Form 8865 is the information return a US person files to report an interest in a foreign partnership: controlling it, owning 10% or more of one that US persons control, contributing property to it, or buying or selling a 10% stake. It's attached to your income tax return and due with it. The basic penalty for not filing is $10,000 per partnership per year, as of October 2026.
It isn't a tax return for the partnership and it usually doesn't change what you owe. It's a disclosure form, and the IRS enforces it with fixed penalties whether or not any tax was due. Everything below comes from the IRS Instructions for Form 8865 for 2025.
The four categories of filer
Whether you file, and how much of the form you complete, depends on which category you fall into. If you fall into more than one, you complete everything each category requires.
| Category | Who files | Key test |
|---|---|---|
| 1 | A US person who controlled the foreign partnership at any time in its tax year | More than a 50% interest |
| 2 | A US person with a 10% or greater interest while US persons each holding 10% or more controlled it | 10%, and no Category 1 filer that year |
| 3 | A US person who contributed property in exchange for an interest | 10% or more after the contribution, or over $100,000 contributed in 12 months |
| 4 | A US person with a reportable acquisition, disposition or change in interest | Crossing or moving by 10% |
A 10% interest means 10% of the capital, 10% of the profits, or 10% of the deductions or losses. Constructive ownership counts, so interests held by family members or related entities can push you over the line.
Category 4: when buying or selling triggers the form
Category 4 catches changes that people often don't think of as reportable. The IRS gives these examples:
- Acquisition: you go from under 10% to 10% or more, for example from 9% to 10%.
- Acquisition: your direct interest rises by at least 10% since your last reportable event, for example from 11% to 21%.
- Disposition: you drop below 10%, for example from 10% to 8%.
- Disposition: your direct interest falls by at least 10% since your last reportable event, for example from 21% to 11%.
If you contribute property for a 10% stake you could be both a Category 3 and a Category 4 filer. Report it correctly under Category 3 and you don't have to report it again under Category 4, although it still counts as the starting point for future changes.
Exceptions that save a filing
- Multiple Category 1 filers: if more than one US person controls the partnership, only one of them has to file, and the others attach a statement called 'Controlled Foreign Partnership Reporting' to their own returns.
- Constructive owners: in some cases a person treated as an owner only through attribution doesn't file, but the penalties still apply if the conditions of the exception aren't met.
- Domestic partnership contributions: if a US partnership contributes property and files Form 8865 itself, its partners don't have to report the transfer.
When and where to file
- Complete a separate Form 8865 for each foreign partnership.
- Attach it to your income tax return (or partnership or exempt organization return) and file both by the due date, including extensions.
- If you don't have to file an income tax return, file Form 8865 on its own at the time and place you'd file one.
- If you later find it was wrong, file a corrected Form 8865 with an amended return, write 'corrected' at the top and attach a statement explaining the changes.
For the schedules that mirror a US partnership return (Schedules B, K, K-1, L, M-1 and M-2), the IRS tells you to use the specific instructions for Form 1065. A Category 1 filer whose partnership already files a Form 1065 can attach those pages instead of completing the matching schedules again.
The penalties
| Failure | Penalty |
|---|---|
| Not furnishing section 6038 information on time | $10,000 per partnership per tax year |
| Still not filed 90 days after an IRS notice | Another $10,000 for each 30-day period, capped at $50,000 |
| Same failure, foreign tax credit | 10% reduction in foreign taxes available for credit, plus 5% for each further 3-month period |
| Not reporting a property contribution (section 6038B) | 10% of the property's fair market value, limited to $100,000 unless the failure was intentional |
| Not reporting an acquisition or disposition (section 6046A) | $10,000, plus $10,000 per 30 days after 90 days from notice, capped at $50,000 |
On an unreported contribution you also have to recognise gain as if you'd sold the property at its fair market value. Reasonable cause exceptions exist, and criminal penalties can apply to false or fraudulent filings.
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Before you start: what to gather
- The partnership's legal name, address, tax year and its reference ID number if it has no EIN.
- Your percentage of capital, profits and losses at the start and end of the year, and on the date of any change.
- Any interests held by relatives or related entities, for the constructive ownership schedule.
- Details and fair market values of any property you contributed in the last 12 months.
Foreign partnership interests rarely travel alone. If the same structure involves a US company with foreign owners, see Form 5472, and if you hold foreign bank accounts, check the FBAR rules too.
The verdict
If you're a US person with 10% or more of a partnership abroad, assume you file Form 8865 until you've ruled it out category by category. The form is long, but the penalty for missing it starts at $10,000 a year per partnership even when no tax was owed, so a late, complete form is far cheaper than a missing one.
Frequently asked questions
Who has to file Form 8865?
US persons who control a foreign partnership, own 10% or more of one controlled by US persons, contribute property to one, or have a reportable acquisition or disposition of a 10% interest.
When is Form 8865 due?
It's attached to your income tax return and filed by that return's due date, including extensions.
What is the penalty for not filing Form 8865?
The basic penalty is $10,000 per foreign partnership per tax year, with up to $50,000 more if it's still not filed after an IRS notice.
Does a 10% interest include family holdings?
Yes. Constructive ownership rules apply when you work out whether you hold a 10% or 50% interest.
