Deductions — Instruction 1065 — Instructions for Form

Caution: Report only trade or business activity deductions on lines 9 through 21.

Don’t report the following expenses on lines 9 through 21.

Rental activity expenses. Report these expenses on Form 8825 or Schedule K, line 3b.
Deductions allocable to portfolio income. Report these deductions on Schedule K, line 13e, and in box 13 of Schedule K-1 using code I or L.
Nondeductible expenses (for example, expenses connected with the production of tax-exempt income). Report nondeductible expenses on Schedule K, line 18c, and in box 18 of Schedule K-1 using code C.
Qualified expenditures to which an election under section 59(e) may apply. The instructions for Schedule K, line 13d, and for box 13, code J, of Schedule K-1 explain how to report these amounts.
Items the partnership must state separately that require separate computations by the partners. Examples include expenses incurred for the production of income instead of in a trade or business, charitable contributions, foreign taxes paid or accrued, intangible drilling and development costs, soil and water conservation expenditures, amortizable basis of reforestation expenditures, and exploration expenditures. The distributive shares of these expenses are reported separately to each partner on Schedule K-1.

Limitations on Deductions

Section 263A uniform capitalization rules. The uniform capitalization rules of section 263A generally require partnerships to capitalize certain costs incurred in connection with the following.

The production of real property and tangible personal property held in inventory or held for sale in the ordinary course of business.
Real property or personal property (tangible and intangible) acquired for resale.
The production of real property and tangible personal property by a partnership for use in its trade or business or in an activity engaged in for profit.

Tangible personal property produced by a partnership includes a film, sound recording, videotape, book, or similar property.

The costs required to be capitalized under section 263A aren’t deductible until the property to which the costs relate is sold, used, or otherwise disposed of by the partnership.

Exceptions. For tax years beginning after 2017, a small business taxpayer, defined earlier, can adopt or change its method of accounting to not capitalize costs under section 263A. See section 263A(i) and Accounting Methods , earlier.

Section 263A doesn’t apply to the following.

Timber.
Most property produced under a long-term contract.
Certain property produced in a farming business. See the note at the end of the instructions for line 5, earlier.
Geological and geophysical costs amortized under section 167(h).
Certain plants bearing fruits and nuts under section 168(k) (5).

The partnership must report the following costs separately to the partners for purposes of determinations under section 59(e).

R&E costs under section 174A.
Intangible drilling costs for oil, gas, and geothermal property.
Mining exploration and development costs.

20 Instructions for Form 1065 (2025)

Indirect costs. Partnerships subject to the uniform capitalization rules are required to capitalize not only direct costs but an allocable part of most indirect costs (including taxes) that benefit the assets produced or acquired for resale, or are incurred because of the performance of production or resale activities.

For inventory, indirect costs that must be capitalized include the following.

Administration expenses.
Taxes.
Depreciation.
Insurance.
Compensation paid to officers attributable to services.
Rework labor.
Contributions to pension, stock bonus, and certain profit-sharing, annuity, or deferred compensation plans.

Regulations section 1.263A-1(e)(3) specifies other indirect costs that relate to production or resale activities that must be capitalized and those that may be currently deductible.

Interest expense paid or incurred during the production period of designated property must be capitalized and is governed by special rules. For more details, see Regulations sections 1.263A-8 through -15.

For more details on the uniform capitalization rules, see Regulations sections 1.263A-1 through -3.

Transactions between related taxpayers. Generally, an accrual-basis partnership can deduct business expenses and interest owed to a related party (including any partner) only in the tax year of the partnership that includes the day on which the payment is includible in the income of the related party. See section 267 for details.

Business interest. Business interest expense (BIE) is limited for tax years beginning after 2017. See section 163(j) for limitations on deductions for business interest, and section 163(j)(4) for rules specific to partnerships.

Business startup and organizational costs. Generally, a partnership can elect to deduct a limited amount of startup or organizational costs paid or incurred. Any costs not deducted must be amortized as explained below. See sections 195(b) and 709(b). Time for making an election. The partnership generally elects to deduct startup or organizational costs by claiming the deduction on its return filed by the due date (including extensions) for the tax year in which the active trade or business begins.

If the partnership timely filed its return for the year without making an election, it can still make an election by filing an amended return within 6 months of the due date of the return (excluding extensions). Clearly indicate the election on the amended return and enter “Filed pursuant to section 301.9100-2” at the top of the amended return. File the amended return at the same address the partnership filed its original return. The election applies when figuring income for the current tax year and all subsequent years.

The partnership can choose to forgo the above elections by clearly electing to capitalize its startup or organizational costs on its return filed by the due date (including extensions) for the tax year in which the active trade or business begins.

The election to either amortize or capitalize startup or organizational costs is irrevocable and applies to all startup and organizational costs that are related to the trade or business.

Amortization. Any costs not deducted under the above rules must be amortized ratably over a 180-month period, beginning with the month the partnership begins business. See the Instructions for Form 4562 for details.

Report the deductible amount of these costs and any amortization on line 21. For amortization that began during the tax year, complete and attach Form 4562, Depreciation and Amortization.

Syndication costs. Costs for issuing and marketing interests in the partnership, such as commissions, professional fees, and printing costs, must be capitalized. They can’t be depreciated or amortized. See the instructions for line 10, later, for the treatment of syndication fees paid to a partner.

Reducing certain expenses for which credits are allowable. The partnership may need to reduce the otherwise allowable deductions for expenses used to figure certain credits. The following are examples of such credits. (Don’t reduce the amount of the allowable deduction for any portion of the credit that was passed through to the partnership from another pass-through entity.)

Work opportunity credit.
Credit for increasing research activities.
Disabled access credit.
Empowerment zone employment credit, if applicable.
Credit for employer social security and Medicare taxes paid on certain employee tips.
Orphan drug credit.
Small employer pension plan startup costs and employer contributions credit.
Credit for employer-provided childcare facilities and services.
Low sulfur diesel fuel production credit.
Credit for employer differential wage payments.
Credit for small employer health insurance premiums.
Employer credit for paid family and medical leave (Form 8994).

Note: Wages taken into account in determining the credit for qualified sick and family leave on Form 941 can’t be taken into account in determining the employer credit for paid family and medical leave on Form 8994. See the Instructions for Form 8994.

If the partnership has any of the credits listed above, figure each current-year credit before figuring the deductions for expenses on which the credit is based.

Line 9. Salaries and Wages Enter the salaries and wages paid or incurred for the tax year, reduced by the amount of the following credit(s).

Work Opportunity Credit (Form 5884).
Empowerment Zone Employment Credit (Form 8844), if applicable.
Credit for Employer Differential Wage Payments (Form 8932).

Don’t reduce the amount of the allowable deduction for any portion of the credit that was passed through to the partnership from another pass-through entity. See the instructions for the credit form for more information.

Don’t include salaries and wages reported elsewhere on the return, such as amounts included in cost of goods sold, elective contributions to a section 401(k) cash or deferred arrangement, or amounts contributed under a salary reduction simplified employee pension (SEP) agreement or a Savings Incentive Match Plan for Employees (SIMPLE) IRA plan.

Line 10. Guaranteed Payments to Partners Deduct payments or credits to a partner for services or for the use of capital if the payments or credits are determined without regard to partnership income and are allocable to a trade or business activity. Also include on line 10 amounts paid during the tax year for insurance that constitutes medical care for a

Instructions for Form 1065 (2025) 21

partner, a partner’s spouse, a partner’s dependents, or a partner’s children under age 27 who aren’t dependents.

For information on how to treat the partnership’s contribution to a partner’s health savings account (HSA), see Notice 2005-8, 2005-4 I.R.B. 368.

Don’t include any payments and credits that should be capitalized. For example, although payments or credits to a partner for services rendered in syndicating a partnership may be guaranteed payments, they aren’t deductible on line 10. They are capital expenditures. However, they should be reported as guaranteed payments on the applicable line of Schedule K, line 4b, and in box 4b of Schedule K-1.

Don’t include distributive shares of partnership profits.

Report the guaranteed payments to the appropriate partners using the applicable box 4 of Schedule K-1.

Line 11. Repairs and Maintenance Enter the cost of repairs and maintenance not claimed elsewhere on the return, such as labor and supplies, that aren’t payments for improvements to the partnership’s property. Amounts are paid for improvements if they’re for betterments to the property or for restorations of the property (such as the replacements of major components or substantial structural parts), or if they adapt the property to a new or different use. Improvements must be capitalized. See Regulations section 1.263(a)-3.

The partnership can deduct repair and maintenance expenses only to the extent they relate to a trade or business activity. See Regulations section 1.162-4. The partnership may elect to capitalize certain repair and maintenance costs consistent with its books and records. See Regulations section 1.263(a)-3(n) for information on how to make the election.

Line 12. Bad Debts Enter the total debts that became worthless in whole or in part during the year, but only to the extent such debts relate to a trade or business activity. Report deductible nonbusiness bad debts as a short-term capital loss on Form 8949.

Caution: Partnerships can’t take a bad debt deduction unless the amount was previously included in income.

Line 13. Rent Enter rent paid on business property used in a trade or business activity. Don’t deduct rent for a dwelling unit occupied by any partner for personal use.

If the partnership rented or leased a vehicle, enter the total annual rent or lease expense paid or incurred in the trade or business activities of the partnership. Also complete Form 4562, Part V. If the partnership leased a vehicle for a term of 30 days or more, the deduction for vehicle lease expense may have to be reduced by an amount called the inclusion amount. The partnership may have an inclusion amount if:

Automobiles other than trucks and vans

During calendar year 2025 . . . . . . . . . . . . . . . . . . $64,000

During calendar year 2024 . . . . . . . . . . . . . . . . . . $62,000

During calendar year 2023 . . . . . . . . . . . . . . . . . . $60,000

During calendar year 2022 . . . . . . . . . . . . . . . . . . $56,000

During calendar year 2021 . . . . . . . . . . . . . . . . . . $51,000

After 12/31/2017 but before 1/1/2021 . . . . . . . . . . . . $50,000

After 12/31/12 and before 1/1/18 . . . . . . . . . . . . . . $19,000

After 12/31/09 but before 1/1/13 . . . . . . . . . . . . . . . $18,500

Trucks and vans

During calendar year 2025 . . . . . . . . . . . . . . . . . . $64,000

During calendar year 2024 . . . . . . . . . . . . . . . . . . $62,000

During calendar year 2023 . . . . . . . . . . . . . . . . . . $60,000

During calendar year 2022 . . . . . . . . . . . . . . . . . . $56,000

During calendar year 2021 . . . . . . . . . . . . . . . . . . $51,000

After 12/31/2017 but before 1/1/2021 . . . . . . . . . . . . $50,000

After 12/31/13 and before 1/1/18 . . . . . . . . . . . . . . $19,500

After 12/31/09 and before 1/1/14 . . . . . . . . . . . . . . $19,000

The inclusion amount for lease terms beginning in 2026 will be published in the Internal Revenue Bulletin in early 2026.

See Pub. 463, Travel, Gift, and Car Expenses, for instructions on figuring the inclusion amount.

Line 14. Taxes and Licenses Enter taxes and licenses paid or incurred in the trade or business activities of the partnership if not reflected elsewhere on the return. Federal import duties and federal excise and stamp taxes are deductible only if paid or incurred in carrying on the trade or business of the partnership. Foreign taxes are included on line 14 only if they are taxes not creditable but deductible under sections 901 and 903. See column (g) of Schedule K-2, Part II, Section 2, line 45.

Don’t deduct the following taxes on line 14.

Taxes not imposed on the partnership.
Federal income taxes or taxes reported elsewhere on the return.
Creditable foreign taxes under sections 901 and 903. Report these taxes separately on Schedule K, line 21, and in box 21 of Schedule K-1.
Taxes allocable to a rental activity. Report taxes allocable to rental real estate activity on Form 8825. Report taxes allocable to a rental activity other than a rental real estate activity on Schedule K, line 3b.
Taxes paid or incurred for the production or collection of income, or for the management, conservation, or maintenance of property held to produce income. Report these taxes separately on Schedule K, line 13e, and in box 13 of Schedule K-1 using code ZZ.

See section 263A(a) for rules on capitalization of allocable costs (including taxes) for any property.

Taxes, including state or local sales taxes, that are paid or incurred in connection with an acquisition or disposition of property (these taxes must be treated as a part of the cost of the acquired property or, in the case of a disposition, as a reduction in the amount realized on the disposition).
Taxes assessed against local benefits that increase the value of the property assessed (such as for paving, etc.).

See section 164(d) for information on apportionment of taxes on real property between seller and purchaser.

The lease term began: And the vehicle’s FMV on the first day of

the lease exceeded:

22 Instructions for Form 1065 (2025)

Line 15. Interest Include only interest incurred in the trade or business activities of the partnership that isn’t claimed elsewhere on the return.

Don’t include interest expense on the following.

Debt used to purchase rental property or debt used in a rental activity. Interest allocable to a rental real estate activity is reported on Form 8825 and is used in arriving at net income (loss) from rental real estate activities on Schedule K, line 2, and in box 2 of Schedule K-1. Interest allocable to a rental activity other than a rental real estate activity is included on Schedule K, line 3b, and is used in arriving at net income (loss) from a rental activity (other than a rental real estate activity). This net amount is reported on Schedule K, line 3c, and in box 3 of Schedule K-1.
Debt used to buy property held for investment. Interest that is clearly and directly allocable to interest, dividend, royalty, or annuity income not derived in the ordinary course of a trade or business is reported on Schedule K, line 13c, and in box 13 of Schedule K-1 using code H. See the instructions for Schedule K, line 13c; box 13, code H, of Schedule K-1; and Form 4952, Investment Interest Expense Deduction, for more information on investment property.
Debt proceeds allocated to distributions made to partners during the tax year. Instead, report such interest on Schedule K, line 13e, and in box 13 of Schedule K-1 using code AC.
Debt required to be allocated to the production of designated property. Designated property includes real property, personal property that has a class life of 20 years or more, and other tangible property requiring more than 2 years (1 year in the case of property with a cost of more than $1 million) to produce or construct. Interest allocable to designated property produced by a partnership for its own use or for sale must be capitalized. In addition, a partnership must also capitalize to the basis of the designated property any interest on debt allocable to an asset used to produce designated property. A partner may have to capitalize interest that the partner incurs during the tax year for the partnership’s production expenditures. Similarly, interest incurred by a partnership may have to be capitalized by a partner for the partner’s own production expenditures. The information required by the partner to properly capitalize interest for this purpose must be provided by the partnership on an attached statement for box 20 of Schedule K-1 using code R. See section 263A(f) and Regulations sections 1.263A-8 through -15.

Special rules apply to the following.

Allocating interest expense among activities so that the limitations on passive activity losses, investment interest, and personal interest can be properly figured. Generally, interest expense is allocated in the same manner as debt is allocated. Debt is allocated by tracing disbursements of the debt proceeds to specific expenditures. Temporary Regulations section 1.163-8T gives rules for tracing debt proceeds to expenditures. Also see Proposed Regulations 1.163-14 for a special rule for allocating interest expense with respect to pass-through entities.
Interest paid by a partnership to a partner for the use of capital, which should be entered on line 10 as guaranteed payments.
Prepaid interest, which can generally only be deducted over the term of the debt. See section 461(g) and Regulations sections 1.163-7, 1.446-2, and 1.1273-2(g) for details.
Interest that is allocable to unborrowed policy cash values of life insurance, endowment, or annuity contracts issued after June 8, 1997, when the partnership is a policyholder or beneficiary. See section 264(f). Attach a statement showing the computation of the deduction.

Limitation on deduction. Business interest expense deduction is generally limited to the sum of business interest income, 30% of the adjusted taxable income (ATI), and floor plan financing interest. This limitation generally applies at the partnership level. See section 163(j)(4) for additional information about the application of the business interest expense limitation to partnerships. See Form 8990, Limitation on Business Interest Expense Under Section 163(j), and its instructions for more information. BIE includes any interest expense properly allocable to a trade or business. A small business taxpayer that isn’t a tax shelter (as defined in section 448(d)(3)) and that meets the gross receipts test isn’t required to limit BIE under section 163(j). A taxpayer meets the gross receipts test if the taxpayer has average annual gross receipts of $31 million or less for the 3 prior tax years under the gross receipts test of section 448(c). Gross receipts include the aggregate gross receipts from all persons treated as a single employer such as a controlled group of corporations, commonly controlled partnerships or proprietorships, and affiliated service groups. If the partnership fails to meet the gross receipts test, Form 8990 is generally required. Also see Schedule B, questions 23 and 24.

Line 16. Depreciation On line 16a, enter only the depreciation claimed on assets used in a trade or business activity. Enter on line 16b the depreciation included elsewhere on the return (for example, on page 1, line 2) that is attributable to assets used in trade or business activities. See the Instructions for Form 4562, or Pub. 946, How To Depreciate Property, to figure the amount of depreciation to enter on this line.

Complete and attach Form 4562 only if the partnership placed property in service during the tax year or claims depreciation on any car or other listed property.

Don’t include any section 179 expense deduction on this line. This amount isn’t deducted by the partnership. Instead, it’s passed through to the partners in box 12 of Schedule K-1. Generally, the basis of a partnership’s section 179 property must be reduced to reflect the amount of section 179 expense elected by the partnership. This reduction must be made in the basis of partnership property even if the limitations of section 179(b) and Regulations section 1.179-2 prevent a partner from deducting all or a portion of the amount of the section 179 expense allocated by the partnership.

Line 17. Depletion If the partnership claims a deduction for timber depletion, complete and attach Form T (Timber), Forest Activities Schedule.

Caution: Don’t deduct depletion for oil and gas properties. Each partner figures depletion on oil and gas properties. See the instructions for Schedule K-1, box 20, Code T. Depletion information—oil and gas, for the information on oil and gas depletion that must be supplied to the partners by the partnership.

Line 18. Retirement Plans, etc. Don’t deduct payments for partners to retirement or deferred compensation plans, including IRAs, qualified plans, and SEP and SIMPLE IRA plans, on this line. These amounts are reported in box 13 of Schedule K-1 using code R and are deducted by the partners on their own returns.

Enter the deductible contributions not claimed elsewhere on the return made by the partnership for its common-law employees under a qualified pension, profit-sharing, annuity, or SEP or SIMPLE IRA plan, and under any other deferred compensation plan.

Instructions for Form 1065 (2025) 23

If the partnership contributes to an IRA for employees, include the contribution in salaries and wages on page 1, line 9, or Form 1125-A, line 3, and not on line 18.

Employers who maintain a pension, profit-sharing, or other funded deferred compensation plan (other than a SEP or SIMPLE IRA), whether or not the plan is qualified under the Code and whether or not a deduction is claimed for the current year, must generally file the applicable form listed below.

Form 5500, Annual Return/Report of Employee Benefit Plan.
Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan (generally filed instead of Form 5500 if there are under 100 participants at the beginning of the plan year).

Tip: Form 5500 and Form 5500-SF must be filed electronically under the computerized ERISA Filing Acceptance System (EFAST2). For more information, see the EFAST2 website at EFAST.dol.gov .

Form 5500-EZ, Annual Return of A One-Participant (Owners/Partners and Their Spouses) Retirement Plan or A Foreign Plan. File this form for a plan that only covers one or more partners (or partners and their spouses) or a foreign plan that is required to file an annual return and doesn’t file the annual return electronically on Form 5500-SF.

Line 19. Employee Benefit Programs Enter the partnership’s contributions to employee benefit programs not claimed elsewhere on the return (for example, insurance, health, and welfare programs) that aren’t part of a pension, profit-sharing, etc., plan included on line 18.

Don’t include amounts paid during the tax year for insurance that constitutes medical care for a partner, a partner’s spouse, a partner’s dependents, or a partner’s children under age 27 who aren’t dependents. Instead, include these amounts on line 10 as guaranteed payments on the applicable line of Schedule K, line 4, and the applicable line of box 4 of Schedule K-1, of each partner on whose behalf the amounts were paid. Also report these amounts on Schedule K, line 13e, and in box 13 of Schedule K-1, using code M, of each partner on whose behalf the amounts were paid.

Line 20. Energy Efficient Commercial Building Deduction Deduction for certain energy efficient commercial building property. See the Instructions for Form 7205 and section 179D for more information. Complete and attach Form 7205 if claiming this deduction.

Line 21. Other Deductions Enter the total allowable trade or business deductions that aren’t deductible elsewhere on page 1 of Form 1065. Attach a statement listing by type and amount each deduction included on this line. Examples of other deductions include the following.

Amortization. See the Instructions for Form 4562 for more information. Complete and attach Form 4562 if the partnership is claiming amortization of costs that began during the tax year.
Insurance premiums.
Legal and professional fees.
Supplies used and consumed in the business.
Utilities.
Certain business startup and organizational costs. See Limitations on Deductions, earlier, for more details.
Any net negative section 481(a) adjustment.

Also see Special Rules , later.

Don’t deduct the following on line 21.

Items that must be reported separately on Schedules K and K-1.
Fines or similar penalties. Generally, no deduction is allowed for fines or similar penalties paid or incurred to or at the direction of a government or governmental entity for violating any law except amounts that constitute restitution (including remediation of property), amounts paid or incurred to come into compliance with the law, amounts paid or incurred as the result of orders or agreements in which no government or governmental entity is a party, and amounts paid or incurred for taxes due to the extent the amount would have been allowed as a deduction if timely paid. No deduction is allowed unless the amounts are specifically identified in the order or agreement and the taxpayer establishes that the amounts were paid for that purpose. Also, any amount paid or incurred as reimbursement to the government for the costs of any investigation or litigation aren’t eligible for the exceptions and are nondeductible. See section 162(f). Report nondeductible amounts on Schedule K, line 18c.
Expenses allocable to tax-exempt income. Report these expenses on Schedule K, line 18c.
Net operating losses. Only individuals and corporations may claim a net operating loss deduction.
Amounts paid or incurred to participate or intervene in any political campaign on behalf of a candidate for public office, or to influence the general public regarding legislative matters, elections, or referendums. Report these expenses on Schedule K, line 18c.
Lobbying expenses. Generally, lobbying expenses aren’t deductible. These expenses include amounts paid or incurred in connection with influencing federal, state, or local legislation; or amounts paid or incurred in connection with any communication with certain federal executive branch officials in an attempt to influence the official actions or positions of the officials. See Regulations section 1.162-29 for the definition of “influencing legislation.” Dues and other similar amounts paid to certain tax-exempt organizations may not be deductible. If certain in-house lobbying expenditures don’t exceed $2,000, the general rule denying deductions for lobbying expenses doesn’t apply to these amounts. See section 162(e)(4)(B).
Amounts paid or incurred for any settlement or payout related to sexual harassment or sexual abuse that is subject to a nondisclosure agreement, as well as any attorney’s fees related to the settlement or payout. See section 162(q).

Special Rules

Travel, meals, and entertainment. Subject to limitations and restrictions discussed below, a partnership can deduct ordinary and necessary travel and non-entertainment-related meal expenses paid or incurred in its trade or business. Generally, entertainment expenses, membership dues, and facilities used in connection with these activities can’t be deducted. Also, special rules apply to deductions for gifts, luxury water travel, and convention expenses. See section 274 and Pub. 463 for details.

Travel. The partnership can’t deduct travel expenses of any individual accompanying a partner or partnership employee, including a spouse or dependent of the partner or employee, unless:

That individual is an employee of the partnership, and
The travel is for a bona fide business purpose and would otherwise be deductible by that individual.

Meals. Generally, the partnership can deduct only 50% of the amount otherwise allowable for non-entertainment meal expenses paid or incurred in its trade or business.

24 Instructions for Form 1065 (2025)

Entertainment-related meals are generally disallowed. In addition (subject to exceptions under section 274(k)(2)):

Meals must not be lavish or extravagant, and
A partner or employee of the partnership must be present at the meal.

See section 274(n)(3) for a special rule that applies to expenses for meals consumed by individuals subject to the hours of service limits of the Department of Transportation.

Membership dues. The partnership may deduct amounts paid or incurred for membership dues in civic or public service organizations, professional organizations (such as bar and medical associations), business leagues, trade associations, chambers of commerce, boards of trade, and real estate boards. However, no deduction is allowed if a principal purpose of the organization is to entertain, or provide entertainment facilities for, members or their guests. In addition, the partnership may not deduct membership dues in any club organized for business, pleasure, recreation, or other social purpose. This includes country clubs, golf and athletic clubs, airline and hotel clubs, and clubs operated to provide meals under conditions favorable to business discussion.

Entertainment facilities. The partnership can’t deduct an expense paid or incurred for a facility (such as a yacht or hunting lodge) used for an activity usually considered entertainment, amusement, or recreation.

Amounts treated as compensation. Generally, the partnership may be able to deduct otherwise nondeductible entertainment, amusement, or recreation expenses if the amounts are treated as compensation to the recipient and reported on Form W-2 for an employee or on Form 1099-NEC for an independent contractor.

Reforestation expenditures. If the partnership made an election to deduct a portion of its reforestation expenditures on Schedule K, line 13e, it must amortize over an 84-month period the portion of these expenditures in excess of the amount deducted on Schedule K (see section 194). Deduct on line 21 only the amortization of these excess reforestation expenditures. See Code S. Reforestation expense deduction, later.

Tax and Payment The IRS recommends paying electronically whenever possible. Options to pay electronically include using your bank account at IRS.gov/DirectPay , your debit or credit card, your digital wallet, or your IRS business account at IRS.gov/BusinessAccount . Go to IRS.gov/Payments to see all your payment options.

Line 24. Interest due under the look-back method for com- pleted long-term contracts. For partnerships that aren’t closely held, attach Form 8697. If paying by check, make it payable to “United States Treasury.” Enter the partnership’s EIN, daytime phone number, and “Form 8697 Interest” on the check or money order.

Line 25. Interest due under the look-back method for prop- erty depreciated under the income forecast method. For partnerships that aren’t closely held, attach Form 8866. If paying by check, make it payable to “United States Treasury.” Enter the partnership’s EIN, daytime phone number, and “Form 8866 Interest” on the check or money order.

Line 26. BBA AAR imputed underpayment. Use this line if the partnership is filing an AAR electronically and chooses to pay the IU. For instructions on how to figure the IU, see the Instructions for Form 8082. Included on line 26 are any payments for the IU, estimated interest and estimated penalties. See the Instructions for Form 8082 for attaching a separate schedule of the detail for the line 26 amount. If paying by check, enter the name of the partnership, TIN, tax year, “Form 1065,” and “BBA AAR Imputed Underpayment” on the payment. Checks must be made payable to “United States Treasury” and mailed to Ogden

Service Center, Ogden, UT 84201-0011. If making an electronic payment, choose the payment description “BBA AAR Imputed Underpayment” from the list of payment types.

Line 27. Other taxes. In a few instances, payments other than those listed above may have to be made with Form 1065. Enter the amount on this line and attach a statement identifying the purpose of the payment. Payments should be made out to “United States Treasury” and mailed to Ogden Service Center, Ogden, UT 84201-0011. Payments can be made by check or electronically.

If a payment relates to the Prevailing Wage & Apprenticeship (PWA) penalty calculated on Form 7220 and reported in columns (o)(1) through (o)(3), and (p)(1) through (p)(3) of Form 4255, Part I, the payment should be made with Form 1065 for the tax year that the partnership claimed the credit to which the PWA penalty payment relates.

Line 29. Elective payment election amount from Form 3800. Report the gross elective payment election amount from column (h) of Form 3800, Part III, line 6.

Line 30. Payment. Enter any prepayments related to lines 24 through 27 above.

Line 31. Amount owed. The IRS recommends paying electronically whenever possible. Options to pay electronically include using your bank account at IRS.gov/DirectPay, your debit or credit card, your digital wallet, or your IRS business account at IRS.gov/BusinessAccount . Go to IRS.gov/Payments to see all your payment options.

Non-electronic payment option exceptions. If you qualify for one of the exceptions below, a check, money order, or cash may still be permitted as a payment option.

Individuals who don’t have access to U.S. banking services or electronic payment systems.
Certain emergency payments where electronic disbursement would cause undue hardship, as contemplated in 31 C.F.R. Part 208.
National security- or law enforcement-related activities where non-EFT transactions are necessary or desirable.
Other circumstances as determined by the Secretary of the Treasury, as reflected in regulations or other guidance.

Paying by cash. You may be able to pay your balance due with cash at a participating retail store. Go to IRS.gov/ PayWithCash .