A Schedule K-1 form is a tax document used to report the income, losses, and dividends of a business's partners or an S corporation's shareholders
. It is used for business partnerships, LLCs that have at least two partners or elect to be taxed as corporations, S corporations, and trusts and estates
. The purpose of the K-1 form is to report each participant's share of the business entity's gains, losses, deductions, credits, and other distributions (whether or not they're actually distributed)
. Key aspects of Schedule K-1 include:
- Partnerships : Partnerships prepare a Schedule K-1 to report each partner's share of the income, losses, tax deductions, and tax credits that the business reported on the 1065 tax form
- S Corporations : S corporations provide a Schedule K-1 that reports each shareholder's share of income, losses, deductions, and credits that are reported to the IRS on Form 1120S
- Trusts and Estates : In cases where trusts and estates pass income through to beneficiaries, the beneficiaries receive a K-1 that shows the income that they need to report on their own tax returns
The K-1 form is essential for accurately reporting each participant's share of the business entity's income, losses, and deductions on their individual tax returns
. It is typically not required to attach the K-1 form to the individual's tax return, unless specifically instructed to do so
