Learning How K-1's Worked Changed How I Invest (Schedule K-1 Explained)

Tax Form Schedule K-1 Explained Simply.

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Purpose of Schedule K-1
The partnership uses Schedule K-1 to report your share of the partnership's income, deductions, credits, etc. Keep it for your records. Do not file it with your tax return unless you are specifically required to do so. (See the instructions for Code O. Backup withholding, later.) The partnership files a copy of Schedule K-1 (Form 1065) with the IRS.

For your protection, Schedule K-1 may show only the last four digits of your identifying number (social security number (SSN), etc.). However, the partnership has reported your complete identifying number to the IRS.

Although the partnership generally isn't subject to income tax, you may be liable for tax on your share of the partnership income, whether or not distributed. Include your share on your tax return if a return is required. Use these instructions to help you report the items shown on Schedule K-1 on your tax return.

The amount of loss and deduction you may claim on your tax return may be less than the amount reported on Schedule K-1. It is the partner's responsibility to consider and apply any applicable limitations. See Limitations on Losses, Deductions, and Credits, later, for more information.

Where can I find a sample K-1 tax form? You can download a sample copy of Schedule K-1 (Form 1065) from the IRS. But you'll probably receive a copy of Schedule K-1 around tax time from your accountant or whoever is responsible for filing your partnership's Form 1065.

Schedule K-1 is an Internal Revenue Service (IRS) tax form issued annually for an investment in a partnership. The purpose of the Schedule K-1 is to report each partner's share of the partnership's earnings, losses, deductions, and credits. Schedule K-1 serves a similar purpose as Form 1099.

Does the IRS get a copy of K-1?
The partnership files a copy of Schedule K-1 (Form 1065) with the IRS to report your share of the partnership's income, deductions, credits, etc.

Who provides a k1 tax form?
K-1s are provided to the IRS with the partnership's tax return and also to each partner so that they can add the information to their own tax returns. For example, if a business earns $100,000 of taxable income and has four equal partners, each partner should receive a K-1 with $25,000 of income on it

March 15
Schedule K-1s are due to be prepared and sent out by March 15 of each year. Unfortunately, they have a reputation for being late. And with the tax-filing deadline just a month later, there's a real chance for headaches

Basis Limitations
Generally, you may not claim your share of a partnership loss (including a capital loss) to the extent that it is greater than the adjusted basis of your partnership interest at the end of the partnership's tax year. Any losses and deductions not allowed this year because of the basis limit can be carried forward indefinitely and deducted in a later year subject to the basis limit for that year.

The partnership isn't responsible for keeping the information needed to figure the basis of your partnership interest. Although the partnership does provide an analysis of the changes to your capital account in item L of Schedule K-1, that information is based on the partnership's books and records and cannot be used to figure your basis.

You can figure the adjusted basis of your partnership interest by adding items that increase your basis and then subtracting items that decrease your basis.

Use the Worksheet for Adjusting the Basis of a Partner’s Interest in the Partnership to figure the basis of your interest in the partnership.

[jameshurliman]

Top button done, second button undone? You know this guy is a pro, his mind's on the taxes, not the drip

[MoneyandLifeTV]

Thank for the topic request! I hope after watching this video you have a much broader understanding of how K-1s work.

[chantel]

This video helped me so much! I’m starting a new internship and was struggling with concepts. Thank youuuu!!!!

[phsx]

I have some passive rental loss. Some other losses and gains but overall loss for the year . Do I report anything

[deejayfloor]

My business made a profit and k1 was issued. Can I transfer profit amount in k1 to my personal checking ?

[uberguy]

Hello. I received my Schedule K1 for teucrium wheat fund (WEAT). However, the fund sent me a letter saying that items of international tax relevance are reported on Schedule K-3. Unfortunately, the letter also stated that I won't receive the K-3 until the end of June 2023. The letter also states "K-3...this information may be necessary to complete your tax returns." I was also told that failure to report K-3 on my tax return can result in a $10, 000 fine by the IRS. However, I don't want to wait until June to file my taxes as I need my refund check immediately and I want to file now with the Schedule K1. So my question is, can I file my taxes now in March of 2023 with the Schedule K1 form and then file an amendment return in June of 2023 once I receive the K-3 form from the Teucrium Wheat Fund? I also want to mention that on the K-1 form in Part 3 box 16 it says "Schedule K-3 is attached if checked" and the box is checked. Ok any help would be appreciated. Thanks

[jono]

I've had a k1 form recently for "Energy Transfer "but live in the UK. Not sure is need to fill something out or not as don't live in the US?

[phsx]

How do I know if I am losing $ and is it normal to lose halfway through and gain at the end? Total value of assets is down and capital account is down

[menduca]

Hi. I’m very confuse about something
Where SCorp distributions to owners r shown on a sch K-1?
Eg: business owner getting 100k from business
70k on a W2
30k on distributions
Where r those 30k shown on business tax return and on the K-1 business owner is receiving?

[Jdeneik]

I’m assuming you only need to fill out a K1 if I show any income? I have a loss only. Thanks

[SherrieJenkins-th]

you are great a explaining how this works thank you

[svenhuber]

I invested in LP's which need a K1 tax form, however I am a non us citizen living outside the US. With Interactive brokers I can invest in them, however I am not ask to use this form. In the tax treaty with the country I live in 10% withholding tax are agreed. so what do I have to do? I never got a tax form from interactive brokers.

[Cashmoneez]

If it's a limited partnership would all income and losses be treated as passive income and losses?

[jennifermorrow]

hi, can you do a video on a K-1 estate?Thank you in advance

[mikeandren]

Great video Mike, clears up a bunch on the "mystery" of the K1. I have a general question if you can answer. When investing in limited partnership (stock) from within an IRA, does the information on the K1 for that investment need to be reported on the tax return?

[JTZMPZ]

I recently bought some shares in a Publicly Traded Partnership in my Roth IRA through a brokerage. The partnership sent me a K-1 along with a very detailed guide on what IRS forms and where to insert the various K-1 line items. If I inset that information on the appropriate forms and include them with my 2022 tax filing, have I met my partnership tax reporting obligation?

[emikami]

Many years ago, I ended up with a master limited partnership that was spun off from a normal company. It was a very small position. I think I was using TurboTax at that time and it put out something like 8 extra pages just for that one entity. It's a good thing we only sign a tax return to declare it is accurate to the best of your knowledge and that after so many years, it is deemed correct if IRS doesn't send you a notice before then. I've sold that position for obvious reason. Any theoretical tax advantage didn't seem worth the tax headache in my case at least.

[BobEstler]

I don't think he touched on this but one nice thing is that with a K1 the depreciation also goes to the owner. I u=used to own shares in a Master Limited Partnership (MLP, trades like a stock). You might get $1, 000 dividend but the depreciation would come through and almost none of that would be subject to tax. It does affect things when you sell but you can build a nice income without using your tax basis. Real Estate does much the same thing if you own it outright.

[lpr]

I owned a company that issued a K-1. I hated dealing with on Turbo Tax. I sold it and the following year Turbo Tax generated all the forms from the previous year and it was difficult to remove it. I had to get help. I won’t ever own another one again unless it’s in a Roth. Lynn

[angelinak]

On my Schedule K-1 I have other income is box 11, part III due to a sale of a rental property. Where on the Form 1040 does this get reported? Form 4797? The purchase was $98K and sold for $148K do each partner record the same purchase and sales price