Key Takeaways:

  • Purpose of K-1 Form 1120S: Reports each S corporation shareholder’s share of income, deductions, credits, and other tax items for their personal return.
  • Form Contents: Includes ownership details, income types, deductions, credits, and other adjustments, including Box 17 “Other Information.”
  • Filing Requirements: Shareholders must use K-1 data to complete Form 1040; S corps file Form 1120S and distribute K-1s annually.
  • Variations by Entity: Partnerships use Form 1065 K-1; S corporations use Form 1120S K-1; trusts and estates issue K-1s with Form 1041.
  • Penalties for Late Filing: Significant per-shareholder penalties for late or missing K-1s.
  • Tax Planning Role: Helps ensure accurate reporting of pass-through income and adjustments to shareholder basis.

A K-1 S-corp, also known as a Schedule K-1 S-corporation, is a type of business that uses Schedule K-1 as part of filing its tax return. This form is also called Form 1120S. It is used to report partner income from the business or shareholder income from the business on an individual's personal tax return. This includes income, losses, receipt of dividends, and capital gains.

What Does Schedule K-1 Include?

A Schedule K-1 form includes the following:

  • Name and address of the business
  • Employer Identification Number (EIN)
  • Shareholder name and percentage of stock ownership during the tax year
  • Shareholder's share of current year's business income, deductions, credits, and other items

Like partnerships, S-corps are responsible for filing annual tax returns. However, an S-corp is a separate legal entity than its owners, so filing a K-1, which is separate from yet part of your personal income tax, is required. The Schedule K-1 has slight variations depending on whether-c income comes from a trust, partnership, or S Corp. However, all K-1s provide detailed information about gains, losses, and the type of income so the person can file an accurate tax return.

Schedule K-1 for a partnership includes the following:

  • Partner's name and address
  • Type of partnership
  • The partner's share of profits, losses, and capital at the beginning and end of the year
  • The partner's share of liabilities at the beginning and end of the year
  • The partner's share of income
  • The partner's capital account analysis
  • Credits
  • Foreign transactions
  • Alternative minimum tax items
  • Tax exemptions and non-deductible expenses
  • Distributions.

Schedule K-1 for an S-corporation includes the following:

  • The shareholder's name and address
  • Information about the corporation
  • Shareholder's ownership percentage
  • Shareholder's share of income
  • Credits
  • Foreign transactions
  • Alternative minimum tax items
  • Tax exemptions and non-deductible expenses
  • Items affecting shareholder basis

To file a K-1 in TurboTax, open your return and search for "k-1" or "K-1". Click the "Jump to" link in the search results. This will take you to the proper form. Click "yes" and follow the instructions from there.

Understanding Box 17 “Other Information” on K-1 Form 1120S

Box 17 of the K-1 Form 1120S contains “Other Information” that does not fit into the main income, deduction, or credit categories. This section may include items that affect a shareholder’s tax liability but require separate reporting, such as:

  • Alternative Minimum Tax (AMT) items – adjustments that could trigger AMT calculations.
  • Tax-exempt income and related expenses – income not subject to federal tax and expenses connected to it.
  • Foreign transactions – details needed for claiming foreign tax credits or reporting offshore income.
  • Section 199A information – amounts relevant for the Qualified Business Income deduction.
  • Investment income and expenses – used to calculate the Net Investment Income Tax (NIIT).

These items may require completing additional IRS forms or worksheets. Shareholders should review Box 17 carefully to ensure proper reporting and avoid errors that could lead to IRS notices or missed deductions.

K-1 Forms for Estate and Trust Beneficiaries

Estates and trusts use Form 1041 to file their tax returns. Some trusts pay taxes on the income directly, while other trusts pass the income on to the beneficiaries, who then pay taxes on it. When a trust receives income, it writes a deduction for that income's amount on its tax return, which assures the income is only taxed once.

Common Errors When Using K-1 Form 1120S

Mistakes with K-1 Form 1120S often lead to inaccurate personal tax returns or IRS correspondence. Common issues include:

  1. Incorrect shareholder percentage – Misreporting ownership changes during the year can distort allocated income.
  2. Omitting adjustments to basis – Basis changes from contributions, distributions, and pass-through items must be tracked to determine gain/loss and deduction limits.
  3. Failing to report all income types – S corporation K-1s may list multiple income categories (ordinary business income, interest, dividends, capital gains) that must be entered separately on Form 1040.
  4. Ignoring passive activity rules – Losses from passive activities may be limited and carried forward rather than deducted immediately.
  5. Not reconciling with corporate records – Discrepancies between the K-1 and corporate books should be resolved before filing.

Maintaining accurate records and cross-checking K-1 entries with supporting documents helps ensure proper tax treatment.

Schedule K-1s and Business Tax Returns

Partnerships are not taxed on their income; rather, the individual partners are taxed on their share of the partnership's income. This is determined by their Schedule K-1. The partners also file an information-only Form 1065 as their personal income tax return.

S-corporations pay income taxes and file 1120S corporate tax returns. The owners then use a Schedule K-1 to pay income taxes on the income they receive as shareholders.

There are two types of Schedule K-1. Form 1065 is for partnerships, while Form 1120S is for shareholders of an S Corporation. The key difference in these two forms is how income, losses, and deductions are reported.

  • In a partnership Schedule K-1, the individual partner's share of the business's income, any losses, and the business's liabilities at the beginning and end of the year are required, as are his/her share of capital gains and loses.
  • In the S Corp Schedule K-1, the shareholder reports his/her share of different types of income, and itemizes certain deductions.
  • In both types, self-employment income or losses must be entered in order to calculate the self-employment tax.

Partnerships and S Corps are pass-through entities, meaning they generally do not pay income tax but rely on the partners or shareholders to pay taxes on the business's income on their personal tax returns. This is done via Schedule K-1, usually on a Form 1040. These forms must be filed even if there is no taxable income or if the business is losing money.

There are two expensive penalties for failure to file a Schedule K-1: $195 per partner/shareholder per month for late filing and fines up to $260 for each form not issued to the partners/shareholders on time.

How to Read and Use K-1 Form 1120S

Reading a K-1 Form 1120S effectively requires understanding its key sections:

  • Part I – Information About the Corporation: Lists the corporation’s name, address, and EIN.
  • Part II – Information About the Shareholder: Includes shareholder name, address, and ownership percentage.
  • Part III – Shareholder’s Share of Current Year Items: Breaks down income, deductions, credits, and other allocations.

When preparing your tax return:

  1. Identify each item’s reporting location – For example, ordinary business income flows to Schedule E, while capital gains go to Schedule D.
  2. Apply limitations – Passive loss rules, basis limitations, and at-risk rules may reduce deductible amounts.
  3. Check for required attachments – Some K-1 items require supplemental schedules or statements.

Tax software can help automate placement of these amounts, but shareholders remain responsible for ensuring all figures are entered correctly.

Frequently Asked Questions

1. What is a K1 Form 1120S used for? It reports each S corporation shareholder’s share of income, deductions, credits, and other tax items for their personal return.

2. When is K1 Form 1120S due? It must be provided to shareholders by the due date of the S corporation’s Form 1120S return, typically March 15.

3. Do I need to file K1 Form 1120S with my personal tax return? You don’t submit the form itself but must report its information on your Form 1040 and related schedules.

4. What happens if my K1 Form 1120S is incorrect? An amended form should be issued by the corporation, and you may need to file an amended personal return.

5. Can K1 Form 1120S show a loss? Yes, it can report losses, but deducting them may be limited by basis, at-risk, and passive activity rules.

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