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.