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Department of the Treasury
Internal Revenue Service
Instructions for Form 1065
U.S. Return of Partnership Income
Section references are to the Internal Revenue Code unless Contents Page
otherwise noted. Schedule M-1. Reconciliation of Income
Contents Page (Loss) per Books With Analysis of Net
How To Get Forms and Publications . . . . . . . . . . . . . 3 Income (Loss) per Return . . . . . . . . . . . . . . . 57
General Instructions . . . . . . . . . . . . . . . . . . . . . . . . . 3 Schedule M-2. Analysis of Partners' Capital
Purpose of Form . . . . . . . . . . . . . . . . . . . . . . . . 3 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Codes for Principal Business Activity and Principal . . . 61
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Who Must File . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Termination of the Partnership . . . . . . . . . . . . . . 5
Electronic Filing . . . . . . . . . . . . . . . . . . . . . . . . . 5 Future Developments
When To File . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 For the latest information about developments related to Form 1065
Where To File . . . . . . . . . . . . . . . . . . . . . . . . . . 6 and its instructions, such as legislation enacted after they were
published, go to IRS.gov/Form1065.
Who Must Sign . . . . . . . . . . . . . . . . . . . . . . . . . 6
Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 What's New
Accounting Methods . . . . . . . . . . . . . . . . . . . . . 7 Changes from the Inflation Reduction Act of 2022. The
Accounting Periods . . . . . . . . . . . . . . . . . . . . . . 8 following changes from the Inflation Reduction Act of 2022 (P.L.
Rounding Off to Whole Dollars . . . . . . . . . . . . . . 9 117-169) may affect partnerships with fiscal years, corporate
partners, or certain impacted activities.
Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . 9 • Advanced manufacturing investment credit for qualified
Administrative Adjustment Request (AAR) . . . . . . 9 investment in an advanced manufacturing facility placed in service
Amended Return . . . . . . . . . . . . . . . . . . . . . . . . 9 after 2022. Section 48D.
• Excise tax on repurchase of corporate stock by certain
Assembling the Return . . . . . . . . . . . . . . . . . . . 12 corporations which make repurchases after 2022. Section 4501.
Entity Classification Election . . . . . . . . . . . . . . . 12 • Excise tax on drug manufacturers under certain circumstances.
Elections Made by the Partnership . . . . . . . . . . 12 Section 5000D.
• Increase in energy credit for solar and wind facilities placed in
Elections Made by Each Partner . . . . . . . . . . . . 13 service in connection with low-income communities, effective
Partner's Dealings With Partnership . . . . . . . . . 13 January 1, 2023. Section 48(e).
• Extension of incentives for biodiesel, renewable diesel, and
Contributions to the Partnership . . . . . . . . . . . . 13 alternative fuels for productions after 2021. See Form 8864 and its
Dispositions of Contributed Property . . . . . . . . . 13 instructions. Sections 40A, 6426, and 6427.
Recognition of Precontribution Gain on • Credit for sustainable aviation fuel sold after 2022. Section 40B.
Certain Partnership Distributions . . . . . . . . . . 14 • Credit for clean hydrogen produced after 2022. Section 45V.
• Deduction for qualified retrofit for energy efficient commercial
Unrealized Receivables and Inventory Items . . . 14 buildings in tax years beginning after 2022. Section 179D(f).
At-Risk Limitations . . . . . . . . . . . . . . . . . . . . . . 14 • Credit for clean vehicles placed in service after 2022. Section
Passive Activity Limitations . . . . . . . . . . . . . . . . 14 30D.
• Credit for qualified commercial clean vehicles for vehicles
Specific Instructions . . . . . . . . . . . . . . . . . . . . . . . . 19 acquired after 2022. Section 45W.
Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 • Advanced manufacturing production credit for certain
Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 components produced and sold after 2022. See Form 7207 and its
instructions. Section 45X.
Schedule B. Other Information . . . . . . . . . . . . . 26 • Credit against payroll taxes for small businesses for increase in
Schedules K and K-1. Partners' Distributive research for tax years beginning after 2022. Section 41(h).
Share Items . . . . . . . . . . . . . . . . . . . . . . . . . 30 Schedule K, line 16. International Transactions. See
Specific Instructions (Schedule K-1 Only) . . . . . 31 information under Line 16. International Transactions regarding a
Part I. Information About the Partnership . . . . . . 32 filing exception for Schedules K-2 and K-3 (Form 1065).
Part II. Information About the Partner . . . . . . . . . 32 Schedule M-1. Reconciliation of Income (Loss) per Books With
Specific Instructions (Schedules K and K-1, Analysis of Net Income (Loss) per Return. The title of the
Schedule M-1 has been changed to Reconciliation of Income (Loss)
Part III, Except as Noted) . . . . . . . . . . . . . . . 34 per Books With Analysis of Net Income (Loss) per Return. There
Flowchart To Help Determine if Items Are weren't any changes to the Schedule M-1 line items. This change
Qualified Business Income . . . . . . . . . . . . . . 52 clarifies that Schedule M-1, line 9, is not the taxable income of the
Analysis of Net Income (Loss) per Return . . . . . . 56 partnership. Instead, Schedule M-1, line 9, agrees with the Analysis
of Net Income (Loss) per Return, line 1. The Analysis of Net Income
Schedule L. Balance Sheets per Books . . . . . . . 56 (Loss) per Return, line 1, is a summary of various items reported on
the Schedule K and is used for reconciliation purposes.
Jan 26, 2023 Cat. No. 11392V