What is a Schedule K-1 Form?

Taxes 101

If you are an owner of a partnership, LLC, S-corp, or other entity that passes through taxes to its owners, in most cases you will receive a K-1 form each year. The K-1 is prepared by the entity to distribute to owners/shareholders to outline their portion of the income, loss, and deductions. Similar to a 1099 form received that highlights contractor income, you do not have to file the K-1 with your personal income tax return. Instead, you use the data on the form to fill out portions of your personal tax return.

Preparing a K-1 For Shareholders

While a K-1 form is easy if you’re just the recipient needing to record income or losses, the process is a bit more detailed for owners of an S-corp, LLC, or partnership who are responsible for distributing the K-1 forms to members. Not only do you need to report net profit or loss, but some financial data must be tracked individually.

The S-corp or partnership must report certain income and expenses separately from the net profit or loss amount. These income and expense items retain their tax characteristics when passed-through to the shareholder, and are subject to the limits and tax rates on each shareholder’s personal Form 1040. Separately stated items are the following:

  • Section 1231 gains and losses,
  • Net short-term capital gains and losses,
  • Net long-term capital gains and losses,
  • Dividends eligible for the dividends received deduction (if a shareholder is a C-Corporation),
  • Charitable contributions,
  • Taxes paid to a foreign country,
  • Tax-exempt interest and related expenses,
  • Investment income and expenses,
  • Amounts previously deducted, such as bad debts,
  • Real estate income and expenses,
  • Section 179 deductions,
  • Tax credits, and
  • Non-deductible expenses, such as 50% of meals and entertainment expenses.

In addition, you must send out your K-1 forms to shareholders by March 15th.

The Unexpected K-1

Obviously, if you’re an active member in a partnership or other business that regularly issues K-1s it will come as no surprise when you receive one each year. But there are situations where you may appear to get a K-1 out of the blue, and this can throw you for a loop.

When this happens it’s almost always due to an investment in an ETF or fund that’s operating as a limited partnership. This isn’t always obvious to a regular investor, but buying shares of a commodity fund may in fact make you a part owner of a partnership. That means at the end of the year you’ll receive a K-1 outlining your share of the partnership’s profit or loss. This can come as quite a surprise for a new investor.

One way to tackle this issue is to hold your ETFs or other investments that are limited partnerships inside an IRA. You’ll still get a K-1 at the end of the year, but the taxes are still deferred and it won’t require any additional tax calculations on your end. If you’re holding these in a taxable account, though, it’s a good idea to use good tax preparation software that will guide you through the process. Here’s what Forbes has to say about how TurboTax handles K-1 forms.

Comments (138) Leave your comment

  1. I owned BOIL a Proshares Ultra DJ-UBS Natural Gas for one month at the end of 2013 and did not sell until 2014. I received a K-1 which reported Item 11 Other Income (loss) in the amount of $32,000. This must be income for the entire year! What should be reported on the 2013 return?? Since I only owned BOIL for one month would I just report the pro rata share of Item 11 or $32,000/12 = $2667? Thanks

  2. If a single member LLC issues a k-1 to the single member as guaranteed payments and this is the only income for the business, does the LLC still need to file a 1065 return?

  3. I have investments in about 20 publically traded MLP’s, most in the energy sector. Will TurboTax handle these? Is there provision to enter carryforward info (such as passive losses) from prior years? Will Turbotax generate all of the necessary forms once the entries form the K-1s are, in turn, entered into the program? I just finished my return for this year, using a tax prep professional, and I am thinking about using TurboTax next year. Thanks.

  4. My 12 year old son has an investment in an MLP. He will be receiving a K-1. If his gains from the investment is less than $1,000, will he still have to file a return as a result of getting the K-1?
    Thank you,
    Alan

    1. Hi Alan,
      If your son’s investment in an MLP is less than $1,000, he will not have to file a tax return unless he has other income that when added increase his income to over $1,000.

      Thank you,
      Lisa Greene-Lewis

  5. I received a K-1(1041) in 2014 as a beneficiary due to my fathers death in 2013. It is an 11 C. I received it from the fiduciary.
    We have already filed our 2013 taxes. What am I to do and how does this affect our 2013 taxes?

  6. I have about $14,000 invested in a piece of family property. I receive my K1 in the middle of the summer, so by then my taxes are done. This year I got one in time to do my taxes with it. My accountant at H&R Block told me that the fee for this raised my prep fee $200. I can’t understand why it cost that much to process. No gains or interest on my part. No I wonder why I should even include this since I haven’t done so since my money was invested in this property. I feel as though I should not include it in the future and risk a penalty, which would probably be less than the prep fee. Am I getting ripped off? Should I just throw this form away?

    1. Hi Chuck,
      You should still file the form. The IRS will match up the form they receive from the payor and if it doesn’t match your tax return you may get an adjustment or notice from the IRS. Next time try TurboTax so you can save some money.
      Thank you,
      Lisa Greene-Lewis

  7. I own 100% of an LLC that I created several years ago. My LLC owns 1 rental property. I also own 4 other properties as a sole proprietor. I file a corporate return for my LLC every year and a personal return for the other 4 properties. Should I also have a K1 statement?

  8. I recently invested in a movie, and another business. Based on tax laws, sec 181, we qualify for a write-off. I also have invested in another business with depreciating assets.
    Therefore, I have received my K-1s and mostly losses are listed. The losses almost outweigh my wage income, but Turbo Tax doesn’t reflect this. Did I miss something when I invested in these businesses?

  9. My husband is a partner in an LLC which is strictly family business. He only gets a K-1 after the family CPA has filed his tax return for the previous year. Is that customary???

  10. I am completely new to the K-1 form and not sure if this has been answered or not, but I am a bit confused as the TurboTax form for the K-1 do not match the descriptions in the K-1. Specifically boxes 13-20 (with letters) On the K-1, I get something like 20J1, 2, 3, etc. and these don’t seem to match any Turbotax box descriptions. Any help?

  11. I am trustee for my brother’s special meets trust. MUST I or MAY I deduct all of the distributions on the 1041? If I do not claim all of the distributions, the trust would pay a higher tax rate on that portion of income (IRS should be happy). I get a simpler administration which should offset all or part of those extra taxes. I get conflicting opinions on this question. Coincidentally, I receive a distribution. My K-1 does not include all of the cash distributions for the year. This occurred two years in a row.
    MattJohn

  12. I filed my taxes last week. I just received a Schedule K-1 for a sale of ASQ which I didn’t realize used a K-1 instead of a 1099. It’s not listed as a MLP, LLP, etc. I entered it as a loss of $21 with the rest of my stock sales, about 30, on my taxes. What should I do, will the IRS notice my error? (I had a entered info for a K-1 I had for an MLP.) Thank you,

  13. This is my first year of owning shares of BX which issues a K-1. I know the amts of the partnership distribution. I don’t know the “tax character”. BX issues what they call preliminary information in late March. Will this have the tax character of the distribution? They won’t tell me now because it would constitute advice in their opinion.

  14. A foreign Company makes an investment in a Joint Venture drilling oil and gas wells. The foreign company get paid out from production and receives a K-1 at the end of the year. does the foreign company have to file a Federal & State Tax return, or may it claim that income in it;s country for tax purposes?

  15. My grandfather passed away and he left some 4 yards (one that has a building on it) to me and 2 other people. These yards are currently being rented out by businesses. We are trying to figure out how we are going to handle this from a tax aspect. We have opened up a business account where all funds are being deposited and setting some of the funds aside for property taxes and expenses. The rest of the funds will be split between the 3 of us quarterly. We have all agreed to pay our own taxes on the money that is distributed qtrly. Are we going about this in the right way and what do we do when tax time comes? Is it required that we pay qtrly taxes on the funds? Any advice is greatly appreciated. thanks in advance

  16. we have a rental property but it is not an LLC. Turbo Tax is telling me I need to upgrade from Premier to House and Business. Why, and do I have to, the rental property is not a business. Thanks!

  17. I have completed filing federal taxes for a trust established by my father-in-law that calls for income to be distributed annually. I am beginning to complete NC taxes for the same trust. Question: since much of the data for NC taxes comes from the fed form 1041, do I have to make additions or deductions, since all this was already “adjusted out” of the federal income?

  18. Last year my wife and I bought a rental property that we purchased under an LLC. We are equal partners but we always file Jointly. Do we need to file a K-1 form to each of us??

    1. Hi Bob,
      Yes, you would need to do your business tax return first with TurboTax Business product and it will produce K-1s for each of you. Then you will use the K-1s on your personal tax return that you file jointly.
      Thank you,
      Lisa Greene-Lewis

      1. Lisa, My HRBlock Basic program is having problems with Box 19 on the K1 and does not know how to handle it. Which TurboTax program will handle all aspects of the K1?

      2. Hi Tom,
        You should use TurboTax Premier if it is a K-1 for distributions to you.
        Thank you,
        Lisa Greene-Lewis

  19. My husband’s aunt passed away in 2011 and he received a K-1 from the CPA, showing Line 11 A (Excess Deductions) and 11 C (Long term Capital Loss Carryover.) We were not comfortable showing a loss, since we really weren’t in on all the ins and outs of the estate, so we didn’t report it last year. This year, as I came to the end of our taxes, I received a message that the K-1 Form isn’t yet ready and can be emailed to me. Why is that populating when I didn’t report anything. Is it necessary for us to report this loss?

  20. I inherited a business. Which new partners took over but kept me on as a limited partner. They then bought out my share and sent me a K-1 showing a $40,000.00 loss. Previous years were 1500 or 799, but this one thru my accountant for a loop. What can I do. I would like to file it with my taxes this year. BTW the K-1 is from 2012, I received it on 9.15.2013.

  21. is k1 income can be used to negate personnel investment income loss?

    example $5,000 income on K1 can be used nullify $5,000 personnel investment loss

    if yes, are there any limits?

  22. I received a incomplete k-1 in March of 2013 because of missing trades. I filed for an extension(I have a total loss). Then in Sept 2013 I sent the partnership the missing trades and they e-mailed me the completed k-1 form. I asked if they were going to file my completed K-1 with the IRS?But told me they do not send k-1s to the IRS after June 1 because they already filed there taxes.Now do I file form 8082 with just the missing trades? (That is what they told me) But how will the numbers match up correctly with the IRS if the partnership never filed my completed K-1? Do I send the IRS the completed K-1?
    Thankyou in advance!
    Barron

  23. I was a partner in a company and left right before tax time, this was 2011…my partner said that she filed for the company but never sent me a k1 and will not give me copies of anything….

    1. I could not agree with you more. Turbo Tax wants you to use their product, but for K-1’s the questions they ask are not totally understandable and I have never been able to get to anyone at Turbo Tax(A live person) to answer questions regarding K1’s.

    2. Isn’t that the truth! I’ve not gotten an answer yet!! I too asked questions regarding K-1s no answer to date!

      1. Thats because it is way too complicated. Lucky I made enough money on the stock BX to pay an accountant to figure it out. It is amazing people sit around and come up with all this stuff. I will be selling the stock this year and no more K1s starting next year!!

  24. I was a manager to an LLC until the members decided to assign the LLC last year over to the operator in lieu of refinancing a distressed RE property. The problem came about when our CPA had indicated he could only generate an estimate K-1 due to the operator refusing to give us the needed financials for our CPA. And one of the member’s CPA refuses to accept an estimate k-1. What are the risks involved with an estimate k-1? And what else can I do to resolve this issue?

  25. Hi Lisa:

    There had been calculation errors in my NJK1 which was audited for the year 2009. The deficiencies were paid off. Please advise how do I go about corrected my following years NJK1’s. Do I have to file the amended NJ1040X with the amended NJK1’s or should I just submit the NJK1 for 2010 thru 2012 to NJ Div. Thanks in advance

  26. my wife just got hired at a new salon. and they want to give her a k1 instead of a w2 . she works on 50% commission, not both rental they also want her to sing a non compete clause .they make the schedule tell her when she can take vacation and can fire her when ever they want , this seams like an employee situation not a partner she should get a w2 is this a legal business practice.

  27. My children have a trust account from the death of their father and are now members of an LLC. The LLC receives rental income from a billboard but the children receive no profits only a K1 showing they received income when they actually never have. What should I do and is this lawful?

  28. I receives a k-1 for one of the stocks I brought nth. I have a loss of -3. The state tax table on the k-1 shows three states with no income for 2 and one state with the loss. Should I be filling returns to all the three states for the partnership. Any guidance would be good. I am not getting good info on it.

  29. I am involved in an S-Corp. We have been an S-Corp for more than 15 years. Each and every year, my partner who handles the books, would complete corporate taxes and personal taxes and provide us with payment to the IRS for our financial share. As of a week ago, after some strife internally, refused to provide any financial information, K-1 or advise me on what is due for our Federal Income Tax and my liability (paid by company) is to the IRS as in the past. He would normally issue a check to us, and write on our account to the IRS. Now I am in a bind for filing Monday. Do I file an extension only? Do I file an extension of what might be due and not pay it? Suggestions please.

  30. I received a K1 form after I filed my taxes for 2012. The amount show a slight loss. Do I have to amend my taxes? I don’t believe the refund would be much and I prefer to just let it go unless I can be in trouble. Please advise.

    1. You shouldn’t be in big trouble. I say this not knowing the amounts however. You should be fine. The IRS doesn’t usually go after people for paying too much taxes. If it does come up, simply explain to them what happen, and they will fix it for you. Because you say it is a small amount, I would not pay to have a amended return done.

  31. Hi, I am filling my 2012 taxes. My most recent K1 says ‘For calendar year 2011, or tax year beginning 02/01/2011 ending 01/31/2012′. I moved from CA to NC on 04/01/2012. How should I file taxes for these states in TurboTax?

  32. I have live in NJ and have ownership in a PA S-Corporation. For which I receive a K-1. I file both a NJ and PA state return. The PA return is only for the S-corporation. In 2011’s return I was able to correctly delete the S-Corporation from the NJ return. In 2012 turbo tax refused to file the NJ return without the incorrect PA K-1 S-corporation information. How do you manually correct errors and delete forms in turbo tax? I followed the help directions. I the information was corrected, however during the final e-filing turbo tax incorrectly added the PA K-1 back into the NJ return. How can the error checking be disabled in turbo tax? How do I file an amended return? I recommend turbotax revise the way they handle S-corporations and K-1. More control should be given to the tax preparer.

  33. My husband abandoned me in April 2012 and we had an LLC from 2007 till he left. Now he’s trying to say he’s going to file a K-1 on me because I’m refuse to give him an uncontested divorce. There are no children, but he stopped paying all bills related to us. I even lost my home and had to move in with a friend. He left me indigent basically. I had worked our entire marriage until Feb 2012 when I lost my job. I was never on the LLC and I never drew a paycheck from our business. We only had owner’s draws put into our personal checking to pay household expenses and our bills. Does he have a leg to stand on or is he just being obstinate?

    1. I need to correct my first statement. I lost my job in Feb 2010 and was told by Tim I could stay home and help with our business, which I did until March of 2012.

  34. We transferred our Amerigas LLP shares from Ameritrade to Fidelity, then sold them all. We’ve received two K-1 forms from Amerigas with different amounts in each. Do we enter these K-1s separately in TurboTax or somehow combine them?

  35. As the sole shareholder in my S corp Turbotax Business attached a K1 to my S corp return for around $10k profit. I did not receive this money from the corp in any way either as a disbursement or divident. Do I have to declare it on my personal earnings return even though the money is still in the corp? The only earnings I received from the corp were in the form of W2 income which I did report on my 1040.

  36. My K-1 will be done in Oct 2013. I need my personal tax returns ASAP. Can I do without K-1? If yes, would it be any negative consequences? Thanks!

    1. My brother, sister, and I had an LLC–equal partnership of my Dad’s money. He died last April, and relationships have deteriorated with my siblings. In May of 2012, the money was distributed, and the LLC no longer existed. Fast forward to now, and 2 weeks before tax day. My brother dealt with all the tax and legal stuff for my Dad because he lived in the same town. I called the CPA office today that is preparing the paperwork for the partnership, and asked about my K1 form. They were very elusive (I had to call 4 times and send 1 e-mail) and one of the partners finally answered. He said he didn’t want to get involved in family drama, and that we should get an extension. Remember, I don’t get along with my siblings. I think the CPA gave the 3 K1’s to my brother, and he will give one to my sister (who he likes) but will hold onto mine for awhile. He likes to upset me, and is just plain mean. I don’t know that this is what happened, but my brother is very coniving and convincing. My question is: since I was an equal partner, I will pay an equal amount for tax prep, and the form is personal with my SSN, isn’t the CPA required to send that form to me?

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