What is Schedule K-1?
Schedule K-1 is a schedule for IRS Form 1065, USA. Return of partnership income. It is provided to partners in a businesspartnershipto report their share of a partnership's profits, losses, deductions, and credits to the IRS.
You complete Form K-1 as part of yourCorporate tax return, form 1065, which lists your partnership's total net income.
Partnerships are so-called 'pass-through' entities. Pass-through entities are so called because they actually pay no taxes, but any income or losses, tax credits, and deductions are distributed (or "passed through") to the partners to report on their tax returns.
Schedule K-1 is an important part of the tax filing process for partners. It helps you and the IRS figure out how big your share of the pie is in the partnership and determines each partner's taxable income – and, by extension, tax liability.
Where can I find a sample K-1 tax form?
You can downloada sample copy of Schedule K-1 (Form 1065)of the Tax Authorities.
But you'll likely receive a copy of Schedule K-1 around tax time from your accountant or whoever is responsible for filing your partnership's Form 1065.
Who will submit it?
If you are a partner in a partnership that must file a tax return for the year, you will receive a K-1 showing your share of the partnership's reportable items.
During tax season you should do at least two things:
- Make sure your partnership has filed onePartnership tax returns, tax form 1065 and K-1s issued to all partners
- Report the items about your personK-1 schedulein the relevant places in your tax return.
Not sure if you have a partnership? Here are some telltale signs:
- You have a company together with one or more others, but that company is not a legal personality. (Note: You don't need to file any forms with your state to start a partnership. All you need is a verbal agreement).
- You have signed a partnership agreement and registered the company with the state.
- Your business is a multi-owner LLC and has not elected to be taxed as a C or S corporation. (That is, it is not archivedForm 8832ofForm 2553.)
There are actually two additional forms that the IRS calls "Schedule K-1":
- Schedule K-1 on Form 1041, which must be filed by beneficiaries of trusts or estates
- Schedule K-1 of Form 1120S, which must be filed by the owners of S corporations
Although these forms are similar, in this guide we will focus solely on Schedule K-1 of Form 1065, which must be filed by partnerships.
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K-1 award
The allocation of profits in a partnership is done according to the partnership agreement drawn up by each of the partners. In other words, each partnership decides for itself how to distribute income and other items such as interest income and charitable contributions.
Even if a partnership has not distributed any cash to the partners, the partners are allocated their share of the income or losses. For example, if your income allocation is $75,000, but you only received $25,000 in withdrawals during the year, you will still be taxed on the full $75,000.
K-1 vs. 1099
Your partnership receivesFormulate 1099from your customers if they paid you more than $600 during the year. When you add up the total income from all 1099s, you get most (but not all) of the income the partnership earned in the tax year. This information can be used to file your Form 1065 on behalf of the partnership.
In other words, 1099 forms are relevant to reporting the income of the corporation as a whole. Schedule K-1 is relevant to the individuals of the partnership when they report their share of the profit or loss on their tax returns. A partner will almost never receive a 1099 from the partnership he/she owns.
Self-employment tax K-1
Schedule K-1 shows you your self-employment income from the partnership or LLC of which you are a member. So you have to payindependent taxon that amount.
But like everything else having to do with the IRS, it isa few exceptions.
How does it look?
OfPDF for Schedule K-1of Form 1065 provided by the IRS only includes the coverage. The instructions, including a glossary of reporting codes you will use in Part III of the form (more on that below), are on aseparate pdf.
The schedule looks like this:
How to Read a K-1, Form 1065
You can read the official oneIRS Partner Instructions for Form K-1, but we've simplified it to just the most important information for you.
All information needed to complete a Schedule K-1 comes from the Income and Expenses section of theFormulate 1065.
In addition to regular business income (or losses), Schedule K-1 also records items such as property income, interest on bonds, royalties and dividends, capital gains, foreign transactions, and any other payments you may have received as part of your partnership involvement. You need this information to complete the form.
Part I. Partnership Information
point one
Enter your partnershipThe employer's identification number(A) hair.
Punt B
Enter the contact details of your partnership here.
Point C
Indicate here which IRS filing center you are sending Form 1065 to. (If you are unsure where to file Form 1065 this year, please contact usit IRS diagram.)
Summer D
Check this box if your partnership is a publicly traded partnership (PTP), where shares are bought and sold on an established securities market. (For more information about PTPs, seethis guidefrom the tax authorities.)
Part II. Information about the partner
Point E
Enter your Taxpayer Identification Number (TIN) here – this could be your Social Security Number (SSN), your Individual Taxpayer Identification Number (ITIN), or your Employer Identification Number (EIN). Read more about TINs atthe website of the Tax Authorities.
Articles F-I
Enter your contact details here, whether you are a general partner or limited partner and whether you are a foreign or domestic partner.
Article J
Here you report your share of the partnership's profits, losses, and capital. Generally, these amounts are based on those of the companypartnership agreement.
If you entered into the partnership after the start of this year's reporting period, enter the percentages that applied to you when you entered in the 'Beginning' column. If you left the partnership before the end of the reporting period, enter the percentages that applied to you when you left in the 'Exit' column.
Vare K
Here you enter your share of the partnership's obligations (or debts), sorted by type of liability: recourse, qualified non-recourse and recourse.
A recourse debt is a debt that holds the borrower personally liable (meaning a lender can go after your property), while all other debts are considered non-recourse. For more information about the difference, see the IRSdebt collection guideIninstructions for Form K-1.
Summer L
You hereby inform the tax authorities how much capital you had in the company at the beginning of the tax year, how much you have paid in during the year, whether your share in the capital has decreased or increased, any withdrawals or distributions and how much capital you have done. with which you ended the year
Summer M
Check here whether you have contributed real estate with built-in profit or loss to the partnership this year. tax authoritiesdefinesa built-in gain or loss as “the difference between the fair market value of the property and your adjusted basis in the property at the time it was contributed to the partnership.”
Part III. Partner's share of current year income, deductions, credits and other items
In this section, you report your share of income, losses, deductions, credits, and anything else that should be allocated to you in connection with your interest in the partnership.
To complete box 11 and boxes 13 through 20, use the codes found in the instructions on the Schedule K-1 form.
Box 1. Ordinary operating income (loss)
Enter your shareordinary income(losses) from trade or business activities of the partnership in this year.
Box 2. Net rental income (loss)
Enter your share in the net rental income (from the rental of homes, office space, retail space and any other type of real estate) from the partnership here.
Box 3. Other net rental income (loss)
Here you state your share of the other rental income you have earned from the partnership.
Box 4. Guaranteed payments
Here you report anyguaranteed paymentsyou have received from the partnership. These are payments that the partnership makes to you, regardless of the partnership's income, usually in exchange for services or for the use of capital.
For more information about guaranteed payments and other types of payments that partnerships make to their partners, see thisaccompaniment of TREASURE.
Box 5. Interest income
Here you report anythe interest ratethat you have earned during the year, from things like bonds, certificates of deposit, bank accounts, etc.
Squad 6. Dividend
Here you record all ordinary, qualified and dividend equivalent payments you have received from the company. (Dividends are payments people receive for owning stock in a company.)
Section 7. Royalties
Here you declare any royalties you received during your dealings with the partnership.
Box 8. Net short-term capital gain (loss).
Report here any short-term capital gains (or losses) you incurred while dealing with the partnership.
Box 9a-c. Other capital gains (losses)
This section is about the long-term gains or losses you experienced this year. For a detailed breakdown of which profits qualify as short-term and long-term, see thisaccompaniment of TREASURE.
Box 10. Net gain (loss) of section 1231
Section 1231 transactions include the sale or exchange of real estate, leases, livestock and horses, timber, coal or iron ore, and other property. For a detailed discussion of section 1231 transactions, see page nine iIRS Schedule K-1 Guide.
Box 11. Other income (loss)
If you have other losses or income to report that do not fall into the category of interest, ordinary dividends, royalties or capital gains, you can report them here and attach a statement explaining what type of income (or loss) you are reporting. Thatinstructions for Form K-1Provide a detailed overview of what you can report here.
Section 12. Article 179 Deduction
If you claimSection 179 deduction, report your share of that deduction here.
Section 13. Other deductions
You must use the codes hereinstructions for Form K-1to report any other deductions you claim, including cash contributions, non-cash contributions, education assistance benefits, pensions and IRAs, andany other deductionsyou want to review.
Box 14. Income from self-employment (loss)
Use this box to report income (or losses) as a self-employed person.
Section 15. Appropriations
You must use the codes hereinstructions for Form K-1to report your share of the credits you claim, including the Low Income Housing Credit, the Disability Access Credit, the Work Opportunity Credit, Research Activity Credits andany other credits.
Boks 16. Skema K-3
If you want to add an attachmentK-3 scheduleCheck this box to report international activities.
Box 17. Alternative minimum tax items (AMT).
Enter anyAlternative Minimum Tax (AMT)Information that may be relevant to you can be found here. (Read more about AMT ininstructions for form 1040.)
Box 18. Tax-free income and non-deductible expenses
Have you received tax-free income or had non-deductible expenses? Please indicate this here.
Box 19. Benefits
Report any distributions you received in the form of cash, marketable securities or real estate or anything elsebenefits covered by section 737her.
Box 20. Other information
Report anyOther informationhere using the codes on page 2 of Schedule K-1 andinstructions for Form K-1.
Box 21. Paid or accrued foreign taxes
Report any foreign taxes that partners paid during the reporting period.
When are K-1s due?
Businesses operating in a calendar year must file Form 1065 by March 15 (unless you request a six-month extension throughForm 7004). March 15 is also the deadline for partnerships to provide individual Schedule K-1s to each partner, giving individual partners just under a month to file their personal federal tax returns by April 15. These deadlines will be moved to the next business day if they fall on a weekend or holiday.
Companies using a fiscal year must file tax returns and provide Schedule K-1 forms to partners by the fifteenth day of the third month after the end of the fiscal year. When the partners file their individual tax returns, they must use Form K-1 starting that year.
For example, if the partnership's fiscal year ends on April 30, 2024, Schedule K-1s must be filed by July 15, 2024. Each partner then uses the information in Schedule K-1 on their 2024 tax return, filed in 2025.
Calculating each partner's share of each Schedule K-1 item can be complex and time-consuming. We highly recommend hiring an expert to help you submit to ensure you receive it on time.
