Schedule K-1 Tax Form: What Business Owners Need to Know
If you’re involved with a partnership, limited liability company (LLC), S corporation or a trust, chances are you’ve heard of the Schedule K-1 tax form. The K-1 tax form is an annual form sent by a company or trust to each of its owners detailing their share of its taxable income or losses.
When you receive a K-1, you must include the information in your personal state and federal tax returns to avoid facing penalties. If you’re the administrator preparing K-1s to send to owners, you need to be aware of what information to include and the deadlines for issuance.
Let’s break down the Schedule K-1, including instructions for filing K-1s properly.
- A K-1 is issued annually by a partnership, S corporation or LLC to each of its owners. Certain types of ETFs, estates and trusts also issue K-1s.
- A K-1 details each owner’s share of the entity’s taxable gains, losses, deductions and credits.
- The business is responsible for filing K-1s with the Internal Revenue Service (IRS), but individual partners, members and shareholders must include this information on their personal tax returns.
What is a K-1 tax form?
A Schedule K-1 tax form is an important document sent to each owner of a partnership, LLC and S corporation as well as some estates, trusts and ETFs. It details the owner’s share of taxable income or losses, including any applicable deductions and credits. Businesses that issue K-1s are called “pass-through entities,” meaning that their income is passed through to the owners, who are responsible for paying the taxes.
The K-1 tax form is similar in concept to the W-2 form, which is issued to employees, and 1099 forms, which are for non-employer payments. Each of these forms reports taxable income which must be included on the individual’s personal income tax returns.
How a K-1 can affect your personal taxes
If you own an interest in a partnership, LLC or another pass-through entity that earns a profit, your share will appear on your K-1 and you must file an annual tax return to report and pay taxes on it. If the entity loses money, the K-1 will show your share of the loss, which will typically reduce your tax liability.
It’s important to know that the entity files a copy of your K-1 form with the IRS, so the information you put on your personal tax return must match the K-1 you receive. Keep in mind that your share of taxable income may be different from the actual cash distributions you receive in a particular year.
Who needs to file a K-1 tax form?
Several types of business entities are required to file an annual tax return using form Schedule K-1. The person responsible for filing the K-1s is the person responsible for preparing the tax return. This may be an owner of the entity or an accounting professional.
Partnerships
A partnership is a business structure in which two or more people share ownership of a business. The owners are responsible for paying the partnership’s income taxes.
Partnerships issue K-1 forms detailing each partner’s share of the business’s taxable income or loss for the tax year, and the owners must include this information on their individual tax returns.The partnership also reports this information to the IRS by filing Form 1065, which includes a copy of each owner’s K-1.
LLCs with more than one member
An LLC is a business structure that allows pass-through taxation while providing limited liability protection for its members. Like partnerships, LLCs with more than one member issue a K-1 to each member and file Form 1065 with the IRS, including a copy of each owner’s K-1.
Single-member LLCs don’t file Form 1065 or issue a K-1 to their owners. Instead, the owner files Schedule C with their individual tax return (Form 1040), just like sole proprietors. LLCs with more than one member can also elect to be taxed like S-corps or C-corps, in which case they’ll file the tax forms used by those entities.
S Corporations
S corporations combine the benefits of pass-through taxation with the liability protection of a corporation. S-corps issue a Schedule K-1 to each shareholder, which represents the shareholder’s share of income or losses. The business files Form 1120-S with the IRS that includes a copy of every K-1 form.
Schedule K-1 requires pass-through entities to track each partner or shareholder’s basis — also known as their investment in the company. This basis determines the extent to which each owner can deduct losses or receive tax-free distributions.
In some cases, shareholders of S corporations may be required to attach a basis calculation (Form 7203) to their tax return. It is generally the shareholder’s responsibility to track their basis, and instructions for Form 7203 explain the process in detail.
Partnerships (and LLCs taxed as partnerships) also need to calculate basis. The business generates a K-1 form with details on the partnership’s inside basis, which represents the company’s stake in its business assets. However, each partner is individually responsible for tracking their outside basis, which represents their interest in the partnership. The IRS includes a worksheet for calculating adjusted basis in the partner instructions for the K-1 form.
Calculating basis can be intimidating, but a tax professional or financial advisor can help.
Trusts or estates
A trust is a legal arrangement in which a trustee holds and manages assets for beneficiaries. An estate refers to the assets and liabilities left behind after an individual’s death.
Although trusts and estates aren’t business entities, many are required to issue Schedule K-1s, depending on the amount of income generated and the residency of beneficiaries.
Trusts and estates file Form 1041 to report their income to the IRS. If K-1s are needed, they are issued to beneficiaries of trusts and estates, and copies are filed with the form 1041.
Instructions for filing schedule K-1
The information on a schedule K-1 is similar for all types of pass-through entities that issue them. Here are brief instructions on what the K-1 form needs to contain:
- Part I is simply information about the entity issuing the form, including its employer identification number (EIN), name and address.
- Part II provides information about the partner, member, shareholder or beneficiary receiving the K-1. This includes their Social Security or tax identification number, name and address. If the K-1 comes from a partnership, LLC or S-corp, it needs to show the partner’s percentage of ownership and share of debts.
- Part III is the meat and potatoes of the Schedule K-1. It provides information that will flow through to the shareholder or partner’s individual tax return, including income, dividends, capital gains and other taxable or deductible items.
K-1 tax form deadlines
Knowing the deadlines for filing K-1 tax forms is essential to complying with IRS rules. This table outlines the standard deadlines for different types of business entities.
Sometimes deadlines are extended due to natural disasters or similar disruptions, so it’s wise to double check each year before filing.
| Entity | Tax form | Deadline for filing return or extension request | Deadline for filing extended return |
|---|---|---|---|
| Partnerships | Form 1065 | March 15 | September 15 |
| LLCs with more than one member | Form 1065 | March 15 | September 15 |
| S corporations | Form 1120-S | March 15 | September 15 |
| Trusts or estates | Form 1041 | April 15 | September 15 |
These deadlines assume the business operates on a calendar year. If your company operates on a fiscal year, you may have a different deadline.
Also, for years where the deadline falls on a Saturday, Sunday or legal holiday, it’s delayed until the next business day. That means that in 2026, partnerships, LLCs with more than one member, and S corporations using a calendar year as their tax year will have until March 16th.
Filing for an extension
If the pass-through entity needs extra time to prepare its returns, it can request an automatic six-month extension from the IRS (five months for estates) by filing Form 7004. It can be completed and filed using a tax professional, tax software or by mail at the address found in the Instructions for Form 7004. The extension must be filed on or before the deadline.
It’s important to note that while Form 7004 extends the deadline for filing a return, it doesn’t extend the deadline to pay any tax due. It’s essential to notify owners and shareholders that the entity has requested an extension so they can request extensions for their personal tax returns as well. They may also need to pay estimated taxes to avoid penalties or interest charges.
Frequently asked questions
The IRS may impose penalties for each Schedule K-1 that isn’t filed on time. These penalties can quickly add up — especially if you have multiple partners or shareholders. Not filing a K-1 can also harm your relationship with your partners or shareholders because they need the information to file complete and accurate personal tax returns.
If you need to issue Schedule K-1s for your business, you can find the necessary forms on the IRS website, or you can work with a professional to prepare your business tax return. If you typically prepare your return with the help of DIY tax software, the software should be able to generate K-1s for all partners and shareholders along with the business return.
For partnerships, LLCs and S-corps, the deadline for filing Schedule K-1 forms is the same as the deadline for the business’s tax return — typically March 15th. For trusts and estates, the due date for K-1 forms is the same day as the trust’s tax return — usually April 15th. If the normal deadline falls on a weekend or holiday, the due date shifts to the next business day.
Keep in mind that owners and beneficiaries need the information on the K-1 information to file their own tax returns. Make sure to issue the K-1s well in advance of the personal tax filing date — typically April 15th — or let recipients know they must file for personal tax extensions.
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