Schedule K-1 Explained: What It Is and How to Report It
If you're a partner in a partnership or LLC, an owner of an S corporation, or a beneficiary of a trust or estate, you'll get a Schedule K-1. It reports your share of the business's income, deductions and credits so you can include them on your own return.
By the Enrolled Agents and CPAs at A&W Tax Services · Updated
Where K-1s come from
- Partnerships and multi-member LLCs: Schedule K-1 from Form 1065
- S corporations: Schedule K-1 from Form 1120-S
- Trusts and estates: Schedule K-1 from Form 1041
You're taxed whether or not you got the cash
Partnerships and S corporations generally don't pay income tax themselves. The profit passes through to the owners, who pay tax on their share even if the business kept the money to grow or pay down debt. That's why owners are often surprised by a tax bill in a year they took little or nothing out.
How it's reported
Most K-1 income goes on Schedule E of your Form 1040, but individual boxes flow to different places: interest and dividends to Schedule B, capital gains to Schedule D, Section 179 deductions and credits to their own forms. General partners usually also owe self-employment tax on their share of partnership income. S corporation owners don't, but they should be paid a reasonable salary through payroll. Many K-1 owners also qualify for the qualified business income deduction.
Losses and basis
If the business has a loss, you can deduct your share only up to your basis: roughly what you invested plus your share of past income, minus distributions and past losses. At-risk and passive activity rules can limit the deduction further. Losses you can't use carry forward. Keeping a basis schedule every year avoids missed deductions and taxable distributions.
When K-1s are late
Partnership and S corporation returns are due March 15, but many businesses extend to September 15, so K-1s often arrive after April. If you're waiting on one, file an extension for your personal return rather than filing without it. If a corrected K-1 arrives after you've filed, you may need to amend.