Have you recently received a Schedule K1 tax form? This tax form is necessary for the declaration of your share from an estate/trust, partnership, or corporation to the Internal Revenue Service (IRS). You don’t have to file this form personally to the IRS, but you need to properly accomplish one annually. Get to know more about the K1 tax form in the discussion below.
Things To Know About K1 Tax Form: A Quick Guide
In this guide:
- What Is The K1 Tax Form?
- Why Do You Need To File K1 Tax Form?
- What Are The Different Types of K1 Tax Form?
- What Makes K1 Tax Form Different?
- When To Prepare K1 Tax Form?
What Is The K1 Tax Form?
The Schedule K1 tax form indicates one’s share of an estate/trust, partnership, or corporation. This share may come in any form: income, credit, deductions, and other items. The K1 tax form signifies the transfer of tax responsibility from the person or company earning income to the one who actually benefits from it.
Why Do You Need To File K1 Tax Form?
The need for K1 tax form is due to the concept of “pass-through taxation.” This is a concept in the US tax code which passes the obligation of paying taxes from the one who owns a business or an estate to those who actually benefit from the business (like a stakeholder or partner) or from an estate (like the heir to an estate). For partnerships or corporations, the “pass-through” concept allows the equal division of benefits to each partner or shareholder.
What Are The Different Types of K1 Tax Form?
This tax form constitutes Schedule K-1 of the following IRS Forms:
- Individual Income Tax Return (Form 1040). Schedule K1 Form 1040 is used to report one’s share of an estate or trust.
- Return of Partnership Income (Form 1065). Schedule K1 Form 1065 is used to report one’s share of a partnership.
- Income Tax Return for an S Corporation (Form 1120S). Schedule K1 Form 1120S is used to report one’s share of a corporation.
What Makes K1 Tax Form Different?
The K1 tax form is among the last tax-related documents a taxpayer gets when obtaining papers for tax return filing. Generally, a taxpayer doesn’t file this tax form along with the individual tax return. However, filing it with the tax return is necessary when the following conditions apply:
- reporting of backup withholding required in box 13, code B (for Schedule K1 Form 1040)
- reporting of backup withholding required in box 13 using code O (for Schedule K1 Form 1065 and Schedule K1 Form 1120S)
Mostly, a partnership or corporation keeps the K1 tax form for an individual’s records purposes. However, an accountant (or anyone who prepares your taxes) must get a copy of this tax form for the proper completion of a tax return. This function makes K1 tax form serve as an information document the IRS must have a copy of.
When To Prepare K1 Tax Form?
Accountants or tax prepares must report this tax form to IRS on or before March 15. The responsibility of filing this tax with the IRS form lies on the partnership (in the case of Schedule K1 Form 1065) or corporation (in the case of Schedule K-1 Form 1120S). And just like any other tax return, failure to comply will result in fines and penalties.
Partnerships and corporations may assist their partners and stakeholders on how to prepare their Schedule K1 tax form. For those who need to secure a Schedule K-1 Form 1040, here’s a video from eHow that might help you:
With a lot of fields needed to fill out in a Schedule K1 tax form, completing one may become tedious and confusing. Consult the help of a tax professional to ensure the complete and accurate declaration of this tax form.
Is there other information about Schedule K1 tax form that you would like to share? Tell us your ideas in the comments section below.
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