When you get a Schedule K-1 form, you won't have to wonder where to put the information it gives you. The K-1 tells you, literally line by line, exactly where each number from the form goes on each part of your 1040. The 1040 is the Internal Revenue Service form that you use for your personal taxes. The K-1 will also tell you if you need to file any other forms with your 1040. Following the 1040 K-1 instructions is crucial in order to ensure full compliance with the IRS.
You will attached the Schedule K-1 Form directly to your 1040 when filing your tax returns if this particular taxation document is required.
Claiming Requirements and Other Information on Your K-1
You can't say much about Schedule K-1 Form 1040 requirements without getting technical about tax laws really fast. The important thing to know is that K-1s are financial reports sent out by pass-through entities. Those entities can be partnerships, S corporations, trusts or estates. With pass-throughs, the IRS doesn't draw a line between the entity and you – the financial results go directly to your personal income tax form. That can be useful because sometimes you can use those financial results to pay less in taxes overall.
There are two categories of Schedule K-1 forms. One category goes from the business, estate or trust to the IRS and reports the whole entity's financial results. Another category of K-1 goes from the business, estate or trust to you and reports just your share of the financial results. That's because you may own only part of the business or receive only part of the payouts or disbursements from a trust or estate.
Deducting Opportunities and Income Reporting
It is the responsibility of the trust to report income it generates on Form 1041, United States Income Tax Return for Estates and Trusts. Estates and trusts must also supply beneficiaries with a Schedule K-1 detailing any distributions received. Beneficiaries then report these distributions as income on their personal income tax returns. An estate is what you call the assets of a deceased person before everything is distributed to the heirs. A trust is an asset or a collection of assets managed by somebody other than the beneficiary. Trusts may dole out money to the beneficiary or do something like hold on to the money until the beneficiary reaches a certain age.
Reporting Requirements For S Corporations and Partnerships
The Schedule K-1 that goes from an S corporation to you is Form 1120-S, unlike the Schedule K1 1040 document. Partnerships use Form 1065B. Both forms are statements of income, expenses, deductions and credits. The K-1 that the company sends you will tell you that interest income goes on line 8a, dividends go on line 9a and 9b, and so forth. If you have to file another form, the results will probably go on Part II of Schedule E, Supplemental Income and Loss.
- IRS: 2017 Instructions for Schedule E (Form 1040) -- Supplemental Income and Loss
- IRS: Forms and Instructions -- Schedule K-1
- IRS: Shareholder's Instructions for Schedule K-1 (Form 1120S) -- Shareholder's Share of Income, Deductions, Credits, etc.
- Turbo Tax: What is a Schedule K-1 Form 1041: Estates and Trusts?
- IRS: Instructions for Schedule K-1 (Form 1041) for a Beneficiary Filing Form 1040
Sarah Brumley has written extensively on business and health-industry topics since 1995. Her work has appeared in publications ranging from Funk & Wagnall's yearbooks to "Medical Economics," a magazine for physicians. She holds a master's degree in finance from New York University.