How to File Schedule K-1 (Form 1065)

If you’re a partner in a partnership, member of an LLC taxed as a partnership, or involved in certain business ventures, you may receive a Schedule K-1 (Form 1065). Understanding how to handle it is crucial for accurate individual tax filing and IRS compliance.

This guide explains what Schedule K-1 is, who files it, and how to include it in your tax return.

What is Schedule K-1 (Form 1065)?

Schedule K-1 (Form 1065) is a tax document issued by partnerships to report each partner’s share of:

Income

Deductions

Credits

Other tax items

It shows the amount you must report on your personal tax return, even if you didn’t receive a cash distribution.

⚠ Important: Receiving a K-1 does not mean you owe taxes on the full partnership earnings—you report your share of the items.

Who Receives Schedule K-1?

You may receive a K-1 if you are:

A partner in a partnership

A member of an LLC taxed as a partnership

A beneficiary of certain trusts or estates (these use different K-1 forms)

Partnerships are responsible for preparing and sending the K-1 to each partner and to the IRS.

Understanding the Sections on Schedule K-1 (Form 1065)

Key parts of K-1 include:

Part I – Information About the Partnership

Partnership name, address, and EIN (Employer Identification Number)

Part II – Information About the Partner

Your personal info and percentage of ownership

Part III – Partner’s Share of Income, Deductions, Credits, etc.

Ordinary business income/loss

Rental income/loss

Interest, dividends, capital gains/losses

Deductions (e.g., Section 179, charitable contributions)

Credits (e.g., foreign tax credit, investment credit)

How to File Your Individual Tax Return with K-1

Step 1: Wait for the K-1 Form

Partnerships must issue K-1 by March 15 for calendar-year filers.

Make sure you receive it before filing your personal tax return.

Step 2: Transfer K-1 Information to Form 1040

Ordinary business income: Report on Schedule E (Supplemental Income and Loss)

Interest/dividends: Report on Schedule B

Capital gains/losses: Report on Schedule D

Deductions or credits: Report on appropriate forms/schedules

Step 3: Attach Schedules as Needed

Include Schedule E (with K-1 info) when submitting Form 1040

Keep K-1 for your records (do not attach it if filing electronically unless required)

Step 4: File Electronically or by Mail

E-filing is supported by most tax software

Paper filing may require attaching certain forms, depending on the software

Important Tips

Check for Accuracy: Ensure your share of income, deductions, and credits matches your records.

Passive vs Non-Passive Income: Passive losses may be limited on your 1040.

Amendments: If the partnership issues an amended K-1, you may need to file Form 1040X.

State Taxes: Some states require separate reporting for partnership income.

Common Mistakes to Avoid

❌ Ignoring a K-1 because you didn’t receive cash
❌ Reporting wrong amounts from the K-1
❌ Mixing up passive and non-passive losses
❌ Filing your 1040 before receiving the K-1

⚠ Tip: Even if you didn’t receive distributions, you must report your share of partnership income.

Schedule K-1 (Form 1065) ensures that partnership income, deductions, and credits are properly allocated to partners. While it can be confusing at first, careful review and proper reporting on Form 1040 helps you stay compliant and avoid IRS issues.

For complex partnerships or multiple K-1s, consulting a CPA or tax professional is highly recommended.