The information in this article is up to date through tax year 2019 (taxes filed in 2020).
Schedule K-1 can be attached to several different types of tax returns, depending on how the company is set up. The K-1 tax form varies slightly based on whether the ownership structure is a partnership, S corporation, or a trust or estate.
K-1 for Business Partnerships
For businesses owned by a partnership, each partner is responsible for reporting their individual share. Any income, losses, deductions or credits that the business reports on informational Form 1065 must be accompanied by a Schedule K-1 form, outlining each partner’s portion of that responsibility. This is sent to the IRS and to each of the owners.
The owners include this information on their individual tax returns.
K-1 for S Corporations
Although S corporations file their taxes using Form 1120S, the Schedule K-1 for this form operates almost the same as with partnerships. The main difference is that instead of the partners receiving them, the shareholders do. Schedule K-1s identify a particular shareholder’s income, losses, deductions and credits, which they are then expected to include when filing their personal tax returns.
K-1 for Trusts and Estates
Whether a trust or estate pays income tax on their earnings or passes that responsibility on to a beneficiary, it varies from case to case. Some trusts pay these taxes themselves on Form 1041, and others are structured to pass that responsibility on to a beneficiary. If it is passed on, the responsible beneficiaries will receive this Schedule K-1.
When this happens, the trust or estate reports a deduction of the same amount on Form 1041 to avoid being taxed for it twice. The beneficiary then includes the information on Schedule K-1 as income when filing their own personal tax returns.
Filing with a K-1 using TaxSlayer
The most important thing to remember when you receive a Schedule K-1 is that it must be included in your income on your tax return. While there are many variations of Schedule K-1, they all represent the same thing: the amount of income, losses, deductions, and credits you have for your portion of ownership in that business.
By filing your tax return with TaxSlayer, we cover all the bases to make sure that you account for all your income, including information outlined on your Schedule K-1.