Schedule K-1 (Form 1065) is a source document prepared by a partnership as part of filing its Form 1065, U.S. Return of Partnership Income. The partnership provides each partner a Schedule K-1 reflecting the partner’s share of income, deductions, credits, and other items that the partner will need to report on their individual tax return (Form 1040).
When preparing the partner's individual tax return in either TaxSlayer Pro desktop or ProWeb, the entries made in the Schedule K-1 entry window will generally flow to the appropriate form or schedule in the return, however some entries do not automatically flow to the return and it's up to the taxpayer to determine the extent of their applicability to the return.
The actual Schedule K-1 consists of three parts:
- Part I - Information about the Partnership - This section contains basic information about the partnership such as its name and address as well as indication if the partnership is a Publicly Traded Partnership (PTP). (Certain items on the K-1 are treated differently in the partner's individual tax return depending on whether or not the partnership is a PTP.)
- Part II - Information about the Partner - This section contains information about the partner and their investment in the partnership. Specifically, this section (a) identifies whether the partner is a general or limited partner, (b) reports the partner's share of profit, loss, and capital, and (c) indicates whether the partner’s share of liabilities is recourse or nonrecourse.
- Part III - Partner’s Share of Current Year Income, Deductions, Credits, and Other Items - This section is used to report the partner's share of any of the partnership's income, deductions, credits, etc.
If you have questions about the partner's Schedule K-1 when entering it in their individual tax return, review the IRS partner instructions along with any information the partnership provided along with the K-1.
If you're preparing both the partnership return and one or more partner's individual tax returns in the desktop version of TaxSlayer Pro, the partner's Schedule K-1 prepared in the partnership return can be pulled into the partner's individual tax return.
Note: This is an overview of Schedule K-1 (Form 1065). This is not intended as tax advice.
Additional Information:
IRS: Partner's Instructions for Schedule K-1 (Form 1065)
Schedule K-1 (Form 1065) - Heading Information
Schedule K-1 (Form 1065) - Income (Loss) Items
Schedule K-1 (Form 1065) - Deductions
Schedule K-1 (Form 1065) - Self-Employment Earnings (Loss)
Schedule K-1 (Form 1065) - Credits & Foreign Transaction Items
Schedule K-1 (Form 1065) - Alternative Minimum Tax (AMT) Items
Schedule K-1 (Form 1065) - Tax Exempt Income, Non-Deductible Expenses, Distributions & Other Items
