Definition:
Schedule K-1 (Form 1065) is a supplemental IRS tax form used to report each partner’s or member’s share of income, deductions, credits, and other financial details from a partnership or Multi-Member LLC (MMLLC) that has filed Form 1065.
Each partner receives a personalized K-1 that breaks down their portion of:
- Business income and losses
- Capital gains or losses
- Deductions and tax credits
- Distributions and guaranteed payments
The partner then uses this K-1 to report their share of the activity on their individual or business tax return (e.g., Form 1040 or Form 1040-NR).
Why is it important?
Schedule K-1 ensures that pass-through taxation is properly accounted for and attributed to each partner. The IRS uses it to match income reporting between the business and its owners. Non-filing or errors may trigger audits or penalties.
Who is it for?
- U.S. and foreign members of Multi-Member LLCs (MMLLCs)
- Partners in U.S. partnerships
- Any business entity filing Form 1065
