Every year individuals and entities of various types in the United States report their income and other information so the government can count their taxes and receive them. There is a wide range of forms people use for such purposes. Among those completed by business partners is the IRS Form 1065 and its add-on, Schedule K-1, that we will now review.
This form is used by the partnerships’ members and displays their revenues, credits, deductions, and other things. Alongside this data, signatories add their information and their partnership’s details for identification. The document is compulsory for all business partners regardless of their partnership type.
Each partner must file the record to the US Internal Revenue Service (or IRS), even if there are only two members of the business. Typically, we advise hiring a professional accountant who will help you deal with the template. However, if you feel confident enough, you can try to create the paper on your own. We have provided you with some instructions below.
You should get the actual Schedule K-1 template before you begin creating the record. You have two options: either visiting the Service’s website and get it there or using our advanced form-building software that can generate you any template you need, including this specific form.
Obviously, the second option is easier and quicker since you are already on our site. Download the file and read our guide to complete the form.
Define the Tax Year
Each entity uses its own time frame (year) to calculate taxes. It often coincides with a calendar year, but sometimes there are exceptions. Write the dates your partnership uses in the line on the form’s top.
Describe the Partnership
Below the year, you will see four boxes where you have to add details about your partnership. Enter its employer identification number (or EIN), name, and full address. Then, specify to which office the entity’s tax return was submitted previously. If you are a member of a publicly-traded partnership (or PTP), mark the box below.
Add Your Data
You, as a partner, must introduce yourself as well. In the first line, write your SSN (social security number) or TIN (tax identification number). Provide your name and address. Choose if you are a general or limited partner; then, mark if you are a domestic or foreign partner.
If you are a disregarded entity (DE) partner, mark the relevant box, insert the TIN and name, and provide the required details.
Describe your share as a percentage in the beginning and ending of the considered year for profit, loss, capital, and liabilities. Then, analyze your capital account by adding the required numbers (the beginning and ending capital account, capital invested during the year, withdrawals, and other items).
If you have invested any property with a built-in gain or loss to your business, choose a relevant answer and add a required attachment described in the IRS instructions. Then, look at Section 704(c) in your Form 1065 and write the number in the designated line.
Define Your Share of the Year
Before you start completing this massive part, pay attention to the template’s second page. Here, you will find tips on the data you have to include. Each line indicates the IRS guidelines or forms you can use to extract the needed numbers correctly.
Generally, this part serves as a description of your share from the business’s income, credits, deductions, and other items. Here, you might need the help of your accountant, your old records (including various IRS forms), and a completed Form 1065 because you will have to insert various numbers.
Step by step, you will add ordinary business income or loss, net rental income from various sources, guaranteed payments, interest income, dividends, royalties, deductions, self-employment earnings (or loss), credits, foreign transactions, distributions, and other info. Follow the template to understand what numbers go where.
If you are missing some numbers or cannot define what to write in the form, we advise asking for professional help. You should always remember that providing untruthful or incorrect information in such forms is illegal, and you may get in huge trouble for that.
You have to send the form along with the 1065 Form submitted on behalf of your entity. The Service accepts these documents both online and via regular mail. The office’s address depends on the state where you file the form, so check twice before sending it.
The deadline depends on the tax year applicable in your entity: it is day 15 of the third month of your year.