Is your business structured as a partnership or multi-member LLC? If so, you must file Form 1065 annually. Read on to learn what is Form 1065 and what kind of information you need to fill it out. And, find out how to file the tax form, including where to send it and when it’s due.
What is Form 1065?
Form 1065, U.S. Return of Partnership Income, is an IRS tax form that partnerships use to report their business’s annual financial information. Partners must include information about their company’s profits or losses, deductions, and taxes and payments on the form. If your business must file, you also need to file Schedule K-1, a form representing each partner’s share.
Whew, that’s a lot of information. But hey, at least now you know what is a 1065 tax form. Let’s take a step back and go over who needs to file the form before going any further.
Again, partnerships must file Form 1065. But, they’re not the only business entity that uses the form. Multi-member LLCs that don’t elect to be taxed as corporations also need to file Form 1065.
What is Form 1065 used for?
Partnerships and multi-member LLCs are not directly taxed. Instead, these business structures are susceptible to pass-through taxation. This means that the tax liability passes through the business entity and onto the owners (e.g., partners or members).
Because the business itself doesn’t pay taxes, Form 1065 is merely an information return that reports federal income taxes. Partners and members are responsible for paying taxes on their individual income.
So, what is IRS Form 1065 used to report? Partnerships and multi-member LLCs use it to report profits, losses, deductions, and taxes and payments. The form shows the IRS information about the business’s annual financial health.
Partnerships and multi-member LLCs must include substantial information on the 1065 form, including things like:
- Identifying information about the partnership
- Federal Employer Identification Number (FEIN)
- When the business started
- Accounting method (e.g., cash-basis vs. accrual accounting)
- Number of Schedules K-1 attached
- Income details
- Deductions details
- Tax and payment details
- Signature of the partner or member preparing the form
There is quite a bit more information you must include on the form. Check out the IRS’s website to see the form.
What is a K-1 Form 1065?
Schedule K-1 is a supplemental form partnerships and multi-member LLCs must file with their partnership form.
Distribute Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc., to each partner or member.
The business submits a copy of Schedule K-1 to the IRS. Individual partners and members do not file Schedule K-1 with their individual tax returns.
Partnerships use Schedule K-1 to showcase information about their partners and their share of the business’s finances.
The business must enter information on Schedule K-1, including each partner’s:
- Identifying number
- Contact information
- Share of profit, loss, and capital
- Share of liabilities
- Deductions
- Credits
- Distributions
- Self-employment earnings
How to file Form 1065
Filing the form can be intimidating, especially if it’s your first time handling the partnership tax return.
Read on to learn how to file a partnership tax return. Find out what information you need to fill it out, how to send the form, and when to file by.
Information to gather
To fill out a 1065 form, you must analyze some numbers. Gather records such as your FEIN, financial statements, bank and credit card statements, and tax documents.
How to send
You can either file a paper or electronic form. If you choose to send a paper file to the IRS, you can download the forms on the IRS’s website.
Keep in mind that not all partnerships and multi-member LLCs have the option of paper filing. If you have more than 100 partners, you must file Form 1065, Schedules K-1, and all related forms electronically.
Due date
File by the 15th day of the third month after your tax year ends. Use the next business day if the due date falls on a weekend or legal holiday.
Many partnerships and multi-member LLCs follow the calendar year for their tax year. So if your tax year ends on December 31, your due date is March 15.
You must also distribute Schedule K-1 to partners or members by your Form 1065 due date.
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This is not intended as legal advice; for more information, please click here.