Form 1065 (US Return of Partnership Income)
The annual federal information return filed by partnerships and multi-member LLCs treated as partnerships, with income passed through to partners on Schedule K-1.
Detailed Explanation
Form 1065 is informational, as the partnership itself does not pay federal income tax. Instead, the partnership issues each partner a Schedule K-1 reporting their distributive share of income, deductions, credits, and other tax items. Partners then report this income on their own returns. Partnership returns are due March 15, with a six-month extension available. New partnership audit rules under the BBA (Bipartisan Budget Act) require a Partnership Representative and may impose entity-level tax on adjustments.
Key Points
- Informational return; the partnership pays no federal income tax, partners do.
- Filed by partnerships and multi-member LLCs taxed as partnerships; each partner receives a Schedule K-1.
- Due March 15 for calendar-year filers; six-month extension to September 15 via Form 7004.
- Each partner is taxed on their distributive share whether or not cash was distributed.
- BBA centralized audit rules require naming a Partnership Representative and can impose tax at the entity level.
Practical Example
A two-person consulting LLC earns $300,000 and splits profits 50/50. It files Form 1065 by March 15 and issues each partner a K-1 reporting $150,000 of ordinary business income. Even if the LLC retained $60,000 for working capital and distributed only $240,000, each partner reports their full $150,000 share on Schedule E and pays self-employment tax on their share.
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Learn about Business Tax PreparationRelated Terms
Form 1120-S (S Corporation Income Tax Return)
The annual federal income tax return filed by S corporations, which pass income, deductions, and credits through to shareholders via Schedule K-1.
Schedule K-1
A tax document issued by partnerships, S corporations, estates, and trusts to report each owner's share of income, deductions, credits, and other tax items.
Partnership
A business entity owned by two or more persons who share in profits and losses, taxed as a pass-through with each partner reporting their share on their individual return.
Pass-Through Entity
A business entity that does not pay federal income tax at the entity level; instead, profits and losses pass through to owners who report them on their individual returns.
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