Form 1065 Page 1: How to Fill It Out

Form 1065, U.S. Return of Partnership Income, is an informational return filed with the IRS by domestic partnerships and limited liability companies (LLCs) with multiple members. It details the income, gains, losses, deductions, and credits of the business. The partnership itself does not pay income tax directly from this form; instead, the financial results are “passed through” to the individual partners. Each partner then reports their respective share of the partnership’s income or loss on their personal tax returns.

Information Needed to Complete Page 1

Before beginning to fill out Form 1065, gather all necessary business and financial information. This preparation involves collecting identifying data for the partnership and the comprehensive financial totals for the year.

The top of Form 1065 requires specific business identification details, including:

• The partnership’s legal name, full address, and Employer Identification Number (EIN)
• The principal business activity and its six-digit North American Industry Classification System (NAICS) code
• The date the business officially started
• The total value of the partnership’s assets at the end of the tax year

You will also need a complete set of financial figures from the partnership’s profit and loss statement to complete the income and deduction sections. This includes final totals for expenses such as salaries and wages, guaranteed payments to partners, rent, repairs and maintenance, business interest expense, and taxes and licenses. You will also need totals for gross receipts or sales, returns and allowances, and the calculated Cost of Goods Sold (COGS).

Reporting Partnership Income

The income section of Form 1065, which covers lines 1a through 8, is where the partnership’s gross income is calculated. The process begins on line 1a, where you enter the total gross receipts or sales for the tax year. On line 1b, you will input the total amount of returns and allowances, which is then subtracted from line 1a to arrive at the net receipts on line 1c.

Line 2 requires the entry for the Cost of Goods Sold. Subtracting line 2 from line 1c gives you the gross profit on line 3. Other types of business income are reported on the subsequent lines. Any ordinary income or loss from other partnerships, estates, and trusts is reported on line 4. Line 5 is for reporting net farm profit or loss, and the net gain or loss from selling business property is entered on line 6. Line 7 is for other miscellaneous income. Finally, all the income lines are added together to determine the total income on line 8.

Reporting Partnership Deductions

The deductions section, spanning lines 9 through 21, details the business expenses incurred by the partnership throughout the tax year. Each line item corresponds to a specific category of expense. You will report specific, categorized expenses on their designated lines.

Line 9 is for salaries and wages paid to employees, but not payments to partners. Guaranteed payments to partners are reported separately on line 10. Line 11 is for repairs and maintenance, line 12 is for rent expenses, and line 13 is for interest paid on business-related debt. Taxes and licenses are entered on line 14, and bad debts are reported on line 15.

Depreciation is entered on line 16. You will report depletion on line 17, and expenses for retirement plans and employee benefit programs on lines 18 and 19, respectively. Other deductions, a catch-all category for expenses not listed elsewhere, are reported on line 20. After entering all applicable deductions, you will sum them up and place the total on line 21.

Calculating Ordinary Income and Signing the Return

The final steps on page 1 involve calculating the partnership’s ordinary business income or loss and signing the return. Line 22, “Ordinary business income (loss),” is the result of subtracting total deductions (line 21) from total income (line 8).

Once the calculation is complete, the return must be signed. The signature block at the bottom of page 1 requires the signature of a general partner or a limited liability company member manager. By signing, this individual declares under penalties of perjury that they have examined the return and believe it to be true, correct, and complete.