What Is Form 165 K-1? It’s Likely a Schedule K-1

If you have searched for “Form 165 K-1,” you have likely encountered a common typo, as the correct document is Schedule K-1. This is an informational form that accompanies several IRS tax returns; it is not a bill or a separate return you file on its own. It reports your specific share of financial activity—such as income, losses, and credits—from an entity like a business or trust. The purpose of Schedule K-1 is to provide the numbers you need for your personal income tax return, Form 1040.

Understanding Your Schedule K-1

You receive a Schedule K-1 because you are an owner or beneficiary of a “pass-through” entity. These entities do not pay income tax themselves; instead, they “pass through” their profits and losses to the individuals involved. This structure avoids the double taxation that can occur with other corporate forms.

The specific type of Schedule K-1 you receive depends on your relationship with the entity that issued it. Partners in a partnership get a Schedule K-1 (Form 1065). Shareholders of an S corporation receive a Schedule K-1 (Form 1120-S). If you are a beneficiary of an estate or a trust, you will be sent a Schedule K-1 (Form 1041). Each version is tailored to the specific type of entity, but they all serve to allocate financial outcomes to the individuals involved.

Key Information Reported on the Form

Parts I and II of the form identify the entity (its name, address, and employer identification number) and you as the recipient (your name, address, and Social Security or taxpayer identification number). This section establishes who is reporting the information and who is receiving it.

Part III is the main part of the form, detailing your share of the entity’s income, deductions, and credits for the year. You will find various types of income, such as ordinary business income in Box 1, net rental real estate income in Box 2, and interest income in Box 5. This section also reports deductions, like the Section 179 deduction, which allows for the immediate expensing of certain business property. The income reported here is your taxable portion, regardless of whether you received that money in cash.

A frequent point of confusion is the difference between the income reported in Part III and any distributions you received. Distributions, often reported in Box 19 on a Form 1065 K-1, represent the actual cash or property paid out to you during the year. This amount is not separately taxable because the income that generated it has already been accounted for in Part III. For example, if the K-1 reports $10,000 of ordinary income but you only received a $4,000 cash distribution, you are still required to pay tax on the full $10,000.

Using Your K-1 Information on Your Tax Return

You must transfer the information from your Schedule K-1 to your personal tax return, Form 1040, and its various schedules. The K-1 instructions provide guidance on where each item should be reported. For instance, ordinary business income from Box 1 of a K-1 (Form 1065 or 1120-S) generally flows to Part II of Schedule E (Form 1040).

Different types of income are directed to different forms. Net rental real estate income from Box 2 is also typically reported on Schedule E. Interest income from Box 5 of a partnership K-1 is reported on Schedule B (Form 1040). Net long-term capital gains are carried over to Schedule D (Form 1040).

Important K-1 Related Concepts

One concept to manage is your tax basis, which represents your total investment in the entity. Your basis increases with capital contributions and your share of income, and it decreases with distributions and your share of losses. While the K-1 may report a capital account analysis, it is your responsibility to track your own basis, as the entity may not have all the necessary information. This figure is important for determining if you can deduct losses and for calculating your gain or loss when you eventually sell your interest.

Another practical issue is the timing of when you receive your K-1. Pass-through entities often have filing deadlines that are on or after the individual tax filing deadline of April 15, making it common for K-1s to arrive late. If you are in this situation, you may need to file for an automatic six-month extension using Form 4868. This extends your filing deadline to October 15, but it does not extend the time to pay any taxes you owe.