If you have received a Schedule K-1, it means you have received income from your share in a partnership, limited liability company or corporation. This income is generally taxable, either as ordinary income or as a distributed capital gain. In addition to your federal tax obligations, each state also has its own tax rules. You must comply with the state tax laws as well as federal tax laws with respect to your interest in a partnership.
Determine the tax jurisdiction that governs the distribution or income. If you earn money from a business interest in another state, you must pay taxes on K-1 income in the state in which the business is domiciled. That is not necessarily the state in which you live. You may find information identifying the state on your form K-1 itself.
Download a copy of the individual income tax return for your state. You can find a state government link from the Internal Revenue Service portal.
Transfer the income and capital gains distributions from the Schedule K-1 you received from your partnership to your state individual income tax return. Generally, you must declare your pro-rata share of all income or gains received by the partnership.
Repeat the process, only this time using IRS Form 1040, your federal individual income tax return. It is important to do your state tax returns first, though, because you can generally deduct the amount you pay in state income taxes on your federal income tax return.
References
- New Jersey: Division of Taxation - Income Tax
- Sourced July 31, 2020
- General Court of New Hampshire. "Senate Bill 404-FN-A," Pages 1 & 6. Accessed Jan. 20, 2020.
- Tennessee Department of Revenue. "2019 Guidance for Tennessee's Hall Income Tax Return," Page 5. Accessed Jan. 20, 2020.
- Federation of Tax Administrators. "State Individual Income Taxes," Page 1. Accessed Jan. 7, 2020.
- The Pew Charitable Trusts. "'Road Warrior' State Income Tax Laws Vary Widely." Accessed Jan. 8, 2020.
- Internal Revenue Service. "Topic No. 511 Business Travel Expenses." Accessed Jan. 20, 2020.
- Cornell Law School. "State Taxation and Regulation: The Modern Law." Accessed Jan. 8, 2020.
Writer Bio
Leslie McClintock has been writing professionally since 2001. She has been published in "Wealth and Retirement Planner," "Senior Market Advisor," "The Annuity Selling Guide," and many other outlets. A licensed life and health insurance agent, McClintock holds a B.A. from the University of Southern California.