This Schedule B-2 Form 1065 guide explains the IRS Election Out of Partnership Level Tax Treatment. Schedule B-2 records an election out of the covered partnership audit regime when the partnership satisfies the relevant conditions. Eligibility, partner type and required information must be reviewed before making the election.
Reviewed October 31, 2026. This is an independent guide. The version and availability information below identifies the IRS documents used for this page.
What Schedule B-2 Form 1065 does and who prepares it
An eligible partnership uses the schedule for the election out of partnership-level treatment covered by the instructions.
For the connected reporting route, see Form 1065. Keep the role of that document separate from the task explained on this page.
| Official form | Form 1065 (Schedule B-2) |
|---|---|
| IRS title | Election Out of Partnership Level Tax Treatment |
| Guide period | the applicable reporting period |
| Target version | Dec 2018 |
| Availability | Current IRS catalog PDF |
| Last checked | October 31, 2026 |
Get the Schedule B-2 Form 1065 PDF and check its status
Use the IRS source to confirm the document before completing a real filing. The download link is a reference to the official file; it is not a statement that every copy inside the PDF may be printed and submitted. Follow any instructions about electronic filing, scannable copies, recipient copies or attachments.
Which version of Schedule B-2 Form 1065 should you use?
This form follows a revision or continuing-use format rather than a new title for every calendar year. Check the revision printed on the document and the period requested inside it. A revision date, transaction date and tax year are different pieces of information. The current document should be read with the instructions that apply to the actual transaction or return.
Records to gather for Schedule B-2 Form 1065
- Partner eligibility information.
- Ownership records.
- Partner identification.
- Required notices and disclosures.
- Partnership return.
Keep a working reconciliation with these records. It should show the source of each reported item, any correction made before filing and the reason a different amount appears on a connected form. This is especially useful when a statement is corrected or a prior-year balance continues into the current calculation.
How to work through Schedule B-2 Form 1065
- Confirm applicability. Start with the purpose, filer category and version of the form. Complete any eligibility or applicability question before spending time on the numerical calculation.
- Prepare the source workpapers. Gather the records listed below and reconcile their totals. Keep prior-year balances, current-year transactions and estimated payments separate where they serve different purposes.
- Complete dependent calculations first. When a line refers to another form, schedule or worksheet, finish that supporting calculation first. Preserve any classification, limitation and carryforward information.
- Follow the line sequence. Use the actual line labels and arithmetic in the applicable form. A line number from an older version may refer to something different after a revision.
- Reconcile the filing package. Check names, identifying numbers, tax periods, totals and required attachments. Then use the filing method, signature process and deadline that apply to this filer and form.
Form-specific IRS instructions and reporting details
The following points retain the operative wording of the IRS documents linked above. Read each point with its stated conditions and the applicable form version. References to another form or section describe a connected requirement; they do not mean that every reader must file every referenced document.
What’s New Bipartisan Budget Act. The Bipartisan Budget Act of 2015 (BBA) created a new centralized partnership audit regime effective for partnership tax years beginning after 2017. Section 6221(b) (as amended by BBA) provides that certain partnerships with 100 or fewer partners may elect out of the centralized partnership audit regime. This schedule was created to allow partnerships to elect out of the centralized partnership audit regime.
Partnerships, including Real Estate Mortgage Investment Conduits (REMIC), that elect out of the centralized partnership audit regime must complete this form for every tax year that the election is to be effective. If the form is not completed correctly, the IRS may determine that the election is not valid.
This form must be attached to a timely filed (including extensions) Form 1065 (or Form 1066 in the case of a REMIC) for every tax year the partnership is electing out of the centralized partnership audit regime.
Line 2. Enter the total number of shareholders reported on Part II and Part V. Do not include the S corporation partner(s) in this count since those partners should be included on Line 1.
Part V. Complete Part V if the Part II S corporation partner is required to issue Schedules K-1 to more than 12 shareholders. Always include the name of the S corporation partner and U.S. TIN for the partner at the top of the page for the grouping of shareholders that are listed. Use the same instructions provided under Part II.
Additional reporting conditions
Certain partnerships with 100 or fewer partners can elect out of the centralized partnership audit regime if each partner is an individual, a C corporation, a foreign entity that would be treated as a C corporation were it domestic, an S corporation, or an estate of a deceased partner. For purposes of determining whether the partnership has 100 or fewer partners, the partnership must include all shareholders of any S corporation that is a partner.
By completing Part I, you are making an affirmative statement that all of the partners in the partnership are eligible partners under section 6221(b)(1)(C) and you have provided all of the information on this schedule. See the instructions, including the instructions for the treatment of real estate mortgage investment conduits (REMICs), for more details.
Reading the lines and boxes
These selected labels come from the linked target PDF. They are a reading aid, not a replacement for the full line instructions or a completed calculation. Match the label and document version before transferring any amount.
| Line or box | Label in the source form | What to check |
|---|---|---|
| S | Corporation Partner ▶ | Check the applicable line instructions and keep the source workpaper with the return records. Transfer only the information that matches the field and reporting period. |
| 1 | Total of Part I and all Parts IV Schedules K-1 required to be issued by the partnership | Follow the stated arithmetic and line references in sequence. Complete the referenced inputs first and retain the worksheet supporting the result. |
| 2 | Total of Part II and all Parts V Schedules K-1 required to be issued by any S corporation partners . | Follow the stated arithmetic and line references in sequence. Complete the referenced inputs first and retain the worksheet supporting the result. |
| 3 | Total. Add line 1 and line 2 | Follow the stated arithmetic and line references in sequence. Complete the referenced inputs first and retain the worksheet supporting the result. |
A practical example
A partnership considers whether it can elect out of the partnership-level regime. Its preparer reviews the partner types and other eligibility conditions before completing the election schedule.
This example illustrates the order of the review. It does not assume an unverified deduction, exemption, treaty rate or final tax amount. The applicable form instructions and the actual records determine the result.
Common mistakes to avoid with Schedule B-2 Form 1065
- Do not assume every small partnership qualifies.
- Check the conditions for every relevant partner.
- Preserve the election and required partner information with the filed return.
Questions about Schedule B-2 Form 1065
Does receiving or downloading this form mean I must file it?
An eligible partnership uses the schedule for the election out of partnership-level treatment covered by the instructions. The form purpose and the applicable filing or furnishing conditions determine the action. Downloading a blank PDF does not itself create a filing obligation or establish eligibility for a tax benefit.
Is the revision date always the same as the tax year?
No. Some forms show a tax year, while continuing-use forms show a revision date and ask separately for the reporting period. Check the actual document and instructions. Do not relabel a payment or transaction solely because it was reported in a later calendar year.
What should I do if the underlying information is wrong?
Do not assume every small partnership qualifies. Keep the original record and the correction trail. The issuer correction process, an amended return and an updated certificate can be different procedures. Choose the process that matches the document and the actual error.
Which records should I keep with the completed form?
Retain the source documents, applicable worksheets, submitted version and filing or furnishing confirmations. For this form, the working file should include partner eligibility information, ownership records, partner identification. Keep continuing balances and prior-year support for as long as they remain relevant under the applicable recordkeeping rules.
Related forms and next steps
Use these guides when the connected issue applies to your records. Each page has its own purpose, reporting year and availability status.