There are three main versions of K-1s:

• K-1 form 1065, used to report the profit or loss from a partnership;

• K-1 form 1120S, used to report the profit or loss from an S corporation;

• K-1 form 1041, used to report the income from a trust or estate.

The United States government offers no specific statutory law regarding partnerships, although each state has its own statutes and common law that govern partnerships. On the contrary, the IRS has an extensive and comprehensive statutory scheme for the taxation of partnerships codified as Subchapter K of Chapter 1 of the U.S. Internal Revenue Code.

For taxation purposes, partnerships are considered “flow-through” entities, meaning that the entity doesn’t pay taxes on its income, instead, the owners of the entity pay tax on their “distributive share” of the entity’s taxable income.

The partnership issues a form 1065 to report the income, gains, losses, deductions, credits, etc. from the operation of the partnership. The amount reported on the 1065 is divided among the partners and reported on a Schedule K-1 for each partner. The K-1s are attached to the 1065 and sent to the IRS. Each partner receives a copy of his/her K-1 form 1065.

Since there is no deadline for mailing out Schedule K-1, you can either make sure you receive the document before filing your personal taxes, or you can include an approximate amount to help you calculate taxes due with filing an extension until you get all the information needed for your tax return.

The information you receive on the K-1 needs to be included on your personal tax return, so first you should make sure that all information is accurate (including your name, address and Social Security number).

Part One of your K-1 offers information about the partnership, Part Two includes information about you as a partner, and Part Three provides all financial details.

For taxation purposes, along with your 1040, you will need to file Schedule E (income or loss from a partnership or S corporation) and when necessary Schedule D (for short and long term capital gains or losses) as well, following the instructions on the forms carefully.

An S corporation is a corporation that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. Like partnerships, S corporations do not pay federal income taxes, the corporation’s income or losses are divided among and “passed through” to its shareholders.

The main difference between an S corporation and a partnership is that, although it provides many of the benefits of partnership taxation, at the same time it gives the owners limited liability protection from creditors.

The term “pass through” doesn’t refer to assets distributed by the corporation to the shareholder, but to the portion of the corporation’s income, losses, deductions or credits that are reported to the shareholder on Schedule K-1.

An S corporation usually needs to file form 1120S together with Schedule K-1s for each shareholder by March 15th.

From a legal point of view, a trust is a relationship whereby property (including real, tangible and intangible) is managed by one person for the benefit of another. The settlor (the one creating a trust) entrusts some or all of their property to a trustee who has the obligation to hold the property for the benefit of one or more individuals or organization, who are the “beneficial” owners of the trust property.

The are many purposes for creating a trust and numerous types of trusts. As far as tax treatment is concerned, the IRS allows trusts to be taxed as corporations, partnerships, or not at all depending on the circumstances.

If you are the beneficiary of a trust or estate fund, you will receive a K-1 (form 1041) reporting distributions of income during the year (interest, dividends, capital gains, annuity, royalties, etc.). This information needs to be included in your tax return.

The trustee files form 1041 and a copy of the K-1s with the IRS.

Unlike some other information returns, you are not required to attach the Schedule K-1 you receive with your tax return. All you need to do is provide all necessary information from the K-1s on your income tax return.

If you receive income with your Schedule K-1 on a regular basis and you expect to owe tax of $1,000 or more, you should consider paying estimated taxes in order to avoid penalties in the following year.

As a matter of fact, it would certainly be in your interest to get assistance from a professional tax preparer.