Form 8978: The Partner's Additional Reporting Year Tax
Published November 8, 2026
Form 8978 is used by a partner to report a tax change that comes from a partnership adjustment. The adjustment may come from an audit or from an administrative adjustment request, called an AAR. The partner reports the change in the year the partnership sends the Form 8986 statement.
This post is general information from the IRS form and its instructions. It does not say how any particular partnership or partner should be treated, and it does not give tax advice.
Who must file
Every partner other than a pass-through partner must file Form 8978 when it receives a Form 8986 from a partnership with adjustments. A pass-through partner, such as another partnership or an S corporation, follows the instructions for Forms 8985 and 8986 instead.
The reporting year and the affected years
The reporting year is the partner's tax year that includes the date the partnership furnished the Form 8986. The first affected year is the partner's tax year that includes the end of the reviewed year or the year for which the AAR was filed.
The years in between are the intervening years. The form computes the change in tax for the first affected year and for each intervening year. The total change then goes on the reporting year return. The total appears on line 14 of Form 8978.
What Form 8978 computes
Part I computes the corrected tax for each year. It starts with total income and deductions from the original return, adds the adjustments from Schedule A, and computes income tax, alternative minimum tax, and credits. Line 13 is the increase or decrease for each year.
Part II lists penalties and Part III lists interest, so those amounts are reported on the form as well.
Schedule A and the source boxes
Schedule A lists the adjustments shown on each Form 8986. The form has two check boxes at the top. One is for a BBA audit and the other is for an AAR filing. If a partner has adjustments from both sources, it files a separate Form 8978 and Schedule A for each source.
Each Form 8978 and Schedule A covers only four years. A partner with more than four years of adjustments files more than one set of forms for that source.
Credits and Form 3800
Credit changes are reported on Form 8978, not on a separate Form 3800 for the same amounts. The instructions allow a Form 3800 used only for the calculation. That attachment is labeled "Form 3800 for Form 8978 Calculation Only." Carryforward credits after the affected years are reported on Form 3800.
Non-income tax changes
Form 8978 is for income tax changes only. A change to self-employment tax or another non-income tax goes on an amended return for the first affected year. That return should include a statement that explains how the change was figured. The instructions for Form 1040-X cover this process.
Mistakes to avoid
- Filing one Form 8978 for both an audit and an AAR. Each source needs its own form.
- Leaving out the source box. The box tells the IRS which kind of adjustment is being reported.
- Counting a credit twice, once on Form 8978 and again on Form 3800.
- Forgetting the four-year limit on each form and schedule.
For background on how partnership income reaches the partner, see Schedule K-1 From a Partnership: The Basics. For the partnership return itself, see Partnership Returns: What Form 1065 Reports. For corrections on a return already filed, see How Do I Fix a Mistake on a Return I Already Filed?
Partnership audit rules change over time. Read the current instructions and the Form 8986 you received before you complete Part I.
Sources: Sources: IRS, Form 8978, Partner's Additional Reporting Year Tax (Rev. January 2023) (https://www.irs.gov/pub/irs-pdf/f8978.pdf); Instructions for Form 8978 (Including Schedule A) (Rev. December 2024) (https://www.irs.gov/pub/irs-pdf/i8978.pdf) This is general information, not advice about your specific return.
