It’s mid-March. Nearly two months ago, you received your W-2. A short while later, the last of your 1099-INTs from your bank arrived. Just when you thought you had all of your tax documents, you surprisingly received a corrected 1099-DIV. If you weren’t such a procrastinator, you would have filed your tax return a few weeks ago. Good thing you hadn’t!
But the strangest thing happened today – you opened the mail and there, with your name on it, is a tax form you’ve never seen: Form K-1. You weren’t expecting it, you never received one before, and you just got it, only a month before the tax deadline.
You: What gives?
A K-1 is a tax form distributed by many partnerships, S-Corps, estates, and trusts. If you are a general or limited partner of a partnership, a shareholder in an S-Corp, or the beneficiary of an estate or trust, you’re likely to receive a K-1.
You: But what is it?
A K-1 is just like a W-2 or other tax form. You use the information provided on the form to accurately complete your tax return. Except as illustrated in the opening scenario, K-1s are often distributed much later in the year than other tax forms.
You: Why do they arrive so late?
In order for the entity to send you the K-1, it first needs to complete its own tax return.
For example, a partnership must prepare its taxes- its partnership tax return – before it sends out the K-1s to the partners. The due date for most partnership tax returns is March 15. Consequently, K-1s are often received much later than other tax forms. Furthermore, like individuals, partnerships can request extensions of time to file, often until September 15.
You: So I might not receive a K-1 until after April 17, the deadline for my tax return?
Indeed, it’s not only possible, it happens routinely.
You: So how do I plan for that?
Most people who receive K-1s know they will receive them.
You: How do they know?
It’s rare to own a partnership or be a trust fund kid and not know it.
You: I suppose you’re right. So if get one of these K-1s, what would I do next?
Once you’re ready to start your tax return, collect all your tax forms, including any K-1s. If you’re using tax software, the program will tell you what you need to do with each form. TurboTax easily guides you through entering items reported on your K-1 and puts the information on your proper tax forms.
So, don’t lose too much sleep; the K-1 is, ultimately, just another form used to complete your taxes and report your income to the IRS.