What is Schedule K-1 and How Is It Filed?

Schedule K-1
Schedule K-1 for Partners and S Corp Owners. Kent Reid/Getty Images

Partners in a partnership, LLC members, and S corporation owners report their income for income tax purposes on a Schedule K-1. This article answers your questions about Schedule K-1, including when it's due, how to prepare this form, and how to include it on your personal tax return. 

What is Schedule K-1? 

Schedule K-1 is used to report individual partner or shareholder share of income for a partnership or an s corporation.

Items from the K-1 are transferred to the individual partner or shareholder's personal tax return.

Schedule K-1 is used to report income, losses, dividend receipts, and capital gains of partners, or of shareholders of s corporations or from some trusts. The partnership Schedule K-1 is also used shares of members in a multiple-member LLC (which is taxed as a partnership). 

Schedule K-1 for Partners vs. S Corporation Owners

There are two versions of Schedule K-1, One version is for partners in partnerships,(Form 1065, K-1), and the other is for shareholders in an S corporation (Form 1120s-K-1).

The major differences between the two Schedule K-1 forms is in how the income/losses and certain types of deductions are included.

  • In a partner's Schedule K-1, the parter's share of the partnership income/losses and liabilities at the beginning and end of the year are required, as well as the partner's share of capital gains or losses. 
  • In a shareholder's Schedule K-1, the shareholder's share of income of different types, and of certain kinds of deductions must be itemized. 
  • On both types of Schedule K-1 forms, any self-employment income or losses from shares of the business must be entered, to calculate self-employment tax on Schedule SE. 

    The Schedule K-1 itself is not filed with the personal return, but is sent to the IRS along with the appropriate business tax form (Form 1065 for a partnership; form 1120-S for an s corporation).

    Including Schedule K-1 on Your Personal Tax Return

    Information from Schedule K-1 is included the partner's or shareholder's personal tax return on Schedule E - Supplemental Income or Loss.

    Completing a Schedule K-1 for a Partner (or Member of an LLC)

    The K-1 information is based on the partner's share of the relevant information from the partnership tax return (Form 1065).

    1. Information about the partnership
    2. Information about the partner, including name and address
    3. Type of partner (general/LLC member), Limited partner, etc.)
    4. Partner's share of profit/loss/capital at the beginning and end of the tax year
    5. Partner's share of liabilities at the beginning and end of the tax year
    6. Partner's capital account analysis: beginning balance, changes, and ending balance
    7. Partner's share of income: ordinary income, rental/real estate,interest, dividends, royalties, short-term and long-term capital gains, other income/loss, section 179 deductions, other deductions, and self-employment earnings/loss
    1. Credits
    2. Foreign transactions
    3. Alternative minimum tax items
    4. Tax-exempt income and nondeductible expenses
    5. Distributions (money paid to partner or member during the year)
    6. Other information.

     

    Completing a Schedule K-1 for a Shareholder of an S Corporation


    The K-1 information is based on the shareholder's share of the relevant income/loss items from the s corporation tax return (Form 1120S).

    1. Information about the corporation
    2. Information about the shareholder, including name and address
    3. Shareholder's percentage of stock ownership for tax year
    4. Shareholder's share of income: ordinary, rental/real estate,interest, dividends, royalties, short-term capital gains, long-term capital gains, collectibles, un-recaptured section 1250 gain, net section 1231 gain/loss, other income/loss, section 179 deductions, other deductions, and self-employment earnings/loss
    5. Credits
    6. Foreign transactions
    7. Alternative minimum tax items
    8. Tax-exempt income and nondeductible expenses
    9. Items affecting shareholder basis
    10. Other information.

    As you can see, completing a Schedule K-1 is complicated. Get the help of an experienced tax professional to make sure the form is completed correctly.

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