Treasury releases new partnership tax form instructions; agency welcomes feedback

January 29, 2026

WASHINGTON — The Internal Revenue Service reminds partners and partnership administrators that the updated Instructions for Form 1065, U.S. Return of Partnership Income, and the updated Partner’s Instructions for Schedule K-1 (Form 1065) have been released for tax year 2025.

Form 1065 and Schedule K-1 remain mostly unchanged from the versions used for tax year 2024. On Form 1065, direct deposit lines were added to line 32, overpayment; and a new checkbox was added to line 16b of Schedule K for the partnership to indicate it qualifies for an exception to filing Schedule K-2 (Form 1065).

Feedback Invited

Final instructions for tax year 2025 (processing year 2026) were issued in January 2026. Feedback submitted will be considered in developing the tax year 2026 forms and instructions.

Interested parties may submit feedback --

• About the revised Form 1065 Instructions to IRS.gov/FormsComments, using the subject line: “Instructions for Form 1065” and
• About the revised Schedule K-1 Instructions to IRS.gov/FormsComments, using the subject line: “Partner’s Instructions Schedule K-1”.

New Reporting Codes for Schedules K and K-1

The updated instructions add new codes partnerships will use to report information to partners on Schedules K and K-1. The IRS has added some of these codes to help partnerships and preparers of their returns understand and comply with provisions of partnership tax law that have proven confusing. Other new codes implement provisions of the One, Big, Beautiful Bill. The new codes will be used to report certain distributions of property by partnerships to partners and other events or transactions. The updated Form 1065 instructions and Schedule K-1 instructions describe the new codes.

Partnership Distributions to Partners

Partnerships will use the following new codes to report particular types of distributions to partners on line 19 of Form 1065 and Box 19 of Schedule K-1. Below is a list of the new codes:

• Code D to report a partnership’s deemed distributions of cash to partners under section 752(b) of the Internal Revenue Code (“Code”), treating any decrease in a partner's share of partnership liabilities, or any decrease in a partner's individual liabilities by reason of the partnership's assumption of the individual liabilities of the partner, as a distribution of money by the partnership to that partner.
• Codes F and G to report distributions to partners for providing services (Code F to report distributions of cash; Code G to report distributions of property other than cash).

Partnerships will continue to use the same codes used in previous years to report other categories of distributions to partners:

• Code A for distributions of cash and marketable securities (other than for services by partners)
• Code B for distributions of property subject to section 737 of the Code
• Code C for distributions of property (other than cash and marketable securities) not reported using other codes

Other Events or Transactions

Partnerships will use two new codes to report certain events or transactions (other than distributions to partners) on line 20 of Schedules K and K-1.

• Code AZ to report reimbursements of preformation expenditures under section 1.707-4(d) of the Treasury Regulations, addressing the exception from disguised sales of property for reimbursements of preformation expenditures.
• Code ZZ to report gains described in section 1062 of the Code from sales by partnerships of qualified farmland property to qualified farmers, enabling partners to elect to pay tax on their gains in installments.

Visit IRS.gov to learn more about Form 1065 including Schedules K and K-1.