165PA Schedule K-1(NR): Nonresident and Out-of-State Partner's Share of Arizona Partnership Adjustment (2024)

Who files this form

This schedule is for nonresident and out-of-state partners whose partnership passed through an IRS audit assessment to its partners. The partnership prepares the schedule to help each partner report their share of the Arizona adjustment on an amended Arizona income tax return.

The form includes reporting instructions for nonresident individuals, nonresident estates and trusts, partnerships that are partners, and corporate partners. Corporate partners must use this schedule.

When it's due

For the 2024 Arizona amended return, the form says to submit the return to the department within 150 days of the IRS final determination date on line 1. Add 150 days to that date to find the deadline.

If the deadline falls on a Saturday, Sunday, or legal holiday, the return is considered timely if it is postmarked the next business day.

What you'll need

The schedule calls for:

• The partner’s identifying number, name, and address.
• The partnership’s EIN, name, and address.
• The calendar or fiscal tax year and whether the schedule is original or amended.
• The IRS final determination date.
• For an amended schedule, the date the original Form 165PA was filed.
• The partner’s portion of the Arizona partnership adjustment and the partnership’s Arizona apportionment ratio.

Partners use this schedule to report the adjustment on the applicable amended return: Form 140X, amended Form 141AZ, amended Form 165, or Form 120X.

How to file

Submit your amended Arizona income tax return to the department. The supplied form does not give a mailing address or e-filing instructions.

Report the adjustment according to your partner type:

• Nonresident individual: Use line 5. Report a positive amount on Form 140X, line 23. Report a negative amount as a positive number on Form 140X, line 25.
• Nonresident estate or trust: Use line 5. Report a positive amount on amended Form 141AZ, Schedule B, line B3. Report a negative amount as a positive number on Schedule B, line B9.
• Partnership that is a partner: Use line 3. Report a positive amount on amended Form 165, Schedule A, line A4. Report a negative amount as a positive number on Schedule B, line B5.
• Corporation filing Form 120X: Use line 3. Report a positive amount on Schedule D, line D8. Report a negative amount as a positive number on Schedule E, line E10.

For corporate partners, no additional adjustments are necessary if the partnership income is business income. If it is nonbusiness income, report any nonapportionable or allocable portion of line 3 on Form 120X, page 1, line 7. Report any portion of line 5 allocable to Arizona on Form 120X, page 1, line 11.

Common mistakes

• Using this schedule to distribute ordinary Form 165 income. The form specifically says not to use it to distribute a partner’s share of income from Form 165.
• Checking “Amended” without a previous schedule. Check that box only if a Form 165PA, Schedule K-1(NR) for the same year was previously provided to this partner.
• Replacing the original income amount when the schedule is marked “Original.” Line 3 is in addition to the amount passed through on Form 165, Schedule K-1(NR). Do not replace that original amount.
• Adding an amended adjustment to the earlier adjustment. When the schedule is marked “Amended,” line 3 replaces the amount previously passed through on Form 165PA, Schedule K-1(NR).
• Using the wrong year when the partnership has a fiscal year. If you file on a calendar-year basis, report the adjustment on your amended return for the calendar year in which the partnership’s fiscal year ends.

Questions people ask

Why did I receive this schedule?

The partnership was audited by the IRS and passed through the assessment to its partners. The schedule helps you report your share of the Arizona adjustment on an amended Arizona income tax return.

How is the Arizona-source adjustment calculated?

Multiply your portion of the Arizona partnership adjustment on line 3 by the partnership’s Arizona apportionment ratio on line 4. Enter the result on line 5.

Do I use line 3 or line 5 on my amended return?

Nonresident individuals and nonresident estates and trusts use line 5. Partnerships that are partners use line 3. Corporations filing Form 120X use line 3 for the addition or subtraction, with further reporting instructions for nonbusiness income that may also involve line 5.

Where does the form direct corporate partners for guidance on business versus nonbusiness income?

It refers corporate partners to Corporate Tax Rulings CTR 94-2, CTR 94-1, CTR 93-10, and CTR 93-9.

Official sources

• https://azdor.gov/forms