Taxes 101 What is a Schedule K-1 Form? Read the Article Open Share Drawer Share this:Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Pinterest (Opens in new window)Click to print (Opens in new window) Written by Published Jan 3, 2011 - [Updated Jul 8, 2019] 3 min read 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. Previous Post How is Your Retirement Savings Taxed? Next Post How to Adjust Your Tax Withholding for the New Year Written by More from 168 responses to “What is a Schedule K-1 Form?” « Older Comments Newer Comments » What if my K! from owning my own business shows an income of $100,000.00 more then I was paid to due growth…will I be double taxed on this forever as my business never pays me as much as it reports due to growth. Reply The firm I received a K1 from does business in 15 states. In some of these states, my income was only $100 or less. Am I required to file a state return in states where I made less than my standard deduction? Reply Hi Brandon, Since this income is reported to the IRS and your state you should file the state tax returns. Thank you, Lisa Greene-Lewis Reply Lisa – Is a K-1 Receipiant entitled to a full copy of the partnership tax return? My daughter has not and has been informed her k-l form will be a while. She need to do her income tax return in order to fill our her FASFA application for grants. Grants are on a first come basis. Do you know what is done in cases like this. Reply She can prepare a temporary return and can be helped by the Student Body Association. Then, her temp. return will be incorporated with her parents’. Reply My wife received a K-1 in 2012 for 2011 for her grandfather’s estate that she shared with her brother. The money was taken out of the estate and devided between her and her brother. I had to file an amended return last year because the K-1 came so late. The K-1 was filed for a loss. I did our taxes this year with turbo tax and it remembered the K-1 and put the loss in capital gains loss. Is this right? I have been using Turbo Tax for 10 years now. Reply Hi Lisa, We’ve a 2 partner LLC for rental investment which we invested the personal money in as loan. The LLC has a little bit of positive cash flow, so We would like to receive as a payment against the loan. What is the best way to do it so we don’t have to pay takes on this money on our personal returns? Thanks! Reply By law is there a drop dead date one should receive their K-1 by? My taxes are ready to go and they are telling me sometime in early March which sounds excessive. Thanks Reply I receive k1’s from 3 MLP’s that I have inside an IRA….The UBTI is below the 1k level. Do I have to even fill anything out at all on my personal tax returns or just ignore them? Reply Ed- My online research says you don’rt nered to do anything, but contact your IRA administrator and se if they wnat them sent to them. Reply Last year my former employer gave me 100 shares (10%) of the company. I didnt invest anything for the shares, now she’s sending a K1 and tells me I going to have to pay for my portion of the company. No money has and I believe will not be issued to me. Am I liable for this if I didnt invest money? Reply When I prepare the partnership tax return, the K-1’s get sent with the tax return. I also supply all my partners with a copy of their K-1. Are there any other filing requirements in regards to the K-1? Thanks! Reply My girlfriend was recently asked to fill out an application that includes membership in an LLC. This includes a K1 tax (form?). The question is; Is this normal procedure nowadays? To what advantage does my gf have by doing this? Why not just file as an independant contractor with a 10-99 form? I’m certainly no tax expert, so we are confused. Any help is greatful. 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What if my K! from owning my own business shows an income of $100,000.00 more then I was paid to due growth…will I be double taxed on this forever as my business never pays me as much as it reports due to growth. Reply
The firm I received a K1 from does business in 15 states. In some of these states, my income was only $100 or less. Am I required to file a state return in states where I made less than my standard deduction? Reply
Hi Brandon, Since this income is reported to the IRS and your state you should file the state tax returns. Thank you, Lisa Greene-Lewis Reply
My daughter has not and has been informed her k-l form will be a while. She need to do her income tax return in order to fill our her FASFA application for grants. Grants are on a first come basis. Do you know what is done in cases like this. Reply
She can prepare a temporary return and can be helped by the Student Body Association. Then, her temp. return will be incorporated with her parents’. Reply
My wife received a K-1 in 2012 for 2011 for her grandfather’s estate that she shared with her brother. The money was taken out of the estate and devided between her and her brother. I had to file an amended return last year because the K-1 came so late. The K-1 was filed for a loss. I did our taxes this year with turbo tax and it remembered the K-1 and put the loss in capital gains loss. Is this right? I have been using Turbo Tax for 10 years now. Reply
Hi Lisa, We’ve a 2 partner LLC for rental investment which we invested the personal money in as loan. The LLC has a little bit of positive cash flow, so We would like to receive as a payment against the loan. What is the best way to do it so we don’t have to pay takes on this money on our personal returns? Thanks! Reply
By law is there a drop dead date one should receive their K-1 by? My taxes are ready to go and they are telling me sometime in early March which sounds excessive. Thanks Reply
I receive k1’s from 3 MLP’s that I have inside an IRA….The UBTI is below the 1k level. Do I have to even fill anything out at all on my personal tax returns or just ignore them? Reply
Ed- My online research says you don’rt nered to do anything, but contact your IRA administrator and se if they wnat them sent to them. Reply
Last year my former employer gave me 100 shares (10%) of the company. I didnt invest anything for the shares, now she’s sending a K1 and tells me I going to have to pay for my portion of the company. No money has and I believe will not be issued to me. Am I liable for this if I didnt invest money? Reply
When I prepare the partnership tax return, the K-1’s get sent with the tax return. I also supply all my partners with a copy of their K-1. Are there any other filing requirements in regards to the K-1? Thanks! Reply
My girlfriend was recently asked to fill out an application that includes membership in an LLC. This includes a K1 tax (form?). The question is; Is this normal procedure nowadays? To what advantage does my gf have by doing this? Why not just file as an independant contractor with a 10-99 form? I’m certainly no tax expert, so we are confused. Any help is greatful. Thanks Reply