A K-1, also known as Schedule K-1, is an IRS tax form used to report an individual partner’s, shareholder’s, or beneficiary’s share of income, deductions, credits, and other financial information from certain pass-through entities. These entities include partnerships, S corporations, and estates or trusts. The purpose of the K-1 is to provide each participant with the necessary information to report their share of the entity’s earnings or losses on their personal tax returns, as the entity itself generally does not pay income tax directly
. There are three main types of Schedule K-1 forms, each corresponding to the type of entity issuing it:
- Partnership K-1 (Form 1065): Issued to partners in a partnership.
- S Corporation K-1 (Form 1120-S): Issued to shareholders of an S corporation.
- Estate or Trust K-1 (Form 1041): Issued to beneficiaries of estates or trusts
The K-1 reports various financial details such as income, losses, deductions, credits, and distributions that the individual must include on their tax return. It essentially shifts the tax liability from the entity to the individual owners or beneficiaries, preventing double taxation
. In summary, a K-1 is a tax document that communicates each participant’s share of a pass-through entity’s financial activity for tax reporting purposes.
