Ah, tax season. It is upon us. You’ve heard of the “April 15” date for personal tax returns. But most small, growing businesses have another form looming over them – the Schedule K-1 form. Here’s what you need to know about the Schedule K-1.
What is a Schedule K-1 tax form?
A Schedule K-1 tax form is for owners of pass-through entities or beneficiaries of trusts and estates. These forms must be submitted with a personal tax return form to report a taxpayer’s share of the business – profits, losses, credits, etc. It’s important to note that pass-through entities are those that report their business information on their personal tax form, unlike a C-corp that is taxed at a corporate level.
How do you obtain this form?
If you are an owner of an S-corp or member of an LLC, it’s likely that you’ve already received this form in the mail. You can also find your form online at https://www.irs.gov/. This is an important business tax form that owners of an S-corp receive yearly. Because business owners in the small to midsize range are often very busy, many corporations will have a CPA complete the Schedule K-1 for them, amongst many other forms.
What needs to be reported on a K-1 tax form?
Reporting requirements vary, and there are different forms (for each taxpayer see the question below). However, there are some general similarities across the board. All K-1s must report detailed information about the type of business income, deduction, or loss – this enables the recipient to then accurately report the information on a personal tax return.
Who needs to complete the K-1 tax form?
This form is only for particular types of businesses. The two types of taxpayers that need to complete this form are:
- Pass-through entities
- Beneficiaries of trusts or estates
There are three different types of forms depending on your role in a company:
- Form 1041 Schedule K-1 for the beneficiaries of a trust or estate
- Form 1065 Schedule K-1 for partnerships (pass-through entity)
- Form 1120S Schedule K-1 for S-corps (pass-through entity)
What happens if I make a mistake in reporting on my K-1?
You’ll want to double check the information displayed on your K-1 with a fine-tooth comb. Accuracy is especially key here. Having an in-house accountant is highly recommended to ensure all information is correct. One mistake could send your company from an S-corp back to C-corp status, which then puts you at risk for double taxation.
When is the deadline?
Deadline to submit is March 15, and you must submit with your personal tax return. For more info on the forms you need to complete the K-1 tax form, visit www.irs.gov. Happy Tax Season!