Tax Forms for Partnerships - dummies

By Consumer Dummies

If your unincorporated business is structured as a partnership (meaning it has more than one owner), it doesn’t pay taxes. Instead, all money earned by the business is split up among the partners.

As a bookkeeper for a partnership, you need to collect the data necessary to file an information schedule called Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc. for each partner. The company’s accountant will most likely complete the Schedule K-1 forms. The entire information filing for the company is called Form 1065, U.S. Return of Partnership Income, which you can find online.

Any partner receiving a Schedule K-1 must report the recorded income on his or her personal tax return — Form 1040 — by adding an additional form called Schedule E, Supplemental Income and Loss. (Schedule E is used to report income from more than just partnership arrangements; it also has sections for real estate rental and royalties, estates and trusts, and mortgage investments.) You can find the most current version of this form online.

Unless you’re involved in a real estate rental business, you most likely only need to fill out page 2 of Schedule E. Pay particular attention to Part II, Income or Loss From Partnerships and S Corporations. In this section, you report your income or loss as passive or nonpassive income, a distinction that your accountant can help you sort out.