What Tax Form Does a Partnership File?

A partnership involves two or more persons or entities that join to carry on a trade or business with a view to profit. Partnerships are pass-through entities, meaning the business itself does not pay federal income tax. Instead, income, gains, losses, deductions, and credits pass directly to the partners. Partnerships must file informational returns with the Internal Revenue Service (IRS) to report financial activities. This reporting is essential for determining each partner’s tax obligations on their individual returns.

The Primary Partnership Tax Form

Form 1065, “U.S. Return of Partnership Income,” is the primary informational return partnerships use to report annual income, gains, losses, deductions, and credits to the IRS. Domestic partnerships and multi-member Limited Liability Companies (LLCs) typically file Form 1065. Foreign partnerships with income in the U.S. may also need to file this form. It serves as the foundational document for allocating financial details to each partner. This allocation forms the basis for partners to report their share of the business’s financial activity on their personal income tax returns.

Reporting Partnership Financial Activity

Form 1065 captures gross receipts or sales. If the partnership sells products, it must also calculate and report its cost of goods sold. It itemizes deductions that reduce taxable income. Common deductions include salaries, guaranteed payments to partners, rent, interest, and taxes. Other deductible expenses can include repairs, bad debts, and depreciation of assets.

After accounting for income and deductions, the form determines the partnership’s ordinary business income or loss. This net figure, and other separately stated items, determines each partner’s share of the business’s financial results. The form also includes Schedule L (Balance Sheet), Schedule M-1 (Reconciliation of Income/Loss), and Schedule M-2 (Analysis of Partners’ Capital Accounts).

Distributing Partner Tax Information

After completing Form 1065, the partnership prepares Schedule K-1 (Form 1065), “Partner’s Share of Income, Deductions, Credits, etc.,” for each partner. This document details each partner’s share of the partnership’s income, deductions, credits, and other items. The partnership provides a copy of Schedule K-1 to each partner and files a copy with the IRS. Partners use Schedule K-1 to prepare their individual income tax returns, typically Form 1040.

The K-1 reports various types of income, such as ordinary business income or loss, net rental real estate income, interest income, and dividend income. It also outlines guaranteed payments made to partners and each partner’s share of capital gains or losses. Schedule K-1 also informs partners of their share of deductions and credits, such as the Section 179 expense deduction. It allows partners to report their share of the business’s financial performance, regardless of whether the earnings were distributed.

Other Common Partnership Tax Forms

Partnerships may need to file other tax forms depending on their activities. If a partnership pays non-employee compensation, such as to independent contractors, it must issue Form 1099-NEC (Nonemployee Compensation) for payments totaling $600 or more. This form reports the compensation to both the contractor and the IRS.

Partnerships acquiring assets eligible for depreciation or amortization, like machinery or buildings, use Form 4562 (Depreciation and Amortization). This form calculates the allowable depreciation deduction and details any Section 179 expense election. It also reports information on the business use of vehicles and other listed property.

For rental real estate activities, Form 8825 (Rental Real Estate Income and Expenses) is required. This form reports the income and deductible expenses from such activities, determining the net gain or loss that flows through to the partners. Partnerships with employees must also file payroll tax forms, such as Form 941 (Employer’s Quarterly Federal Tax Return), reporting federal income, Social Security, and Medicare taxes.

Submitting Partnership Tax Documents

For calendar year partnerships, Form 1065 is due by March 15 of the following year. If the partnership operates on a fiscal year, the due date is the 15th day of the third month after the close of its tax year. If a partnership needs more time, it can request an automatic six-month extension by filing Form 7004 (Application for Automatic Extension of Time To File). This extends the filing deadline, typically to September 15 for calendar year partnerships, but it does not extend the time to pay any taxes due.

The IRS requires partnerships with 100 or more partners to file Form 1065 electronically. Partnerships with fewer partners may also file electronically or submit a paper return by mail to the appropriate IRS service center. The partnership must furnish each partner with their Schedule K-1 by the filing deadline of Form 1065, including any approved extensions. Maintaining accurate records of all filed forms and supporting documentation is essential, typically for three years from the filing date.