| Annual Federal Tax Return for Partnerships 1065 |
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Each LLC which elects to be treated as a partnership must file a federal form 1065. Each member's share of net income is
reported to the IRS and to the members using Schedule K-1. Members 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.
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| Forms to use | |
IRS 1065 Annual Tax Return for Partnerships
Schedule K-1 forms for partners
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| How often? | |
Annual reporting requirement |
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| Good news for small businesses! | |
If your LLC:
- Had less than $250,000 total receipts
- Had less than $600,000 in assets AND
- Filed Schedules K-1 with the IRS and all members 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 members' capital (Schedule M-2)
- Section J of Schedule K-1.
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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 members (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.
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| 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.)
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| Page 3 | Sch. K: the LLC's 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 members, 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 members 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).
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| K-1s | Each member's share of IRS 1065 Schedule K.
Results from lines 1-20 of Schedule K (page 3 of form 1065) are allocated to each member
on the K-1 forms. Your tax preparer needs the percentage ownership of each member. |
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| Members...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.
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| Due date | |
Forms 1065 and the members' Schedule K-1s are due April 15.
To help your members meet their tax deadline, complete the forms as soon as possible.
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| How to submit | |
Mail 1065 with copies of your members' Schedule K-1s to the IRS. Do not pay any tax.
Give your members their Schedule K-1s. They should pay any tax due with their
IRS 1040.
Members should attach Schedule SE,
Schedule E, and
letter to amortize start-up costs on their 1040 return.
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| Questions? | |
Call the IRS information hotline (800) 829-4933. For forms, call
(800) 829-3676 or obtain them online at http://www.irs.gov/formspubs/index.html.
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