Introduction

This publication provides supplemental federal income tax information for partnerships and partners. It supplements the information provided in the Instructions for Form 1065, U.S. Return of Partnership Income; the Partner’s Instructions for Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc.; and the instructions for Schedule K-2 and Schedule K-3 (Form 1065). Generally, a partnership doesn’t pay tax on its income but passes through any profits or losses to its partners. Partners must include partnership items on their tax returns.

For a discussion of business expenses a partnership can deduct, see the 2022 version of Pub. 535, Business Expenses, at Publication 535, Business Expenses (2022) . Partnerships can’t deduct depletion on oil and gas wells. Each partner must determine the allowable amount to report on their return. As such, members of oil and gas partnerships should read about the deduction for depletion in chapter 9 of that publication.

Each partnership must designate a partnership representative unless the partnership has made a valid election out of the centralized partnership audit regime. See Designated Partnership Representative (PR) in the Form 1065 instructions and Regulations section 301.6223-1.

Withholding on foreign partner or firm. A partnership that has foreign partners or engages in certain transactions with foreign persons may have one (or more) of the following obligations.

Fixed or determinable annual or periodical (FDAP) income. A partnership may have to withhold tax on distributions to a foreign partner or a foreign partner’s distributive share when it earns income not effectively connected with a U.S. trade or business. A partnership may also have to withhold on payments to a foreign person of FDAP income not effectively connected with a U.S. trade or business. See section 1441 or 1442 for more information.

Withholding under the Foreign Investment in Real Property Tax Act (FIRPTA). If a partnership acquires a U.S. real property interest from a foreign person or firm, the partnership may have to withhold tax on the amount it pays for the property (including cash, the fair market value (FMV) of other property, and any assumed liability). See section 1445 for more information.

Publication 541 (Rev. 12-2025) Catalog Number 15071D Dec 18, 2025 Department of the Treasury Internal Revenue Service www.irs.gov

Withholding on foreign partner’s effectively con­ nected taxable income (ECTI). If a partnership has income effectively connected with a trade or business in the United States (including gain on the disposition of a U.S. real property interest), it must withhold on the ECTI allocable to its foreign partners. See section 1446(a) for more information.

Withholding on foreign partner’s sale of a partner­ ship interest. A purchaser of a partnership interest, which may include the partnership itself, may have to withhold tax on the amount realized by a foreign partner on the sale for that partnership interest if the partnership is engaged in a trade or business in the United States. See section 1446(f) for more information.

Withholding under the Foreign Account Tax Com­ pliance Act (FATCA). A partnership may have to withhold tax on distributions to a foreign partner of a foreign partner’s distributive share when it earns withholdable payments. A partnership may also have to withhold on withholdable payments that it makes to a foreign entity. See sections 1471 through 1474 for more information. A partnership that has a duty to withhold but fails to withhold may be held liable for the tax, applicable penalties, and interest. See section 1461 for more information.

For more information on withholding on nonresident aliens and foreign entities, see Pub. 515.

Comments and suggestions. We welcome your comments about this publication and suggestions for future editions.

You can send us comments through IRS.gov/ FormComments . Or, you can write to the Internal Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224.

Although we can’t respond individually to each comment received, we do appreciate your feedback and will consider your comments and suggestions as we revise our tax forms, instructions, and publications. Don’t send tax questions, tax returns, or payments to the above address.

Getting answers to your tax questions. If you have a tax question not answered by this publication or the How To Get Tax Help section at the end of this publication, go to the IRS Interactive Tax Assistant page at IRS.gov/ Help/ITA where you can find topics by using the search feature or viewing the categories listed.

Getting tax forms, instructions, and publications. Go to IRS.gov/Forms to download current and prior-year forms, instructions, and publications.

Ordering tax forms, instructions, and publications. Go to IRS.gov/OrderForms to order current forms, instructions, and publications; call 800-829-3676 to order prior-year forms and instructions. The IRS will process your order for forms and publications as soon as possible. Don’t resubmit requests you’ve already sent us. You can get forms and publications faster online.

Additional forms. A list of other forms and statements that a partnership may need to file is included at the end

of this publication. Also, see the instructions for the partnership’s tax return for additional forms and statements that may be required.

Useful Items You may want to see:

Publication

See How To Get Tax Help at the end of this publication for information about getting publications and forms.