To enter a K-1 (Form 1041) in the tax program from the Main Menu of the Tax Return (Form 1040) select:
- Income Menu
- Rents, Royalties, Entities (Sch E, K-1, 4835, 8582)
- K-1 Input - Select 'New' and double-click on Form 1041 K-1 Estate/Trust which will take you to the K-1 Heading Information Entry menu. All information in this menu must be entered to continue. At the bottom of this screen, the user must select if the K-1 is from an Estate or a Trust.
After entering all required information, select ‘OK’ and the K-1 1041 Edit Screen will appear. This K-1 1041 Edit Screen has two distinct sections entitled ‘Heading Information’ and ‘Income, Deductions, Credits, and Other Items.
See below basic information on each line of the Heading Information section of the Schedule K-1 1041 Edit Menu. For additional information regarding the requirements for Schedule K-1 (Form 1041) see: Instructions for Schedule K-1 (Form 1041) for a Beneficiary Filling Form 1040.
Lines A-E – Contain the basic information about the taxpayer and the entity that was entered in the Heading Information Menu. These entries will appear on the taxpayer’s 1040 on Schedule E, Line 28 and the Entity’s name will appear on supplemental schedules and worksheets that are generated as a result of the entries made on this Schedule K-1 1041 Edit Menu. The user has the option under Line B to select if the beneficiary is the Taxpayer or the Spouse, and under Line E to identify if the Fiduciary Type is an Estate or a Trust.
Line F –Are the Amounts on the K-1 Passive? - This is a YES or NO response based on whether the activity is consider to be passive or non-passive. This depends on the relationship that the taxpayer has with the underlying entity. See Publication 925 for passive activity rules.
Line G–Actively Managed Passive Loss Carryover – It is in this field that any actively managed passive carryover loss is reported. The amount entered in this field should correspond to what the taxpayer reported on last year’s 1040 on Form 8582, Worksheet 5 as unallowed loss for this K-1 entity. Any amount entered in this field will then carry to the 1040, Form 8582, Worksheet 1 where it will be subjected to the passive activity loss limitations.
Line H –Other Passive Loss Carryover? – It is in this field that a passive loss carryover for an activity that is not actively managed is reported. The amount entered in this field should correspond to what the taxpayer reported on last year’s 1040 on Form 8582, Worksheet 5 as unallowed loss for this K-1 entity. Any amount entered in this field will then carry to the 1040, Form 8582, Worksheet 1 where it will be subjected to the passive activity loss limitations. If the taxpayer has disposed of their interest in this investment during the tax year, see the Note at Line F for treatment of any prior year passive losses which were not allowed due to passive loss limitations.
NOTE: This is a guide on entering items in the Heading from Schedule K-1 (Form 1041) for a Beneficiary Filing Form 1040 into the tax program program. This is not intended as tax advice.
Additional Resources:
Instructions for Schedule K-1 (1041) for a Beneficiary Filing a Form 1040
Schedule K-1 (Form 1041) - Heading Information
Schedule K-1 (Form 1041) - Income Items
Schedule K-1 (Form 1041) - Deductions, Credits & Other Items