Form 8978 Schedule A – Partner's Additional Reporting Year Tax

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A client brings in a push-out statement three weeks before their individual return is due and has no idea what it means. That moment is where Schedule A earns its keep, because the partner who thought the partnership handled everything is now the one computing additional tax on their own reporting-year return.

Form 8978 Schedule A reports pushed-out BBA audit or AAR adjustments across columns (a) through (d), one per affected review year. Line 2 for income, line 4 for deductions, and line 6 for credits flow to Form 8978 lines 1b, 3b, and 9b, with the combined change landing on Form 8978 line 14. The trap is the interest charge: the additional tax does not carry at the standard underpayment rate, it bears an interest-based addition under specific BBA rules that can be material.

Key Takeaways

• What it does: Form 8978 Schedule A computes the additional tax a reviewed year partner owes on their own reporting year return after a BBA partnership makes a push-out election under IRC Section 6226.
• Who files it: Any partner – individual, corporation, trust, or pass-through entity – who was a partner during the reviewed year and receives a push-out statement from the partnership.
• Key deadline: Filed with the partner’s return for the reporting year, due on the normal return due date; additional tax bears an interest charge from the reviewed year through the reporting year.
• Interest component: The additional tax does not just carry forward at the standard underpayment rate – it carries an interest-based addition computed under specific BBA rules that can be material.
• Main pitfall: Partners receiving push-out statements late in the year often fail to anticipate the interest charge, creating an unexpected tax bill beyond the base additional tax amount.
• SOP tip: When a partnership client is under BBA audit, notify all current and former partners immediately so they can engage their own advisors – a push-out election affects people who may no longer be your clients.

What Form 8978 Schedule A Is and When to Use It

The Bipartisan Budget Act of 2015 fundamentally changed how IRS audits of partnerships are conducted. Under the old TEFRA rules, partnership adjustments flowed through to partners who then reported them on their own amended returns. Under the BBA centralized audit regime (effective for partnership tax years beginning after December 31, 2017), the default is for the partnership entity itself to pay an “imputed underpayment” at the highest applicable tax rate.

But Congress also gave partnerships an alternative: the push-out election under IRC Section 6226. When a partnership makes this election, it “pushes out” the audit adjustments to the reviewed year partners, who then must take those adjustments into account on their own returns. Form 8978 is the form those partners use, and Schedule A is the attachment that computes how much additional tax they owe on those pushed-out adjustments.

The BBA Timeline: Reviewed Year, Adjustment Year, Reporting Year

Three time periods matter in BBA audit mechanics. The reviewed year is the year the IRS is auditing (e.g., 2022 partnership return). The adjustment year is the year in which the final partnership adjustment is made (e.g., 2025, when the IRS issues its Final Partnership Adjustment). The reporting year is the partner’s tax year that includes the date the push-out statement was received (also often 2025). Schedule A connects these three time periods by computing the reviewed year tax impact and requiring payment – with interest – in the reporting year.

Who Receives Push-Out Statements

The partnership must furnish statements to all reviewed year partners when making a push-out election. This includes not just current partners but any partner who held an interest during the reviewed year, even if they have since left the partnership. For large partnerships with frequent partner turnover, locating and notifying former partners is operationally challenging and creates liability exposure for the partnership representative if statements are not timely furnished.

How to Complete Form 8978 Schedule A

Schedule A walks through a step-by-step computation that starts with the partner’s reviewed year tax and builds up to the additional tax plus the BBA interest charge. The computation is partner-type sensitive – the tax rate and available deductions differ for individuals, corporations, and pass-through entities.

Schedule A Step	What to Compute	Practitioner Notes
Part I – Adjustment items	List each adjustment item from the partnership push-out statement: income, gain, loss, deduction, credit increases and decreases	The partnership statement allocates specific dollar amounts to each partner. Use those figures exactly – do not recalculate from K-1 data, which relates to a different year.
Part II – Tax attributable to adjustments	Recompute the reviewed year tax by including the pushed-out adjustments, then subtract the tax as originally reported for that year. Recompute alternative minimum tax on the corrected taxable income as well (Form 8978 line 7) – a change in income or deductions can trigger AMT in a year that originally had none, and the form requires AMT to be added to regular tax on line 8.	This requires accessing the partner’s original reviewed year return. Gather that return before starting Schedule A.
Part III – Interest computation	Compute the BBA interest charge from the due date of the reviewed year return through the due date of the reporting year return	The interest rate compounds daily using the federal short-term rate plus 5 percentage points. The IRS provides interest factor tables to simplify this computation; use the current tables from the instructions.
Total additional tax	Additional tax from Part II plus BBA interest from Part III	This total flows to Form 8978 Line 14, which flows to the partner’s return (Schedule 2, Form 1040 for individuals; Form 1120 for corporations). Note that only the tax change belongs on Line 14 – partnership-pushed penalties are reported separately on Form 8978 Part II (lines 15–16) and interest on Part III (lines 17–18); they are not blended into the Line 14 tax figure.
Credit adjustments	If pushed-out adjustments include credit reductions, those are computed separately and reduce any credit otherwise claimed on the reporting year return	Credit push-outs are particularly complex – the computation must account for the credit type and any applicable limitations that would have applied in the reviewed year.

Partner-Level Tax Rate Issues

The additional tax on Schedule A is computed at the partner’s own tax rates for the reviewed year – not at any blended partnership-level rate. This is one of the potential advantages of the push-out election over the imputed underpayment: a partner in a lower tax bracket may owe less tax on the same adjustment than the partnership-level imputed underpayment rate would generate. Quantifying this difference is a standard part of the push-out vs. pay analysis that partnership representatives and their advisors should perform before making the Section 6226 election.

Deadlines, Penalties, and Filing Requirements

The filing deadlines for Form 8978 and Schedule A are tied to the partner’s own return due date for the reporting year, but the interest clock started ticking in the reviewed year.

Event	Deadline	Notes
Partnership furnishes push-out statements to partners	60 days after the Final Partnership Adjustment becomes final	Statements must include partner-specific adjustment amounts and the election year
Partner files Form 8978 with reporting year return	Normal due date of reporting year return (e.g., April 15 for individuals; with extension to October 15)	The form is attached to the return for the year in which the partner receives the push-out statement
Interest accrual on additional tax	Accrues from original reviewed year return due date through reporting year return due date	This means interest typically runs for 2+ years; the longer the audit process, the larger the interest charge
Late filing penalty	Standard 5% per month penalty on additional tax if reporting year return is filed late	Extensions are available for the reporting year return; the extension applies to the Form 8978 filing deadline as well
Accuracy-related penalty	20% of underpayment if the additional tax computation is incorrect	Negligence or substantial understatement standards apply; good documentation of the Schedule A computation is the primary defense

Push-Out Election vs. Paying the Imputed Underpayment: The Analysis

When a partnership receives a Final Partnership Adjustment from the IRS, the partnership representative must decide: pay the imputed underpayment at the entity level, or make the push-out election under Section 6226. This decision has significant tax and relationship implications.

Arguments for the Push-Out Election

The push-out election makes sense when the reviewed year partners would collectively owe less tax at their individual rates than the imputed underpayment amount the partnership would owe at the 37% default rate (or 21% for corporate partners). Tax-exempt partners, partners with significant losses in the reviewed year, or partners in lower brackets can all reduce the aggregate tax burden through push-out. The election also prevents current partners from bearing the economic cost of tax liabilities attributable to former partners.

Arguments Against the Push-Out Election

Push-out creates an administrative burden for the partnership – it must locate and furnish statements to potentially dozens or hundreds of reviewed year partners, including those who have since exited. It also creates uncertainty about whether all partners will correctly compute and pay their share of the additional tax. Partnerships with complex partner rosters or significant partner turnover may find the imputed underpayment simpler operationally, even if the aggregate tax cost is higher.

Pass-Through Partners and Tiered Structures

If a reviewed year partner is itself a pass-through entity (a partnership, S corporation, or trust), the push-out statement flows through to that entity, which must then push the adjustment further through to its own partners or shareholders. This creates a tiered push-out chain that can require multiple Forms 8978 at different levels of the ownership structure. Tracking this chain is one of the more operationally complex aspects of BBA audit administration.

How Push-Out Interacts With Amended Returns and the BBA Interest Charge

A common misconception is that partners who receive push-out statements must file amended returns for the reviewed year. They do not. The Form 8978 mechanism specifically avoids amended returns – the additional tax is reported on the reporting year return (the current year return), not an amended prior year return. This is administratively simpler but means the interest clock runs longer.

The BBA Interest Rate

The interest rate under the BBA push-out regime is the federal short-term rate plus 5 percentage points, compounded daily. This is higher than the normal underpayment interest rate (federal short-term rate plus 3 points). The premium reflects Congress’s intent to incentivize voluntary compliance without partnership-level audit. From my side of the desk, the interest charge often exceeds 15–25% of the base additional tax when two or three years have elapsed since the reviewed year – clients need to be prepared for that.

Interest Netting Considerations

Some practitioners explore whether the BBA interest charge can be netted against other interest the IRS might owe the partner (from overpayments in the same reviewed year period). The netting rules are complex and fact-specific – this is an area where careful analysis before filing Schedule A can produce meaningful savings.

Common Mistakes That Slow Things Down

The same handful of mistakes show up year after year on partner-level push-out filings, and almost all of them trace back to treating Schedule A like a stand-alone schedule instead of a tightly-linked attachment to Form 8978.

Practical Checklists You Can Reuse

These checklists are copy-paste ready for a firm SOP. The goal is to standardize the partner-level push-out workflow from the moment a Form 8986 statement arrives through the reporting-year return handoff.

Keep Form 8978 Schedule A Season From Stalling

Schedule A (Form 8978) filings rarely arrive on a predictable calendar. The reporting-year clock belongs to the partner, but the trigger (a push-out statement from a BBA-audited or AAR-filing partnership, issued on Form 8986) lands whenever the partnership's audit or amendment cycle closes. By the time the statement reaches the partner's desk, the original reviewed-year return due dates are years in the rearview mirror, and the BBA interest charge has been accruing the entire time on the (Rev. January 2023) version of the form still in use for 2025 filings (per the IRS Schedule A (Form 8978) instructions).

Most stalls happen at the workflow seams, not at the line-item math: confirming the source-of-adjustments classification, gathering tracking numbers, recomputing AMT on the corrected taxable income, and routing the line 14, line 16, and line 18 amounts to the correct reporting-year return lines. A documented sequence at each handoff removes the guesswork before the reporting-year deadline starts to pinch.

• Build a Form 8986 intake checklist that captures the partnership EIN, the BBA Audit vs AAR Filing source, every tracking number, and the original reviewed-year return due dates in one place
• Stand up the four-column Schedule A workpaper before any line-item entry, labeling columns (a) through (d) with the affected review years so adjustments land in the correct column on the first pass
• Run the AMT recomputation on corrected taxable income for every column, even when the original review-year return showed no AMT, and document it alongside the regular-tax recomputation
• Keep line 14 (tax change), line 16 (penalties), and line 18 (interest) on separate workpaper tabs so the three amounts route to the correct reporting-year return lines without blending
• Lock the partner's name, TIN, and source-of-adjustments checkbox into a top-of-form template so reviewer time is spent on the math, not the header

Accountably's U.S. accounting and tax outsourcing teams handle the partner-level BBA push-out workflow as a documented sequence: intake the Form 8986 statement, build the four-column Schedule A workpaper, recompute regular tax and AMT per column, and carry the line 14, 16, and 18 amounts to the partner's reporting-year return with a multi-layer review behind every figure.

FAQs

What is Form 8978 Schedule A?

Form 8978 Schedule A is the Partner’s Additional Reporting Year Tax schedule. It is completed by reviewed year partners who receive a push-out election statement from a BBA partnership following an IRS audit under IRC Section 6226. Schedule A computes the additional tax the partner owes in their reporting year as a result of taking the partnership’s audit adjustments into account on their own return, plus a BBA interest charge that runs from the reviewed year.

Who files Form 8978 Schedule A?

Any partner who was a partner during the BBA-reviewed year and receives a push-out statement from the partnership must file Form 8978 (with Schedule A attached) with their own return for the reporting year. This applies to individual partners, corporate partners, and pass-through entity partners, and it applies to former partners who are no longer in the partnership when the audit concludes.

What is the push-out election in BBA partnership audits?

Under the BBA centralized audit rules, when the IRS makes adjustments to a partnership’s reviewed year return, the default is for the partnership to pay an imputed underpayment at the entity level. However, the partnership can elect under Section 6226 to push those adjustments out to the reviewed year partners. Those partners then compute and pay additional tax on their own reporting year returns using Form 8978 and Schedule A.

When is Form 8978 Schedule A due?

Form 8978 and Schedule A are filed with the partner’s reporting year return – the year in which the partner receives the push-out statement. The return is due on the normal due date for that partner’s return type, with extensions available. However, interest on the additional tax accrues from the original reviewed year return due date, so the total amount owed grows the longer the audit process takes.

How is the additional tax on Schedule A computed?

Schedule A computes the additional tax by recomputing the reviewed year tax with the pushed-out adjustments included, then subtracting the tax as originally reported for the reviewed year. The difference is the base additional tax. A BBA-specific interest charge, computed at the federal short-term rate plus 5 percentage points compounded daily for the period from the reviewed year return due date to the reporting year return due date, is then added on top. The total flows to Form 8978 and from there to the partner’s reporting year return.