Schedule K-1 (Form 1065) (2024)

Schedule K-1 (Form 1065): What it is and how to report It

What is Schedule K-1 (Form 1065)?

Schedule K-1 (Form 1065) is a federal tax document that reports a partner's share of a partnership's income, deductions, credits and other tax items for the year. The partnership prepares a separate Schedule K-1 for each partner and provides a copy after filing Form 1065 with the IRS.

Partnerships generally use pass-through taxation, which means the partnership's income, deductions and other tax items are passed through to its partners rather than taxed as partnership income at the federal level. Each partner uses their Schedule K-1 to determine which amounts to report on their own tax return.

Who receives a Schedule K-1?

A Schedule K-1 is issued to each partner in a partnership. The partnership or its tax preparer completes the form, so individual partners generally do not prepare their own K-1. Partners who may receive a Schedule K-1 include:

• General and limited partners in a partnership
• Members of a multi-member LLC taxed as a partnership
• Partners in a limited liability partnership (LLP)
• Investors or other owners of interests in certain partnerships

The partnership reports each partner's distributive share of the partnership's tax items on the K-1.

Is Schedule K-1 the same as Form 1065?

No. Form 1065 and Schedule K-1 serve different purposes within the same partnership tax filing.

• Form 1065 is the partnership's annual information return. It reports the partnership's income, deductions and other tax information to the IRS.
• Schedule K-1 reports each individual partner's share of those items. A partnership generally prepares a separate K-1 for every partner and provides each partner with a copy.

Schedule K-1 is also used with other tax forms, including Form 1120-S and Form 1041. Check the form heading to confirm that the K-1 is Schedule K-1 (Form 1065).

How to report Schedule K-1 income on a tax return

The amounts on Schedule K-1 do not all go on the same line of Form 1040. Each item is reported according to its type and the instructions for that item. For example:

• Box 1, ordinary business income or loss: Generally reported on Schedule E, Part II, with the treatment depending in part on whether the partner materially participated in the activity
• Box 5, interest income: Generally reported on Form 1040 or Form 1040-SR, line 2b
• Box 6a, ordinary dividends: Reported according to the instructions for dividends on the partner's individual return
• Box 8, net short-term capital gain or loss: Generally reported on Schedule D
• Box 9a, net long-term capital gain or loss: Generally reported on Schedule D
• Box 14, self-employment earnings or loss: May be used to calculate self-employment tax on Schedule SE

Additional information may appear in attached statements, and some items are subject to rules such as basis, at-risk and passive activity limitations. Review the instructions for each K-1 item before reporting it.

Do you pay taxes on K-1 income?

Generally, a partner reports their share of the partnership's taxable income whether or not the partnership distributed that amount in cash. This means a partner may owe tax on income allocated through the K-1 even if the corresponding cash has not been received.

Cash distributions are generally treated differently from the partnership income reported on the K-1. Their tax treatment can depend on the partner's basis and other circumstances. Distributions that exceed a partner's adjusted basis may result in taxable gain.

Certain partners may also have self-employment tax obligations. For example, Schedule K-1 reports self-employment earnings in box 14, which individual partners may use when completing Schedule SE.

When is Schedule K-1 due?

The partnership generally must file Form 1065 and provide Schedule K-1 to its partners by the 15th day of the third month after the partnership's tax year ends. For a partnership using a calendar tax year, the usual deadline is March 15.

A partnership can generally request an extension to file Form 1065 by submitting Form 7004. An extension gives the partnership additional time to file the return, but partners should still consider when they need their K-1 information to complete their own tax returns.

Late filing can result in penalties based on the number of partners and the length of the delay. Separate penalties may also apply when required Schedule K-1 information is furnished late or contains incorrect information. Check the current IRS instructions for the applicable penalty amounts before filing.

Fill out Schedule K-1 (Form 1065) with Lumin

Complete the required partnership and partner information using Lumin’s fillable Schedule K-1 (Form 1065) template. Enter the applicable tax items, review the completed schedule and make any necessary changes before downloading it. Check the current IRS instructions and related partnership records before completing or filing the form.