How Do I Fill Out a Schedule K-1?

Key Takeaways

A federal Schedule K-1 is an Internal Revenue Service (IRS) tax form that reports how much income, losses, deductions, and tax credits were passed through to your company’s shareholders or partners (based on how much of your business they own).

If your business is a pass-through entity, like a partnership, S corporation (S corp), or LLC taxed as a partnership or S corp, you’ll have to fill out a Schedule K-1 for each of your shareholders or individual partners (including yourself). The Schedule K-1 tax form will help all of the business owners file their personal income tax returns. It reflects the taxable income based on the entity that paid you.

Which Schedule K-1 do I need? Should I complete Form 1065 or Form 1120-S?

Depending on your business entity type, there are a few different IRS Schedule K-1 forms out there. The right one for you depends on the primary tax form your company fills out:

• If you’re a partnership filing Form 1065 (U.S. Return of Partnership Income): Fill out Schedule K-1 (Form 1065). All types of partnerships need to fill this out, regardless of whether your small business is a limited partnership, general partnership, limited liability partnership, or a multi-member limited liability company.

• If you’re an S corp with shareholders: Fill out Schedule K-1 (Form 1120-S). 

For tax preparation, here are the differences between the two forms:

You may also have to fill out a state-specific Schedule K-1 (or equivalent form). Talk to your accountant to see if this applies to you.

There are also other types of Schedule K-1 tax forms. Work with your certified public accountant (CPA) or other tax professional to see if you need to issue either of these forms for tax filing:

• Form 1041 for distributions to beneficiaries of trusts and estates

• Form 8655 for reporting with respect to foreign partnerships.

What are the Schedule K-1 instructions?

Fortunately, this form is a one-pager. Here’s what the Schedule K-1 looks like, for Form 1065:

And for Form 1120S:

Each form has three sections.

• Part I asks for information about your company.

• Part II asks for information about the partner or shareholder. You’ll see that this section is much longer in Schedule K-1 (Form 1065) because the IRS wants a lot more information about partners than shareholders.

• Part III is where you detail the partner or shareholder’s share of income, gains, losses, deductions, and credits. This includes but isn’t limited to the following:
  

  • Ordinary business income

  • Ordinary dividends

  • Other income

  • Section 179 deduction of the cost of certain property, including improvements to nonresidential real property

  • Other deductions

  • Alternative minimum tax items

Don’t worry if you can’t fill in every single field—the IRS form is meant to apply to a variety of situations.

Let’s walk through the sections in each form and what you’ll need to know to fill them out:

How to fill out Schedule K-1 (Form 1065)

Part I: Information About the Partnership

• A-B: Your employer identification number (EIN), business name, and address

• C: Your business’s IRS filing location — which will be either “e-file” or, if you’re filing by paper, the location listed here

• D: If your company is a publicly-traded partnership or traded on a stock exchange

Part II: Information About the Partner

• E: The partner’s Social Security number, individual taxpayer identification number, or employer identification number

• F: Their name and address 

• G: What type of partner they are:
  

  • General partner or LLC member-manager

  • Limited partner or other LLC member

• H1: Check the appropriate box to indicate what type of partner you have
  

  • Domestic partner

  • Foreign partner

• H2: Only check this box ad fill out this section if your partner is a disregarded entity

• I1: Their entity type—basically, if they’re an individual or a business. Types of entities include
  

  • Individual

  • Corporation

  • Estate

  • Trust

  • Partnership

  • Disregarded entity (or a single-member LLC)

  • Exempt organization

  • Foreign government

  • Custodian

  • Retirement plan

• J: Their share of your business’s profit, loss, and capital at the tax year’s beginning and end—this is often outlined in your partnership agreement

• K: Their share of liabilities at the beginning and end of the tax year

• L: A reconciliation of the partner’s capital account, including money contributed during the year, their share of the current year increase/decrease, and any withdrawals. Be sure to indicate the method of accounting used to compute the partner’s capital account.

• M: If they contributed property to your business

• N: Long story short: Section 704(c) is a complicated law that only applies if a partner in the business is contributing land to the partnership. The law is meant to prevent the partner who contributed the property from shifting any of the consequences of gains or losses from the property that were incurred before the land was contributed to the partnership onto the other partner or partners. If you are in a partnership in which one or more partners has contributed land, then this section applies; enter the partner’s share of the net (partner’s gain or loss) at the beginning of the tax year and then again at the end of the tax year.

Part III Partner’s Share of Current Year Income, Deductions, Credits, and Other Items

• 1-20: The partner’s share of this year’s income, deductions, and credits.

• 21: Share any information about foreign taxes.

• 22: Check this box if it applies.

• 23: Check this box if it applies.

Keep in mind that many of the sections in this portion may be blank, depending on your business. You’ll need to know things like the value of any collectibles you’ve sold, royalties you’ve earned, rental income, and self-employment earnings. 

How to fill out Schedule K-1 (Form 1120S)

Part I Information About the Corporation

• A-B: Your EIN, business name, and company address

• C: Your IRS filing location. This will be either “e-file” or, if you’re filing by paper, the location outlined here

• D: The total number of shares both at the beginning of the year and at the end

Part II Information About the Shareholder

• D: The shareholder’s identification number (e.g., Social Security number, individual taxpayer identification number, or employer identification number)

• E: Their name and address 

• F: The percentage of stock they held

• H: Number of shares held by the shareholder both at the beginning and end of the tax year

• I: Enter any loans from the shareholder

Part III Shareholder’s Share of Current Year Income, Deductions, Credits, and Other Items

• 1-17: Their share of this year’s income, deductions, and credits. But just like the Form 1065 version, many of the sections in this portion may be blank.

• 18 – 19: Check the boxes if applicable.

You should be able to find this information in your business tax return, financial statements, partnership agreement, LLC operating agreement, and corporate bylaws. 

Remember, the Schedule K-1 instructions can be somewhat complicated. So we recommend discussing any specific questions with your accountant.

When is the Schedule K-1 due?

You must issue your shareholders or partners their Schedule K-1 forms by the date your primary tax form—either Form 1065 or 1120-S—is due: the 15th day of the third month after your tax year ended. 

For most calendar-year businesses with tax years ending December 31, that date will be March 15. Or, if your fiscal year and tax year ends September 30, your due date will be December 15. 

If that date is a Saturday, Sunday, or legal holiday, the form is due on the next business day.

There’s one exception for Form 1120-S filers: If you ended your company’s S corp status during the year and switched to a C corporation (C corp), you’ll need to file your Form 1120-S—and send out Schedule K-1s—by the due date of your C corp’s shorter year.  S corp and C corp get their names from Subchapters S and C, respectively, of the Internal Revenue Code (IRC).

Because your partners or shareholders need the Schedule K-1 to file their taxes, you should submit this form promptly. The IRS will fine you $270 per shareholder or partner if you’re late or provide incorrect information. 

A paper copy can be provided, or electronic copies may be issued. Electronic versions generally require the partner’s written consent to receive their K-1. For the requirements related to written consent for electronic delivery, it’s best to check with your accountant.

How do I file my own Schedule K-1 form?

You can file your Schedule K-1 form when you submit your Form 1065 or 1120S to the IRS.

The easiest thing to do is to submit the form electronically by using IRS Free File or tax prep software. You can also file the form by mail.

Here’s where to send the different K-1 forms:

• Schedule K-1 (Form 1065)

• Schedule K-1 (Form 1120S)

Where can I find detailed Schedule K-1 instructions from the IRS?

The IRS offers detailed instructions for each form:

• Partner’s instructions for Schedule K-1 (Form 1065)

• Shareholder’s instructions for Schedule K-1 (Form 1120S)

• Instructions for Schedule K-1 (Form 1041)

• Partner’s instructions for Schedule K-1 (Form 1065-B)

What else do my partners or shareholders need to know about from Schedule K-1?

You don’t want your partners or shareholders to be confused when they get their Schedule K-1s, especially if this is their first one.

Here are some important things to tell them:

• It’s okay if some sections are empty. Depending on your business, there may be only a couple of fields filled in.

• You’ll still get a Schedule K-1 if your business had losses. Schedule K-1s are sent out every year, even if you had a loss.

• Don’t file your taxes until you get your Schedule K-1. This form is absolutely essential to filing your personal taxes.