Answered: 8978 or not to 8968

strongsilence · ‎05-19-2025

My first time involved with AAR/F8986. The individual partner received a total of $3000 for two separate years. Since I don't have these two tax years in my software but have the actual tax returns, I'll need to manually calculate the tax and the amounts for each line of F8978. The 8978 has no line for Sch 1 adjustments so I think those belong on Line 3a. So the F8978 don't correspond with the actual 1040.

It's tedious.

There should be a better way.

Then there are the penalties and interest. And I'm not going to calculate those manually. Which likely means the client will receive notices from the IRS/FTB. Which means I'll be having to answer questions about it in a year.

Taxes-by-Rocky · ‎05-19-2025

Just wait until you have to start "layering" these adjustments in prior years (i.e., multiple 8978 filings for the same tax year from different partnerships...issued year, after year, after year). It's like stacking (filing) four amended returns on (for) the same tax year (all on one neat tax schedule). Based on experience, I'm pretty sure the IRS has difficulty going back more than three years to check your math on those adjustments. My guess.

I realize partners in later years don't want to pay the taxes of those that came before them, but without significant advances in technology (i.e., tax software; ours and/or the IRS'), the Centralize Partnership Audit regime under the BBA - and these forms - are no better solution than their predecessor.

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strongsilence · ‎05-19-2025

To 8978 or not to 8978 ctd.

In addition, QBI income and QBI wages changed on the 8986. So essentially, I need to do the tax return by hand or input it to the software.

strongsilence · ‎05-19-2025

To 8978 or not to 8978 ctd

SE tax adds more calculations headaches.

I think I'll multiply the additional income by the effective tax rate and then list this amount on the F8978.

Taxes-by-Rocky · ‎05-19-2025

Just wait until you have to start "layering" these adjustments in prior years (i.e., multiple 8978 filings for the same tax year from different partnerships...issued year, after year, after year). It's like stacking (filing) four amended returns on (for) the same tax year (all on one neat tax schedule). Based on experience, I'm pretty sure the IRS has difficulty going back more than three years to check your math on those adjustments. My guess.

I realize partners in later years don't want to pay the taxes of those that came before them, but without significant advances in technology (i.e., tax software; ours and/or the IRS'), the Centralize Partnership Audit regime under the BBA - and these forms - are no better solution than their predecessor.

8978 or not to 8968

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