If you own an interest in a partnership, you'll receive a tax document known as a Schedule K-1 each year. This form reports your share of the partnership's taxable income. The partnership does not pay tax on this money; instead, it is passed through to the partners who must report the income on their Form 1040 personal income tax return and pay any resulting tax. Schedule K-1 reports your share of the taxable income as well as deductions you are entitled to claim. Before entering Schedule K-1 information on your tax return, verify that the Social Security number shown in Part II, Box E of the K-1 document is yours (or your spouse's, if filing jointly). If there is a discrepancy, contact the partnership before entering this information on your personal tax return.
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Things you need
- Schedule K-1 (Form 1065)
- Form 1040
- Schedule E (Form 1040)
Enter information about the partnership shown on Schedule K-1 in Part I, boxes A and B in Part II, line 28 of your Form 1040, Schedule E.
Determine if your interest in the partnership is passive or non-passive. A passive interest means you do not materially participate in decision-making and day-to-day management of the business. Enter the amount of income or loss from boxes 1 and 2 of Schedule K-1 on line 28 of your Schedule E, sections f, g, h or j, depending on whether your interest is passive or non-passive and the amount reported on the K-1 is income or loss.
Enter the amount of rental income or loss from Schedule K-1, box 3, on Schedule E, line 28, section g. Enter the amount of guaranteed payments from Form K-1, box 4, on Schedule E, line 28, section j.
Enter the amounts of interest and dividends from Schedule K-1, boxes 5, 6a and 6b on Form 1040, lines 8a, 9a and 9b, respectively.
Enter the amount of royalties from box 7 of Schedule K-1 on line 4a of Schedule E, Part I.
Enter the amount of short- and long-term capital gains or losses from Schedule K-1, boxes 8 and 9a on Schedule E, lines 5(f) and 12(f). The K-1 will include specific instructions for reporting the gains and losses reported in boxes 9b, 9c and 10.
Report the information in boxes 11 through 15 on Schedule K-1 per the instructions provided on the K-1 form.
Enter any information relating to foreign transactions reported in box 16 of Schedule K-1 on IRS Form 1116, Part I.
Enter information regarding alternative minimum tax, distributions and other information reported in boxes 17, 19 and 20 on Schedule K-1 per the instructions provided on the K-1 form.
Enter tax-exempt income reported on Schedule K-1, box 18a, on line 8b of Form 1040. For items reported in Schedule K-1, boxes 18b and 18c, see the specific instructions provided on the K-1 form.
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