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Annual Federal Tax Return for Partnerships 1065 Go to topics
Each partnership must file a federal form 1065. Each partner's share of net income is reported to the IRS and to the partners using Schedule K-1. Partners pay income tax on their portion of net income by attaching Schedule K-1 and IRS 1040 Schedule E to their federal 1040 tax return.
Forms to use  IRS 1065 Annual Tax Return for Partnerships
Schedule K-1 forms for partners
How often?  Annual reporting requirement
Good news for small businesses!  If your partnership:
  • Had less than $250,000 total receipts
  • Had less than $600,000 in assets AND
  • Filed Schedules K-1 with the IRS and all partners on time
then you can check "Yes" for question 5 on page 2 and ignore one third of the 1065 form. You won't have to complete:
  • The balance sheet information (Schedule L on page 4)
  • Reconciliation of book income versus tax income (Sch. M-1)
  • Analysis of partners' capital (Schedule M-2)
  • Section J of Schedule K-1.
How to complete
IRS 1065
Page 1  Calculating net income. Your tax preparer will need:
  • Income and expense statement
  • List of any equipment you bought or used, the purchase price and date and the percentage use for business purposes;
  • List of start-up expenses (do not include items in your income and expense statement above)
  • Whether any guaranteed payments were made to partners (payments for services or investment return made regardless of the business' profits). These payments cannot be interest or repayment of start-up costs that you are amortizing. Guaranteed payments should also be reported on line 4 of both Schedule K and K-1.
  • Do not include: charitable deductions, section 179 expenses, depreciation, or investment income such as interest or dividends.
Page 2  Sch. A: backup for cost of goods sold. You will need to provide:
  • Beginning and end of year inventory
  • Selection of inventory methods (cost, LIFO, etc.)
Page 3  Sch. K: the partnerships' taxable bottom line. This page starts with the net income from page 1 and
  • Adds investment income (interest, etc.)
  • Deducts special tax credits.
  • Line 4 should include all payments guaranteed to partners, even the ones you included on page 1. That is because these payments are only deductible as expenses for certain purposes and thus the payments must be added back in this section of the form.
  • Line 14 self-employment tax. Report the same net income as on line 1 of this page plus any guaranteed payments to partners. Divide this amount between partners to use on line 1 of their Schedule SE. Put your total income before expenses on line 14b.Schedule SE to calculate social security self-employment tax.
  • Report how much of your net income was distributed to your members (see lines 19a and b).
K-1s   Each partner's share of IRS 1065 Schedule K. Results from lines 1-20 of Schedule K (page 3 of form 1065) are allocated to each partner on the K-1 forms. Your tax preparer needs the percentage ownership of each partner.
Partners...what to do with your K-1  1065 Schedule K-1 information should be entered on IRS 1040, Schedule E, Part II. The information from Schedule E is entered on line 17 of form 1040.
Due date  Forms 1065 and the partners' Schedule K-1s are due March 15. To help your partners meet their tax deadline, complete the forms as soon as possible.
How to submit  Mail 1065 with copies of your partners' Schedule K-1s to the IRS. Do not pay any tax.

Click here for the mailing address for IRS 1065.

Give your members their Schedule K-1s. They should pay any tax due with their IRS 1040.

Partners should attach Schedule SE, and Schedule E with their 1040 return.

Questions?  Call the IRS information hotline (800) 829-4933. For forms, call (800) 829-3676 or obtain them online at