should figure the  
additional reporting year tax as if all the adjustments on Form  
8986 had been included on the partner’s first affected year return  
using a statement attached to Form 8978 to support the amounts  
reported on lines 6 and 7 of the Form 8978. The additional  
reporting year tax from line 14 is then reported on the partner’s  
reporting year income tax return.  
Note: An entity partner can be both a non-pass-through partner  
and pass-through partner. To the extent the adjustments an  
entity partner receives on a Form 8986 relate to items that are  
taxable at the entity level, it is considered a non-pass-through  
partner and with regard to adjustments that pass through to its  
owners/beneficiaries it is considered a pass-through partner.  
Reporting year is the partner’s tax year(s) that includes the  
date the audited or AAR partnership furnished the Forms 8986 to  
its partners. The date the audited partnership or BBA  
partnership that filed an AAR furnished Forms 8986 to its  
partners is found on Form 8986, Part II, item G. For example, if  
the Form 8986, Part II, item G, date is 06/15/2023 and the  
partner receiving the Form 8986 is a calendar-year-end partner,  
that partner’s reporting year is tax year ending 12/31/2023.  
Reviewed year is the audited or AAR partnership’s tax year to  
which the partnership adjustment(s) relates.  
Columns (a) through (d). Columns (a) through (d) on Form  
8978 and Schedule A can be used for adjustments for the first  
affected year or intervening years. See Receipt of multiple Forms  
8986, later.  
Years to include and exclude on Form 8978 and Sched-  
ule A. Only applicable tax years (see Definitions, earlier) need  
to be shown on Form 8978 and Schedule A. A year that is not  
impacted does not have to be shown on the form or schedule.  
For example, if the first affected year is 2020 and the reporting  
year is 2025, years 2021–2024 are considered intervening years.  
If the only intervening year impacted is 2023 (that is, 2023 is the  
only intervening year that had related changes to partner-level  
Reviewed year partner is any person that held an interest in  
the audited or AAR partnership at any time during the  
partnership’s reviewed year.  
2
Instructions for Form 8978 (Jan. 2024)  
         
tax attributes as a result of the 2020 adjustments), the form and  
schedule only need to show 2020 and 2023.  
the $5,000 that he has determined is available for offset as a  
negative amount on line 1c.  
Bill carries the totals from lines 2 and 4 of Schedule A to Form  
8978, lines 1b and 3b, respectively. Bill also completes lines 1a,  
2, 3a, and 4 on the Form 8978, according to the instructions.  
Receipt of multiple Forms 8986. If a partner receives multiple  
Forms 8986 for different years, a column on the form and  
schedule could be both an affected year and an intervening year.  
Bill attaches to Form 8978 a statement that shows how his tax  
year 2021 corrected taxable income, income tax, and AMT, if  
applicable, were figured. He includes the income adjustment as  
an increase to income and the deduction adjustment as a  
decrease to deductions.  
Bill carries the amounts figured in the statement to lines 5, 6,  
and 8 of Form 8978. He enters his corrected tax liability for tax  
year 2021 on line 11 of Form 8978. He enters his income tax as  
previously reported for tax year 2021 on line 12 of Form 8978  
and subtracts this amount from the amount on line 11 to obtain  
the increase or decrease to tax, which he enters on line 13.  
If any applicable penalties are shown on Form 8986, Part V,  
Bill must attach a statement to his Form 8978 that shows how the  
additional penalties that result from the additional tax were  
figured. If penalties are applicable, Bill needs to include this  
amount on line 15 of Form 8978. Because Part V of the Form  
8986 Bill received indicates that the section 6662 substantial  
understatement penalty applies, Bill prepares a separate  
calculation which shows that the additional $3,408 in tax  
reported on line 13, column (a), of the Form 8978 does not  
exceed the $5,000 threshold required for the penalty to apply. He  
attaches this separate penalty calculation statement to his return  
and enters zero on line 15 of his Form 8978.  
Bill figures his additional interest on the increase in tax shown  
on line 14 of his Form 8978 from April 15, 2022 (the due date of  
his 2021 return), up to the date the additional reporting year tax  
is paid. If penalties had been shown on his Form 8978, Bill would  
have figured interest on penalties from the due date of his 2021  
return, or the extended due date of his 2021 return, if a valid  
extension request had been filed.  
Note. If all of the adjustments from Forms 8986 cannot fit on  
one Schedule A (Form 8986), multiple Schedules A can be  
attached. If more than one Schedule A is needed, enter the  
totals from all Schedule A lines 2, 4, and 6 on the corresponding  
Form 8978 lines 1b, 3b, and 9b, respectively.  
Reporting adjustments related to an AAR. Adjustments from  
an AAR are reported separately from adjustments from a BBA  
audit on Forms 8978 and Schedules A. A checkmark in box 1 or  
2 of Part I, item A of Form 8986 indicates the adjustments are  
related to an audit of a BBA partnership. A checkmark in box 3 or  
4 of Part I, item A of Form 8986 indicates the adjustments are  
related to an AAR. If a partner has no adjustments from a Form  
8986 that are related to an audit, but only adjustments related to  
an AAR, only the AAR-related Form 8978 and Schedule A need  
to be included.  
If one or more adjustments are from a Form 8986 that is  
related to an AAR, a separate Form 8978 and Schedule A (Form  
8978) must be completed to report the tax impact of these  
adjustments and calculate the correct interest. The Form 8978  
and its Schedule A should be filled out in the same way as for an  
audit-related Form 8978 and its Schedule A. Select the “AAR  
Filing” checkbox at the top of the Form 8978 and the Schedule A  
and enter the employer identification number of the entity that  
issued the Form 8986.  
Note. If all adjustments are AAR-related, only one Form 8978  
and one Schedule A need to be completed.  
Reporting adjustments related to a BBA audit. The following  
example shows how adjustments reported on Form 8986 related  
to a BBA audit are reported on Form 8978 and its Schedule A.  
Note. The reduction in tax for 2022 reflected in column (b) of the  
Form 8978 is included in the total increase to tax reported on  
line 14, but is not included in the interest calculation.  
If there were any intervening year partner-level adjustments,  
Bill would have done similar calculations for those years. For  
example, if any of the adjustments made for 2021 or 2022 would  
also apply to Bill’s 2023 tax year, Bill would complete column (c)  
for 2023 on Schedule A (Form 8978) and column (c) for 2023 on  
Form 8978, showing the partner-level adjustments.  
Bill must report the additional reporting year tax from line 14  
of Form 8978 on the appropriate line on his 2023 Form 1040,  
following the Instructions for Form 1040.  
Bill’s payment accompanying his 2023 Form 1040 should  
include the tax and interest. If a penalty had been applicable, he  
would include that in his payment as well.  
Example 2. Completing Form 8978 and Schedule A for  
an audit-related Form 8986. On June 10, 2023, Bill Jones,  
who files as a single individual, calendar-year taxpayer, receives  
a Form 8986 from an audited partnership of which Bill is a  
partner. The Form 8986 is for reviewed year 2021. Part II, box G,  
of the Form 8986 indicates that the audited partnership issued  
Forms 8986 to its partners on June 8, 2023. Because June 8,  
2023, is within Bill’s tax year ending December 31, 2023, Bill  
must report these adjustments on his 2023 Form 1040 income  
tax return and attach Form 8978.  
The Form 8986 indicates that Bill's share of the adjustments  
includes a $15,000 increase to ordinary income and a $10,000  
decrease in other deductions, in Part V of Form 8986, and a  
$6,000 decrease to capital gains, shown as a negative amount in  
Part V of Form 8986.  
Bill determines that the adjustments shown on Form 8986 are  
from a partnership that he treats as a section 469 passive activity  
for tax purposes.  
Bill previously reported no capital gains or losses on his  
Forms 1040 in 2021 and 2022, and now has a $6,000 decrease  
to capital gains (increased capital loss). Due to the $3,000  
annual capital loss limitation, the $6,000 capital loss adjustment  
is taken in $3,000 annual increments. So, Bill claims a $3,000  
capital loss in 2021 and the remaining $3,000 capital loss in  
2022.  
Bill enters the ordinary income, the capital gain/loss  
adjustments, and the appropriate tracking numbers on  
Schedule A (Form 8978), lines 1a and 1b, respectively. After  
taking into account the BBA income adjustment for 2021, 2022,  
and 2023, Bill determines that there are $5,000 in previously  
suspended passive activity losses that can be used. He enters  
Bill must attach Form 8978, Schedule A (Form 8978), and the  
calculation statements to the Form 1040 he files for 2023. In this  
example, Bill should include statements for tax and penalty  
calculations related to Form 8978. He should also attach his  
section 469 suspended loss and section 199A schedules; these  
should include the adjustments shown on his Schedule A (Form  
8978).  
If a corporation received a Form 8986 identical to the one that  
Bill received, the corporation would follow the same procedures  
for completing Form 8978 and Schedule A, and include those  
with its tax year 2023 income tax return. The additional tax,  
penalties, and interest would be reported and paid following the  
instructions for the corporation’s income tax return.  
Reporting adjustments from both an audit and from an  
AAR. If a partner receives one or more audit-related Forms  
3
Instructions for Form 8978 (Jan. 2024)  
   
8986 and also one or more AAR-related Forms 8986, the  
partner’s Form 8978 related to the AAR adjustments should be  
completed first. The numbers shown on this first Form 8978  
should be included in the “as previously reported” numbers on  
the Form 8978 related to the audit adjustments. Each Form 8978  
should have applicable lines completed, and the partner should  
add all the amounts on line 14 (total increase/decrease to tax)  
from all the Forms 8978 and report the sum on the appropriate  
line of the tax return.  
Example 3. Completing Forms 8978 and Schedules A for  
an audit-related Form 8986 and an AAR-related Form 8986.  
Frank Smith files as a single individual. On May 15, 2021, Frank  
received a Form 8986 related to an AAR that was filed by a  
partnership in which he is a partner. This Form 8986 reflects an  
increase of $5,000 to Frank’s share of other deductions. On June  
12, 2021, he received a Form 8986 related to an audit, showing  
an additional $10,000 in income. No penalties were noted on  
either Form 8986. According to the date shown on Parts II, item  
D of the Forms 8986, both relate to adjustments made to the  
2020 tax year.  
Frank’s first step is to complete a Form 8978 and Schedule A  
(Form 8978) for the AAR-related adjustments. He calculates a  
decrease in tax of $1,200 from the AAR- related adjustments  
and reports that amount on line 14 of the AAR-related Form  
8978.  
Frank’s second step is to complete another Form 8978 and  
Schedule A (Form 8978) for the audit-related adjustments. On  
this second Form 8978 (the audit-related Form 8978), he  
includes the amounts from the AAR-related Form 8978 in the  
“previously reported” amounts on lines 1a, 3a, 9a, and 12. He  
figures a total increase to tax of $2,400 from the audit-related  
adjustments and reports this on line 14 of the audit-related Form  
8978. He reports the total net amount of $1,200 on the  
appropriate line of his Form 1040, referring to the Instructions for  
Form 1040.  
Frank attaches the forms to his 2022 Form 1040 and includes  
payment of the additional $1,200 in tax, following the Instructions  
for Form 1040 with regard to amounts from Form 8978. The  
amount of interest is figured on the audit-related increase to tax  
on line 13 of the audit-related Form 8978 using the short-term  
quarterly rate plus 5%; interest runs from the due date of Frank’s  
2020 Form 1040 to the date of payment. This amount is reported  
on lines 17 and 18 of the audit-related Form 8978.  
Because the AAR-related Form 8978 showed a decrease to  
tax, no interest is shown on that Form 8978. If the AAR-related  
Form 8978 had an increase to tax, the interest would be figured  
using the same dates as for the audit-related Form 8978, but the  
rate would be the short-term quarterly rate plus 3%, and the  
amount would have been reported on line 17 of the AAR-related  
Form 8978.  
and its Schedule A should only include ECI figures, and each  
“FDAP Form 8978” and its Schedule A should only include FDAP  
figures.  
Note. Attach a statement to each “ECI Form 8978” and each  
“FDAP Form 8978” explaining how all line 13 income tax  
numbers were calculated. Enter the total of all the line 13  
amounts on line 14. Enter the amounts from line 14 on the  
applicable lines on the partner’s reporting year income tax  
return. See the instructions for the applicable income tax return.  
You may receive a Form 1042-S or 8805 from the partnership (or  
a pass-through partner) that has withheld on your additional  
reporting year tax, and you may claim the withholding credit on  
your income tax return.  
Specific Instructions for Form 8978  
Part I—Computation of Additional Reporting  
Year Tax  
Each column, (a) through (d), is figured separately for lines 1  
through 13.  
Line 1a—Total income per original return or as  
previously adjusted. Enter the total income amount as shown  
on your original or amended return, or as adjusted by the IRS.  
Enter negative amounts in parentheses.  
Line1b—Adjustments to income. Enter the amount from  
Schedule A, line 2, Total adjustments to income.  
Line 2—Corrected income. Enter the total of lines 1a and  
1b.  
Line 3a—Total deductions per return or as previously  
adjusted. Enter the total amount of deductions shown on your  
original or amended return, or as adjusted by the IRS.  
Line 3b—Adjustments to deductions. Enter the amount  
from Schedule A, line 4, Total adjustments to deductions.  
Line 4—Corrected deductions. Combine the amount on  
line 3b with the amount on line 3a and enter the result.  
Line 5—Corrected taxable income. Subtract line 4 from  
line 2 and enter the result. This should be the corrected taxable  
income. If, as a result of changes in tax attributes, corrected  
taxable income is different from the result obtained by  
subtracting line 4 from line 2, include a separate statement  
showing how the corrected taxable income amount was figured  
and enter that corrected amount on line 5.  
Line 6—Income tax. Include a separate statement showing  
how the corrected income tax was figured and enter that  
corrected income tax on line 6. See the Instructions for Form  
1040 or the instructions for your income tax return for the  
appropriate year(s).  
Line 7—Alternative minimum tax (AMT). If AMT applies,  
include a separate statement showing how the corrected AMT,  
including the applicable adjustment(s) shown on Schedule A,  
was figured and enter the corrected AMT on line 7. See the  
Instructions for Form 1040 or the instructions for your income tax  
return for the appropriate year(s) to figure the corrected AMT.  
Line 8—Total corrected income tax. Enter the sum of lines  
6 and 7.  
Line 9a—Total credits per return or as previously  
adjusted. Enter the total amount of credits shown on your  
original or amended return, or as adjusted by the IRS.  
Line 9b—Adjustments to credits. Enter the amount from  
Schedule A, line 6, Total adjustments to credits.  
Line 10—Total corrected credits. Combine the amounts on  
lines 9a and 9b and enter the result on line 10.  
Line 11—Total corrected income tax liability. Subtract  
line 10 from line 8 to obtain the corrected income tax liability.  
This amount should not include any non-income taxes. If, as a  
result of changes not reflected on a line item on the form or  
schedule, corrected income tax liability after credits is different  
More than 4 applicable tax years. If there are more than 4  
applicable tax years (see Definitions, earlier), additional Forms  
8978 should be prepared for the additional years. Each Form  
8978 should have all lines completed and the total of all the  
line 14 amounts should be reported on the appropriate line of the  
partner’s return. Include a Schedule A for each Form 8978.  
Foreign partners that receive Forms 8986. Foreign corporate  
partners that receive Forms 8986 must complete separate  
Forms 8978 and Schedules A (Form 8978) to report adjustments  
pertaining to effectively connected income (ECI) under section  
882, and fixed, determinable, annual, periodical (FDAP) income  
under section 881. ECI is income effectively connected with the  
conduct of a trade or business in the United States; FDAP  
income is income from U.S. sources not effectively connected  
with the conduct of a trade or business in the United States. The  
Forms 8978 and related Schedules A should clearly indicate  
whether they reflect ECI or FDAP income. Each “ECI Form 8978”  
4
Instructions for Form 8978 (Jan. 2024)  
 
from the result obtained by subtracting line 10 from line 8,  
include a separate statement showing how the corrected liability  
was figured and enter that correct amount on line 11.  
Line 12—Total tax shown on return or as previously  
adjusted. Enter the amount shown on your original or  
amended return, or as adjusted by the IRS.  
the Form 8986. If the tracking number is not on the Form 8986,  
use the audit control number at the top of the Form 8986, and if  
the audit control number is also blank, enter the tax identification  
number of the entity that issued the Form 8986. Leave the  
tracking number field blank for all adjustments to partner-level  
tax attributes.  
Line 13—Increase/decrease to tax. Subtract the amount  
shown on line 12 from the amount on line 11 and enter the result.  
Line 14—Total additional reporting year tax. Enter the  
sum of line 13, columns (a) through (d). Report this amount on  
the appropriate line of your income tax return for the reporting  
year.  
Reporting amounts from Form 8986. All adjustments  
(positive and negative) from a Form 8986 should be shown as  
reported on that form. When entering adjustments from a Form  
8986, enter amounts from Form 8986, Part V, column (h), which  
reflect the adjustments net of any approved modifications  
(column (g) of Form 8986). These amounts should be entered in  
the applicable columns (a) through (d) that correspond to the  
partner’s affected year. However, if Form 8986 is a result of an  
AAR partnership (and not an audited partnership), no  
modifications should be shown on Part V, column (g), of that  
Form 8986 and no modifications should be reported on  
Schedule A.  
Line 15. Form 8986, Part V, Applicable Penalties, lists which  
penalties, if any, apply and which line items are affected. If  
penalties apply, include a statement showing how the penalties  
were figured and enter the amount of penalties in the applicable  
column(s) of Form 8978. Penalties for each applicable tax year  
should be reported on line 15, columns (a) through (d).  
Line 17. Interest on any increase in income tax is figured from  
the original due date of your income tax return for each tax year  
to which an increase in tax is attributable, as determined under  
section 6226(b)(3). Interest is computed at the underpayment  
rate under section 6621(a)(2), but substituting “five percentage  
points” for “three percentage points” for purposes of section  
6621(a)(2)(B) (that is, the sum of the federal short-term rate plus  
five percentage points instead of three percentage points). For  
additional reporting year tax reported as a result of a Form 8986  
from an AAR, this substitution is not made. Interest for each  
applicable tax year should be reported on line 17, columns (a)  
through (d).  
Schedule A line instructions.  
Line 1—Income. Enter all the adjustments individually from  
Form 8986, Part V, that affect taxable income. Generally, this  
includes adjustments to ordinary income, rental income, interest  
income, dividends, royalties, gains and losses, and other  
income. Also include related amounts and adjustments not on  
Form 8986 that result from changes to partner-level tax attributes  
and other items as a result of adjustments from Form 8986.  
Line 2—Total adjustments to income. Enter the total of all  
adjustments from line 1. Carry the total of each column to the  
corresponding column on Form 8978, line 1b.  
Line 3—Deductions. Enter all the adjustments individually  
from Form 8986, Part V, that affect deductions from income.  
Generally, this includes adjustments to separately stated items  
such as a section 179 deduction. Also include related amounts  
and adjustments not on Form 8986 that result from changes to  
partner-level tax attributes as a result of adjustments from Form  
8986.  
Line 4—Total adjustments to deductions. Enter the total of  
all adjustments from line 3. Carry the total of each column to the  
corresponding column on Form 8978, line 3b.  
Line 5—Credits. Enter all the adjustments individually from  
Form 8986, Part V, that affect tax credits. Also include related  
amounts and adjustments not on Form 8986 that result from  
changes to partner-level tax attributes as a result of adjustments  
from Form 8986.  
Line 6—Total adjustments to credits. Enter the total of all  
adjustments from line 5. Carry the total of each column to the  
corresponding column on Form 8978, line 9b.  
Note. Interest should not be calculated on any decreases in tax  
on line 13 for a tax year.  
Note. Interest on penalties is figured in the same manner as  
interest on tax, except it is figured from the due date of the  
partner’s return including any valid extensions that were filed by  
the partner.  
Where to report additional reporting year tax. The total  
additional reporting year tax from Form 8978, Part I, line 14, is  
reported on the appropriate lines of the partner’s reporting year  
return (see the instructions for the applicable reporting year tax  
return). The additional penalties and interest should be included  
in the net payment calculation for the partner’s reporting tax year  
but these are not reported on the partner’s reporting year return  
and are not included in the additional reporting year tax.  
Specific Instructions for Schedule A  
(Form 8978)  
Inconsistent Positions  
If you originally reported an amount for an item inconsistent with  
the amount reported to you by the partnership on Schedule K-1  
or Schedule K-3, and this same item is included as an  
adjustment on the Form 8986 received, you should also include  
the amount of inconsistency for that item on Schedule A (Form  
8978).  
Adjustments. Enter the description of the item that  
corresponds to the Schedule K-1 or Schedule K-3 line number  
and title as reflected in columns (a) and (b) of Form 8986, Part V.  
For example, if Form 8986, Part V, column (a), shows “1” and  
column (b) shows “Ordinary business income,enter on  
Schedule A, Adjustments column, “Schedule K-1, line 1,  
Ordinary business income.” For adjustments due to changes in  
partner tax attributes, use the description used on the partner’s  
return.  
Example 4. Inconsistent position and BBA audit  
adjustment. Mary Johnson, a partner and calendar year  
taxpayer, received a tax year 2022 Schedule K-1 with $100 of  
ordinary business income. If she only reported $70 on her Form  
1040 or 1040-SR, she would have taken a $30 inconsistent  
position on her Form 1040 or 1040-SR. If she subsequently  
receives a Form 8986 for affected tax year 2022, with an audit  
adjustment reflecting a $50 increase to the Schedule K-1, line 1,  
Ordinary business income amount, she would have two amounts  
to enter on Schedule A (Form 8978). First, Mary would enter on  
line 1a “Schedule K-1, line 1, Ordinary business income” in the  
adjustments column and $50 in column (a), which would be  
labelled “12/31/2022.Second, Mary would enter on line 1b  
Note. Schedule K-3 (Form 1065) adjustments that do not  
directly increase or decrease a partner's taxable income should  
be reported with a zero amount on Schedule A (Form 8978), with  
any corresponding change to the partner's tax attributes, such as  
the foreign tax credit, shown as a positive (increase) or negative  
(decrease) amount.  
Tracking number. If an adjustment is from a Form 8986, the  
tracking number column should be completed for that  
adjustment line. The tracking number can be found at the top of  
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Instructions for Form 8978 (Jan. 2024)  
   
“Inconsistent position previously taken on line 1a item” in the  
adjustments column and $30 in column (a). Because she  
received a Form 8986 from an audit, Mary must now resolve the  
inconsistency with the original Schedule K-1. If she had no other  
adjustments, the amount of her total adjustments to income on  
line 2 of Schedule A, column (a), would be $80. She would carry  
this amount to Form 8978, line 1b, column (a).  
ensure that you are complying with these laws and to allow us to  
figure and collect the right amount of tax.  
You are not required to provide the information requested on  
a form that is subject to the Paperwork Reduction Act unless the  
form displays a valid OMB control number. Books or records  
relating to a form or its instructions must be retained as long as  
their contents may become material in the administration of any  
Internal Revenue law. Generally, tax returns and return  
Note. A partner’s requirement to treat partnership-related items  
consistently applies to adjustments that result from an audited  
partnership or an AAR partnership regardless of whether the  
partner previously treated the item inconsistently. However,  
partners that properly and timely file a subsequent Form 8082,  
Notice of Inconsistent Treatment or Administrative Adjustment  
Request (AAR), for items that are adjusted as part of an AAR  
filing are not required to treat the items on Schedule A (Form  
8978) consistent with the partnership’s treatment.  
information are confidential, as required by section 6103.  
The time needed to complete and file this form will vary  
depending on individual circumstances. The estimated burden  
for business taxpayers filing this form is approved under OMB  
control number 1545-0123 and is included in the estimates  
shown in the instructions for their business income tax return.  
If you have comments concerning the accuracy of these time  
estimates or suggestions for making this form simpler, we would  
be happy to hear from you. See the instructions for the tax return  
with which this form is filed.  
Paperwork Reduction Act Notice. We ask for the information  
on this form to carry out the Internal Revenue laws of the United  
States. You are required to give us the information. We need it to  
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Instructions for Form 8978 (Jan. 2024)