The IRS notifies the partnership at each stage of a Bipartisan Budget Act (BBA) audit, also called an examination. The partnership, partnership representative, or both will receive notices by mail. These are:

BBA Taxpayer Overview

BBA audit procedures, timelines and notices at-a-glance PDF

Interim Guidance

IRM 4.31.9 Interim Guidance on the Centralized Partnership Audit Regime Field Exam Procedures PDF

Notice of Selection for Examination: Letter 2205-D

If a partnership return is selected for audit, we mail an initial notice only to the partnership.

We use Letter 2205-D to notify all partnerships (TEFRA, Non-TEFRA, BBA and BBA elect-outs) regardless of the tax year. The partnership will receive a Letter 2205-D for each year under examination. 

Actions to Take if You Get Letter 2205-D

Call the IRS contact person listed on Letter 2205-D by the specified date to schedule an initial examination appointment.

A partnership that receives Letter 2205-D may take additional actions depending on its status under the law during the examined year:

Partnerships Under TEFRA Audit Procedures

Partnerships that receive Letter 2205-D and are under TEFRA for examined tax years beginning after November 2, 2015 and before January 1, 2018 may make a time-sensitive election into the BBA. Review eligibility requirements in Treas. Reg. §301.9100-22.

Partnerships Under non-TEFRA Procedures

Partnerships that receive Letter 2205-D and are under general deficiency procedures for tax periods beginning after November 2, 2015 and before January 1, 2018, may make a time sensitive election into the BBA. Review eligibility requirements in Treas. Reg. §301.9100-22.

For more information, review the Interim Guidance on Initial Taxpayer Contact in Partnership Examinations and Elections into the Bipartisan Budget Act of 2015 (BBA) Centralized Partnership Audit Regime for tax periods beginning after November 2, 2015 and before January 1, 2018 PDF.

Partnerships Under BBA Audit Procedures

Partnerships that receive Letter 2205-D and are under BBA audit procedures for tax periods beginning January 1, 2018 may revoke or designate a partnership representative after receiving Letter 2205-D if no partnership representative designation is in place.

Partnerships Elected out of BBA

Partnerships that receive Letter 2205-D for tax periods beginning January 1, 2018 and that made an election out of the BBA on the original Form 1065 are under general deficiency audit procedures unless the election is revoked or invalid. The partnership can revoke its election out of BBA with the consent of the IRS.

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Notice of Administrative Proceeding (NAP): Letters 5893 and 5893-A

The Notice of Administrative Proceeding (NAP) is a statutory notification required by Internal Revenue Code section 6231. The NAP informs the partnership and partnership representative that the IRS has started an administrative proceeding. This notice is similar to the Notice of Beginning Administrative Proceedings (NBAP) used in an examination subject to TEFRA procedures.

We issue the NAP about 30 days after we send Letter 2205-D. We mail the NAP to the partnership (Letter 5893) and the partnership representative (Letter 5983-A). We issue a separate NAP for each year under examination.

Under certain circumstances, the IRS may, without consent of the partnership, withdraw a NAP within 60 days of issuance.

A partnership may not file an AAR after the NAP is issued. Its partners also may not amend their returns to file inconsistently from the partnership for the examined tax year.

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Summary Report

We issue the summary report only to the partnership representative.

We send the summary report after the IRS examiner has completed the audit issues development. The summary report contains the preliminary audit results and the imputed underpayment computation. The report package includes:  

  • Letter 5895 - Instructs the partnership representative to request a conference with the examining agent and gives next steps whether the partnership representative agrees or disagrees with the preliminary audit results. It also explains actions the IRS will take if the partnership representative does not communicate with the examining agent after receiving the summary report package.
  • Form 14791 - Provides the partnership representative the computation of any preliminary imputed underpayment amount. It includes estimated interest and penalties with the computation of the imputed underpayment.
  • Form 886-A (explanation of Items) - Describes each issue and provides a detailed explanation of the preliminary adjustment, the facts, related law, taxpayer position and conclusion.

Appealing Issues in the Summary Report

Bipartisan Budget Act (BBA) partnerships that do not agree with the merits of the issues presented in the summary report have the right to request an Appeals conference if certain conditions are met. The partnership representative may request an Appeals conference if at least 18 months remain on the Internal Revenue Code §6235 statute. The partnership representative will receive a 30-Day Letter Package as a starting point.

30-Day Letter Package

If you don’t agree with the proposed changes or we don’t hear from you, we will issue a 30-day Letter Package only to the partnership representative. The package provides information for the partnership representative to request an Appeals conference and protest proposed changes relating to:

  • One or more of the substantive issues
  • The imputed underpayment amount or
  • Penalties

The 30-day Letter Package includes:

  • Letter 5891 - Provides information on preparing a protest for an Appeals consideration.
  • Form 14791 - Provides the partnership representative the computation of any preliminary imputed underpayment (IU) amount. It includes estimated interest and penalties with the computation of the IU.
  • Form 886-A (explanation of Items) - Describes each issue and provides a detailed explanation of the preliminary adjustment, the facts, related law, taxpayer position, and conclusion.

Protest or Rebuttal

If the partnership representative submits a timely protest, the examiner may issue a rebuttal before forwarding the case to Appeals for consideration. If the partnership representative does not submit a timely protest, the case will not be forwarded to Appeals. We will process the case and send a NOPPA/PPA to the partnership and the partnership representative.

Appeals Process

The partnership representative will have an opportunity to present to Appeals the reason(s) for disagreement. Appeals will consider each disputed item only once.

After the Appeals process is complete, the IRS will issue a Notice of Proposed Partnership Adjustment.

Review Interim Guidance on BBA Appeals Procedures PDF.

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Notice of Proposed Partnership Adjustments (NOPPA or PPA)

The IRS will issue the Notice of Proposed Partnership Adjustments (NOPPA) to the partnership and partnership representative.

The NOPPA is a statutory notification required by Internal Revenue Code section 6231. Both the partnership and partnership representative will receive the NOPPA package after the partnership representative indicates agreement with the preliminary audit results or the Appeals process is complete. The NOPPA package includes:

  • Letter 5892 (to partnership) and Letter 5892-A (to partnership representative) - Explains how to agree with the proposed audit adjustments, submit a request to modify the proposed imputed underpayment and receive a final partnership adjustment. 
  • Form 14792 - Provides the computation of any proposed imputed underpayment (IU) amount. It also includes estimated interest and penalties with the computation of the IU. The partnership can make a payment of the IU before the tax is assessed.
  • Form 886-A (explanation of Items) - Explains each issue and provides a detailed explanation of the proposed adjustment, the facts, related law, taxpayer position and conclusion.

Requesting Modification of Imputed Underpayment

The partnership representative may submit a request to modify the IU amount only after the NOPPA/PPA has been issued. The partnership representative will have 270 days from the date of the NOPPA to make such a request. 

If the partnership representative does not make a request for modification within the 270-day window, it will have forfeited its right to request modification. The 270-day modification request period can be extended by agreement and it (or a portion thereof) can also be waived by agreement.

How to Submit a Modification Request

The partnership representative must complete and electronically submit Form 8980, Partnership Request for Modification of Imputed Underpayment Under IRC Section 6225(c) PDF. Also see Publication 5346, Instructions for Form 8980 PDF.

Get instructions for electronic submission of BBA audit forms.

What to Expect after Requesting a Modification

After the partnership representative submits Form 8980, we will confirm receipt by mailing Letter 5939.

Once we decide on the request, we will mail a modification determination package to the partnership representative. The package provides details on the modification request determination and next steps. It includes Letter 5975 (Notice of Modification Request Determination) and Form 15027 (Partnership Summary of Approved Modifications and the Imputed Underpayment).

Appeals Process after Modification Determination

If disagreeing with the modification determinations, the partnership representative will have an opportunity to request a conference with management and an Appeals conference. Appeals will consider each disputed item only once.

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Notice of Final Partnership Adjustments (FPA)

The Final Partnership Adjustments (FPA) is a statutory notification required by Internal Revenue Code section 6231. We issue the FPA to both the partnership and partnership representative.

If the partnership representative does not waive receipt of the FPA, both the partnership and partnership representative will receive the FPA package. The date of the FPA starts the 45-day window to elect alternative to payment of IU (push out election) and the 90-day window to petition court.

The FPA package includes, at a minimum:

  • Letter 5933 (for the partnership) and Letter 5933-A (for the partnership representative) - Provides information on how to agree with the final audit adjustments, how to make a push out election, and how to challenge the final determination in court. 
  • Form 15027 - Provides the computation of any final IU amount, including approved modifications, if any. It also includes interest and penalties.
  • Form 886-A (explanation of items) - Describes each issue and provides a summary explanation of the adjustment.

Payment

A partnership that does not make a push out election must pay the imputed underpayment.

To pay before the tax is assessed: 

  • Pay by EFTPS or debit or credit card. (Direct Pay is not available for this payment.)
    •  Select Advance BBA Exam Imputed Underpayment from the list of payment types.
    •  Apply payment to: Form 1065.
  • Pay by check or money order.
    • Make payable to “United States Treasury.”
    • Include the following information: the name of the partnership, Form 1065, the tax identification number of the partnership, the tax year, and “Advance BBA Exam Imputed Underpayment.”  
    • Payment may be submitted to the attention of the current IRS employee point of contact for the examination. 

To pay after receiving an assessment letter:

  • Pay by EFTPS or debit or credit card. (Direct Pay is not available for this payment.)
    • Select BBA Exam Imputed Underpayment from the list of payment types.
    • Apply payment to: Form 1065.
  • Pay by check or money order
    • Make payable to “United States Treasury.”
    • Include the following information: the name of the partnership, Form 1065, the tax identification number of the partnership, the tax year, and “BBA Exam Imputed Underpayment.” 
    • Payment may be submitted to the return address as reflected on the assessment letter.

Push Out Process

The partnership representative may submit an election to push out the audit adjustments underlying the IU amount to its partners rather than make a payment. This can be done only after the FPA has been issued. The partnership representative will have 45 days from the date of the FPA to make a push out election. If the partnership representative does not make an election, the partnership is liable for the IU amount. The 45-day election period cannot be extended.

How to Submit a Push Out Election

The partnership representative must complete and electronically submit Form 8988, Election to Alternative to Payment of the Imputed Underpayment – IRC Section 6226 PDF.

Get instructions for electronic submission of BBA audit forms.

After the partnership representative submits Form 8988, we will mail Letter 5931 acknowledging receipt and response to the election.

As part of a push out election, the partnership representative has 60 days from when the audit matters (issues or adjustments the IRS identified in the audit) become final to submit push out statements to its partners and to the IRS. The audit matters become final:

  • On the expiration of the 90-day period to petition the courts or
  • On final determination by any court.

If the statements to partners are not submitted within the 60-day period, the IRS may determine the push out election is invalid, and the partnership will be liable for the IU amount.

How to Submit Push Out Statements to the IRS and Partners

The audited partnership is required to furnish to each of its partners for the reviewed year Form 8986, Partner’s Share of Adjustments(s) to Partnership-Related Items(s) (Required Under Sections 6226 and 6227).

The partnership representative must complete and electronically submit Form 8985, Pass-Through—Statement Transmittal/Partnership Adjustment Tracking Report (Required under Sections 6226 and 6227) along with the Forms 8986 that were furnished to its partners.

Get instructions for electronic submission of BBA audit forms.

After submitting Forms 8985 and 8986, the partnership representative will receive Letter 6073 to acknowledge receipt.

Partner Push Out Procedures as a Result of a Partnership Examination

Non pass-through Partners

Non pass-through partners who receive a Form 8986 as a result of a partnership examination will:

  • Use Form 8978, Partner’s Additional Reporting Year Tax to calculate and report their tax impact of adjustments pushed out to them.
  • Include Form 8978 with their income tax return that includes the date the audited partnership furnishes Form 8986 to its direct partners (reporting year return). 
  • Be able to pay in advance to stop running of interest. Pay by EFTPS or debit or credit card. (Direct Pay is available only for Form 1040 series.)
    •  Select Prepayment on BBA AAR/Exam Push Out from the list of payment types.
    •  Apply payment to: Forms 1040, 1120 (except 1120S), or 990T.

Pass-through Partners

Pass-through partners who receive Form 8986 as a result of a partnership examination and want to further push out adjustments to their partners will:

Pass-through partners who receive Form 8986 as a result of a partnership examination and do not push the adjustments out to their partners by the extended due date of the audited partnership’s return for the year in which the adjustments become final will:

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