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.

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.

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.

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