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Individual Income Tax

2020 Iowa Acts, House File 2641, Division V, modified the procedures and requirements for reporting federal income tax changes to the Iowa Department of Revenue. This guidance is intended to provide a general overview of these procedures and requirements for Iowa taxpayers who are individuals (IA 1040), estates or trusts (IA 1041), C corporations (IA 1120), financial institutions (IA 1120F), S corporations (IA 1120S), partnerships (IA 1065), and composite return filers (IA 1040C or IA PTE-C), for federal income tax changes made after July 1, 2020. The Department intends to adopt or update administrative rules as necessary to implement these law changes and this guidance.

Federal Amended Returns or Federal Audit Adjustments

Note: This section does not cover federal income tax changes governed by the Bipartisan Budget Act of 2015 (BBA), also referred to as the centralized partnership audit regime. If you are a partnership or partner that is subject to a federal centralized partnership audit change or a federal administrative adjustment request (AAR) change, see the “Federal Centralized Partnership Audit Regime” section below.

Federal Centralized Partnership Audit Regime Changes

The Bipartisan Budget Act (BBA) of 2015 created a centralized partnership audit regime that changed how most federal partnership returns are audited and amended, and how additional federal taxes are collected. For tax years 2018 and forward, the IRS makes audit adjustments and generally collects additional federal taxes at the partnership level for partnerships subject to the federal centralized partnership audit regime. View additional information about the federal BBA Centralized Partnership Audit Regime. If a partnership under this regime (called a “BBA partnership”) is audited by the IRS or files a federal Administrative Adjustment Request (AAR), the partnership and its direct and indirect partners must follow certain procedures and timelines for reporting the adjustments to Iowa and paying the resulting Iowa tax or requesting Iowa refunds. Taxpayers who have questions about this process and its effect on Iowa income tax reporting are encouraged to submit a policy guidance request to the Department.