Updated October 16, 2026. Quick answer: Form 8865 is titled Return of U.S. Persons With Respect to Certain Foreign Partnerships. A U.S. person files it when the instructions place that person in one or more of four categories of filers, and it is attached to the filer’s own income tax return. The first decision is which category applies, because the category sets which schedules are required and which penalty can apply.
S corporation return (Form 1120-S) for 2025, read line by line: Form 1120-S Schedule B questions 4 and 5 and Form 1120-S Schedule K lines 14 to 16.
Partnership return (Form 1065) for 2025, read line by line: Form 1065 lines 4 to 8, Form 1065 lines 24 to 31 and Form 1065 Schedule B questions 1 to 3.
What Form 8865 is
The form’s title is “Return of U.S. Persons With Respect to Certain Foreign Partnerships”. The instructions describe its purpose in terms of three Code sections: “Use Form 8865 to report the information required under section 6038 (reporting with respect to controlled foreign partnerships), section 6038B (reporting of transfers to foreign partnerships), or section 6046A (reporting of acquisitions, dispositions, and changes in foreign partnership interests).”
The form is not a partnership return in the way a Form 1065 is. It is a return filed by a U.S. person about a foreign partnership, and the instructions say a separate one is needed for each: “Complete a separate Form 8865 and the applicable schedules for each foreign partnership.”
Who must file: the four categories
The filing rule is one sentence: “A U.S. person qualifying under one or more of the Categories of Filers (see below) must complete and file Form 8865.” The four categories are printed as follows.
| Category | As printed in the instructions |
|---|---|
| Category 1 | “A Category 1 filer is a U.S. person who controlled the foreign partnership at any time during the partnership’s tax year.” |
| Category 2 | “A Category 2 filer is a U.S. person who at any time during the tax year of the foreign partnership owned a 10% or greater interest in the partnership while the partnership was controlled by U.S. persons each owning at least a 10% interest. However, if the foreign partnership had a Category 1 filer at any time during that tax year, no person will be considered a Category 2 filer.” |
| Category 3 | “A Category 3 filer is a U.S. person who contributed property during that person’s tax year to a foreign partnership in exchange for an interest in the partnership (a section 721 transfer), if that person either owned directly or constructively at least a 10% interest in the foreign partnership immediately after the contribution, or the value of the property contributed (when added to the value of any other property contributed to the partnership by such person, or any related person, during the 12-month period ending on the date of transfer) exceeds $100,000.” |
| Category 4 | “A Category 4 filer is a U.S. person that had a reportable event under section 6046A during that person’s tax year.” |
The category tests turn on two ownership levels. “Control of a partnership is ownership of more than a 50% interest in the partnership.” The lower level has its own rule: “For purposes of determining a 10% interest, the constructive ownership rules described below apply.”
A filer can fall into several categories at once, and the instructions say what follows: “If you qualify under more than one category for a particular foreign partnership, you must submit all the items required for each category under which you qualify.”
Reportable events for Category 4
Category 4 is built on the idea of a reportable event. “There are three categories of reportable event’s under section 6046A: acquisitions, dispositions, and changes in proportional interests.” The instructions give the acquisition test in terms of crossing the 10% line, and they give examples such as an interest that goes from 9% to 10%. The disposition test works the same way in the other direction.
Category 3 and Category 4 can overlap when property is contributed for an interest. The instructions resolve it this way: “If you properly report the contribution of property under the Category 3 rules, you aren’t required to report it as a Category 4 filer.”
Exceptions and relief
Several exceptions reduce the paper, and each has its own conditions. For a partnership with several controlling U.S. owners the instructions say: “only one of these Category 1 partners is required to file Form 8865.” The instructions attach conditions to that exception.
When the foreign partnership itself files a U.S. return, the instructions allow substitution: “If a foreign partnership files Form 1065 for its tax year, Category 1 and 2 filers may use a copy of the completed Form 1065 schedules in place of the equivalent schedules of Form 8865.” The Form 1065 side of that choice is explained on the Schedule K-1 (Form 1065) boxes page.
When and where Form 8865 is filed
The form travels with the filer’s own return. “File the 2025 Form 8865 with your income tax return for your tax year beginning in 2025.” The fallback for a filer with no income tax return is also printed: “If you don’t have to file an income tax return, you must file Form 8865 separately with the IRS at the time and place you would be required to file an income tax return”.
If the form turns out to be wrong, the instructions give the correction route: “file a corrected Form 8865 with an amended tax return following the instructions for the return with which you originally filed Form 8865.”
The key schedules
Which schedules a filer completes depends on the category. The instructions send the partnership income and capital schedules to the Form 1065 instructions: “If you are required to complete these schedules for Form 8865, use the specific instructions for the corresponding schedules of Form 1065, U.S. Return of Partnership Income.”
| Schedule | Who completes it, as printed |
|---|---|
| Schedule K | “Only Category 1 filers must complete Form 8865, Schedule K.” |
| Schedule K-1 | “All Category 1 and 2 filers must complete Schedule K-1 (Form 8865) for any direct interest they hold in the partnership.” |
| Schedule L | “Only Category 1 filers are required to complete Form 8865, Schedule L.” |
| Schedule N | “All Category 1 filers must complete Schedule N and report all transactions of the foreign partnership during the tax year of the partnership listed on the top of Form 8865, page 1.” |
| Schedule O | “Category 3 filers must complete Schedule O.” |
Two schedules carry the international detail. “Schedule K-2 (Form 8865) is an extension of Schedule K of the Form 8865 and is used to report items of international tax relevance from the operation of a partnership.” “Schedule K-3 (Form 8865) is an extension of Schedule K-1 (Form 8865) and is generally used to report the partner’s share of the items reported on Schedule K-2.”
Page 3 of the form is Schedule B, and the form carries a reminder at its top: “Include only trade or business income and expenses on lines 1a through 22 below.” A Category 1 filer whose partnership meets both tests may answer Yes to item H11 and skip Schedules L, M-1, and M-2. Item H11 on page 1 asks “Does this partnership meet both of the following requirements?” The two requirements are listed in the glance table below.
The penalties for filing late or not at all
The penalty depends on the category. For Category 1 and Category 2 filers the instructions print the following. “A $10,000 penalty is imposed for each tax year of each foreign partnership for failure to furnish the required information within the time prescribed.” “If the information isn’t filed within 90 days after the IRS has mailed a notice of the failure to the U.S. person, an additional $10,000 penalty (per foreign partnership) is charged for each 30-day period, or fraction thereof, during which the failure continues after the 90-day period has expired.” “The additional penalty is limited to a maximum of $50,000 for each failure.”
A worked illustration follows the printed formula. Suppose the first $10,000 penalty applies and then 2 thirty-day periods of continuing failure pass after the 90-day period. The computed amount of the additional penalty is $10,000 times 2 periods, which makes $20,000 of additional penalty. The computed amount with the first penalty is $30,000. This is a computed illustration, not an IRS example.
A second consequence is on foreign tax credits: “Any person who fails to furnish all of the information required within the time prescribed will be subject to a reduction of 10% of the foreign taxes available for credit under sections 901 and 960.” The credit itself is covered on the Form 1116 page.
Categories 3 and 4 have penalties of their own. For a contribution that was not properly reported, “is subject to a penalty equal to 10% of the fair market value (FMV) of the property at the time of the contribution.” “This penalty is subject to a $100,000 limit, unless the failure is due to intentional disregard.” For Category 4, “Any person who fails to properly report all the information requested by section 6046A is subject to a $10,000 penalty, in addition to the section 7203 criminal penalty, unless it is shown that such failure is due to reasonable cause.”
For Category 1 and 2 filers, the instructions add: “Criminal penalties under sections 7203, 7206, and 7207 may apply for failure to file or for filing false or fraudulent information.”
Key numbers at a glance
The thresholds and penalty limits that matter most are collected here, each as printed.
| Item | As printed |
|---|---|
| Control | “Control of a partnership is ownership of more than a 50% interest in the partnership.” |
| Late filing, first penalty | “A $10,000 penalty is imposed for each tax year of each foreign partnership for failure to furnish the required information within the time prescribed.” |
| Late filing, cap on the additional penalty | “The additional penalty is limited to a maximum of $50,000 for each failure.” |
| Category 3 contribution penalty limit | “This penalty is subject to a $100,000 limit, unless the failure is due to intentional disregard.” |
| Small partnership test, receipts | “The partnership’s total receipts for the tax year were less than $250,000.” |
| Small partnership test, assets | “The value of the partnership’s total assets at the end of the tax year was less than $1 million.” |
Related reporting for the same foreign holdings is covered on the foreign inheritance and Form 3520 page and on the FBAR and Form 8938 page.
Which revision applies
The edition read for this page is Form 8865 (2025) and the Instructions for Form 8865 (2025), which are the revisions irs.gov served when they were read on 2026-10-16. Check the revision printed on the form you are filing, because a later revision can change the categories of filers, the schedules and the penalty wording.
Common mistakes
- Checking only one category. The instructions say a filer who qualifies under more than one category for a particular foreign partnership must submit all the items required for each category.
- Treating the form as optional because the foreign partnership files nothing in the United States. The instructions place the filing duty on the U.S. person, and the penalty is stated per tax year of each foreign partnership.
- Assuming a Category 3 contribution is only a Category 3 issue and ignoring the dollar limit. The instructions print a penalty of 10% of the property’s fair market value, subject to a $100,000 limit unless the failure is due to intentional disregard.
Related: Schedule K-1 (Form 1065) boxes explained, Form 1116 foreign tax credit, foreign inheritance and Form 3520, and FBAR and Form 8938 compared.
Sources
- Form 8865 (2025), Return of U.S. Persons With Respect to Certain Foreign Partnerships: https://www.irs.gov/pub/irs-pdf/f8865.pdf
- Instructions for Form 8865 (2025): https://www.irs.gov/pub/irs-pdf/i8865.pdf
Read from the IRS documents linked above on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.