Understanding Your K-1 (Form 1065 - Partnerships)
What is a K-1
The form K-1 is a tax document that is used to report the incomes, losses, and dividends of a partner of a business. Since partnerships are taxed as pass through entities, the income of the business is dispersed among the partners on a K-1 who then report and pay income tax on their personal returns.
Form K-1 can be broken down into three separate parts as follows:
Part 1 - Information about the partnership.
The first part of a K-1 for partnerships is where information about the business is entered. Information such as employer identification number, partnership name and address can all be found on the first section of the K-1.
Part 2 - Information about the partner.
The second part of the K-1 form is where information about the partner can be found. This section includes personal information such as identifying numbers, name, and address.
Also on part 2 is information regarding the partners share of profit, loss, and capital.
Part 3 - Partner’s Share of Current Year Income, Deductions, Credits, and Other Items.
The third part of the K-1 form is where you will find the partners share of income which includes: ordinary, real estate, guaranteed payments, interest, dividends, short and long term capital gains, royalties, collectibles, unrecaptured 1250, section 1231 gains and other incomes on lines 1-11.
Section 179 and other deductions appear on lines 11 and 12.
Self employment earnings, credits, foreign transactions, alternative minimum tax, tax-exempt income, distributions, and other information are found on lines 14-20.
Link to Form K-1 (1065) - https://www.irs.gov/pub/irs-pdf/f1065sk1.pdf
Instructions - https://www.irs.gov/pub/irs-pdf/i1065sk1.pdf