Tax
Schedule K-1
IRS form reporting a partner's, S-corp shareholder's, or trust beneficiary's share of income, deductions, and credits.
A K-1 is issued by passthrough entities (partnerships, S-corps, trusts) to allocate their income to owners. The owner reports the K-1 amounts on their personal tax return.
Three flavors exist: Form 1065 K-1 (partnerships and multi-member LLCs), 1120-S K-1 (S-corps), and 1041 K-1 (estates and trusts).
K-1 income is taxable to the owner whether or not the entity actually distributed cash — a common surprise known as 'phantom income.'
Common pitfalls
- Receiving the K-1 after April 15 because partnerships file extensions — plan to extend your personal return
- Not setting aside cash for tax on K-1 income that wasn't distributed
- Missing footnotes that contain QBI calculations, foreign income, or other audit-flagged items
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