Schedule (K-1) Instructions: How to File in 11 Steps

As tax time rolls around, it’s not uncommon to find yourself facing the task of completing your tax return. One of the documents you may receive can include the Schedule K-1( Form 1065) or you may need to complete a small business tax filing that includes Schedule K-1 (Form 1120-S). While there is a Schedule K-1 (Form 1120-S) we will focus on Schedule K-1 (Form 1065). Don’t worry; we’re here to help with our Schedule K-1 instructions. 

In this 1065 K-1 instruction guide, we’ll help simplify the process of reporting and filing  Schedule K-1(Form 1065) amidst the paperwork chaos. Whether you’re a partner, shareholder, or an investor, this guide breaks down the information you need to know to hopefully make your tax-filing experiences much easier. 

Keep reading to learn the steps for reporting and filing Form 1065 Schedule K-1, and make sure you can handle your taxes with ease. 

What is a Schedule K-1?

Did you receive a K-1 form? It’s not a common form for most taxpayers, but questions about K-1s are some of the top questions we are seeing at this time in the season. K-1s are documents and small business tax forms that partnerships, LLCs, S-corps, estates, and trusts use to describe to owners/shareholders what income they are receiving from the entity.

Basically, it’s a schedule that allows you to see what income you received during the tax year, and the Schedule K-1 is used for pass-through entities. Realize, too, that you might receive a K-1 form if you are invested in a fund or an exchange traded fund that operates as a partnership. As a result, you’ll get a form that states your portion of the profit or loss associated with the partnership.

If you are a partner or shareholder in a pass-through entity, you probably received a copy of the Schedule K-1, filled out to report your share of the partnership’s income, deductions, and credits. The information from the K-1 is then put on your personal tax return.

The entity issuing the K-1 forms files them with the IRS. The recipients use their copies to make sure that they are paying the appropriate taxes.

Will You Get a K-1?

If you own a business with someone else, such as a partnership, then that business will issue you a K-1 to report your share of the income, credits, and deductions. If you own a business by yourself, either incorporated or as a sole proprietorship, then your business won’t issue a K-1.

There are a few other cases where you will receive a K-1 and not realize you were to get one – the most common has to do with your investments. If you invested in a master limited partnership (MLP), then you will receive a K-1 because MLPs are set up as partnerships, with shareholders being limited partners in the enterprise.

If you invested in an Exchange Traded Fund, some of those ETFs will issue K-1s if they are organized in a way that requires it. These ETFs are often trading in commodities such as gold, silver, natural gas, or oil.

Parts of the Schedule K-1

There are three different sections of the Schedule K-1:

1. Issuing entity information: This section includes information about the entity issuing the K-1. It has the EIN, as well as the address and the IRS filing location of the entity. You can also find the publicly traded partnership status if it applies.
2. Partner/shareholder information: This is the area where the individual partner/shareholder information appears. It includes the tax ID number (usually a Social Security number) as well as name and address.
3. Financial details: In this portion, the partner/shareholder can see information about his or her profits and losses related to the entity’s activities. So, if you have received a distribution from your LLC, or if you have income from a partnership or S-corp, this is where it will appear. Your losses also appear in this section.

The tricky part for you as a tax filer who may be issued a K-1 that you have to file is timing since a partnership you are involved in needs to file their taxes first in order to generate a K-1 that is filed with your personal taxes. Unlike 1099 and W-2 forms, which are due to the taxpayer by the end of January ), a K-1 isn’t due until mid-March when the small business tax fiing deadline is.

Employers and banks know how much they’ve paid out to people by January 1st, so the 1099 and W-2 deadlines are reasonable. Small businesses like partnerships, multi-member LLCs, and  S-Corps, however, need to file the partnership taxes first to generate a K-1 that is filed with each individual partner’s personal taxes and they have until the March 15 tax deadline for small businesses to do so.  If you have a small business where a K-1 would be issued then you may be waiting for your K-1 before you file your personal taxes.

If you actually own the business, you can prepare your own K-1 when you prepare your business taxes and then file your K-1 with your personal taxes.

Form 1065 Schedule K-1 instructions

Now that you understand what a Schedule K-1 is if you are a business owner and are ready to learn how to complete one and file small business taxes? Follow these Form 1065 K-1 instructions to get started: 

Part I. Partnership Information

1. Part I is the easiest to understand in terms of instructions for 1065 K-1. For items A through C, enter the name, address,  employer identification number (EIN) of the partnership and the IRS center where the partnership filed return. 

2. Check box D if your company is a publicly traded partnership. 

Part II. Partner’s Information

3. For each partner, provide their name, address, and SSN or TIN. Then, you’ll check the boxes based on the type of partner they are– general partner or LLC member-manager, Limited partner or other LLC member. Identify if the partner is domestic or foreign. If the partner is a disregarded entity (DE) you will provide their name and taxpayer identification number (TIN). 

4. The entity type in item I1 refers to whether they’re an individual, corporation, or so forth. The box on I2 will be checked if the partner is a retirement plan. 

5. In item J, you’ll enter the partner’s share of business profit, loss, and capital at the beginning and end of the tax year. 

6. item K outlines their liabilities at the beginning and end of the year. 

7. For item L, you’ll enter the relevant information about the partner’s capital contributions, withdrawals, distributions, allocations of income or losses, and any other adjustments during the tax year. 

8. In item M, if the partner has contributed property with a built-in gain or loss a statement must be attached.

9. To complete item N, you’ll typically find information related to the partner’s share of any unrecognized gains or losses at the beginning and ending of the tax year. 

Part III. Partner’s Share of Current Year Income, Deductions, Credits, and Other Items

10. The amounts reported in boxes 1 through 21 reflect the partners share of income, loss, deductions, credits and other items from the partnership business activities. You’ll also detail their share of deductions and tax credits during the year. 

11.  In the final two boxes, 22 and 23, of the Form 1065 Schedule K-1 you will check if more than one activity for at-risk purposes or for passive activity purposes. If so, then there is an attached statement will be included for more details.

When is Schedule K-1 due?

The due date for Schedule K-1 is the same as the deadline for filing Form 1065. The deadline for partners, LLCs, and S-corps is usually March 15th.

However, if you file an extension, the due date may be extended to September 15th. If September 15 falls on a weekend, the due date is the next business date. It’s important to note that individual partners or shareholders must receive their K-1 forms before their personal  tax return deadline to allow for the K-1 to be included in their personal filings, which individual tax returns are due on April 15 this year.

Don’t worry about knowing how to fill out your taxes if you have a K-1. You can come to TurboTax and do your taxes yourself, get help along the way and have your taxes reviewed by a tax expert before you file or hand your taxes off to a TurboTax Live expert who can do your taxes from start to finish.

If you have a small business that is an S-Corp, multi-member LLC, or partnership, you can come to TurboTax and be matched with a dedicated small business expert with TurboTax Live Full Service Business who specializes in business taxes and can do your taxes for you.