Schedule K-1 (Form 1065) explained

If you own part of a partnership or a multi-member LLC, the Schedule K-1 is the form that tells you what to put on your own return. It is often misunderstood, mostly because the tax follows your share of profit, not the cash you took out. This guide walks through the boxes that matter and where they go.

By Muhammad Bilal, Chartered Accountant. Reviewed by Awais Jameel, Chartered Accountant. Checked against official sources on . 3 minute read.

Short answer

Schedule K-1 (Form 1065), explained simply, shows your share of a partnership's income, deductions and credits for the year. You report those amounts on your own return, mostly on Schedule E, whether or not the partnership paid you any money. Box 1 is ordinary business income, box 4 guaranteed payments, box 14 self-employment earnings and box 19 distributions.

At a glance

Issued by
The partnership, with Form 1065
Due to partners
March 15, 2027 for calendar year 2026, or September 15 if extended
Where most of it goes
Schedule E, page 2, of the partner's Form 1040
Taxed on
Your share of income, whether or not distributed
Box 14
Self-employment earnings for general partners and active LLC members
Box 19
Distributions: money and property you received
Schedule K-1 (Form 1065) explainedIssued by: The partnership, with Form 1065; Due to partners: March 15, 2027 for calendar year 2026, or September 15 if extended; Where most of it goes: Schedule E, page 2, of the partner's Form 1040; Taxed on: Your share of income, whether or not distributed; Box 14: Self-employment earnings for general partners and active LLC members; Box 19: Distributions: money and property you received.KEY FACTS AT A GLANCESchedule K-1 (Form 1065) explainedIssued byThe partnership, withForm 1065Due to partnersMarch 15, 2027 forcalendar year 2026, orSeptember 15 if extendedWhere most of it goesSchedule E, page 2, ofthe partner's Form 1040Taxed onYour share of income,whether or notdistributedBox 14Self-employment earningsfor general partners andactive LLC membersBox 19Distributions: money andproperty you receivedChecked against official sourcesTax BakersSchedule K-1 (Form 1065) explainedIssued by: The partnership, with Form 1065; Due to partners: March 15, 2027 for calendar year 2026, or September 15 if extended; Where most of it goes: Schedule E, page 2, of the partner's Form 1040; Taxed on: Your share of income, whether or not distributed; Box 14: Self-employment earnings for general partners and active LLC members; Box 19: Distributions: money and property you received.KEY FACTS AT A GLANCESchedule K-1 (Form 1065) explainedIssued byThe partnership, with Form 1065Due to partnersMarch 15, 2027 for calendar year 2026, orSeptember 15 if extendedWhere most of it goesSchedule E, page 2, of the partner's Form1040Taxed onYour share of income, whether or notdistributedBox 14Self-employment earnings for generalpartners and active LLC membersBox 19Distributions: money and property youreceivedChecked against official sourcesTax Bakers
Key facts at a glance, as set out in this guide.

What is Schedule K-1?

A partnership pays no income tax itself. Instead it works out its results on Form 1065 and divides them between the partners on Schedule K-1, one for each partner. The partnership files every K-1 with the IRS and gives each partner their own copy. You then report the figures on your personal return.

Why do you owe tax on money you did not receive?

Because partners are taxed on their share of the partnership's income, not on distributions. If the partnership earned $100,000 and kept it all to reinvest, a 50% partner is taxed on $50,000 that year. When the money is later distributed, it is generally not taxed again, as long as it does not exceed the partner's basis. This is why many partnerships make tax distributions to cover partners' bills.

Which boxes matter most?

BoxWhat it showsWhere it usually goes
1Ordinary business income or lossSchedule E, page 2
2 and 3Rental real estate and other rental income or lossSchedule E, page 2
4a to 4cGuaranteed payments for services and for capitalSchedule E, page 2
5 to 7Interest, dividends and royaltiesForm 1040 and its schedules, as for the same income received directly
8 and 9aShort-term and long-term capital gainsSchedule D
12Section 179 deductionForm 4562, then Schedule E
13Other deductions, with codes, such as charitable contributionsDepends on the code
14Self-employment earningsSchedule SE
19DistributionsNot income in itself. Used to track basis
20Other information, including code Z for the qualified business income deductionForm 8995 or 8995-A, and elsewhere by code

The K-1 comes with partner instructions that explain each code. Follow them, because the same box can go to different places depending on the code.

Box 4 amounts are covered in guaranteed payments to partners.

What do the items at the top show?

  • Item J: your share of profit, loss and capital at the start and end of the year.
  • Item K: your share of the partnership's liabilities.
  • Item L: your capital account: what you contributed, your share of income, your withdrawals and distributions, and the ending balance.

These help you track your basis, but your capital account is not the same as your tax basis. Keep your own basis record, because losses are deductible only up to basis, and distributions above basis are taxed as gains.

Can you always deduct a K-1 loss?

No. A loss passes three tests in order: your basis in the partnership, your amount at risk, and the passive activity rules if you do not materially participate in the business. A loss that fails a test is carried forward.

Do partners pay self-employment tax?

General partners, and LLC members who are active in the business, generally pay self-employment tax on their share of ordinary business income and on guaranteed payments for services. Box 14 shows the amount. See self-employment tax explained.

What if the K-1 is late?

Partnerships that extend their return can issue K-1s as late as September 15. If yours is late, you can extend your own return with Form 4868, but you still need to pay estimated tax on the income by April 15. Filing without the K-1 and amending later is possible but invites errors.

What if you are not a US resident?

Your K-1 may show US tax withheld on your share of effectively connected income, reported on Form 8805. You file Form 1040-NR and claim the withholding as a payment.

Got a K-1 and not sure what to do with it?

We report your K-1 correctly on your return, track your basis in the partnership, and check the figures against the partnership's accounts.

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Questions people ask

Do I pay tax on K-1 income I did not receive?

Yes. Partners are taxed on their share of partnership income whether or not it was distributed.

Where does K-1 box 1 go on my return?

Ordinary business income from box 1 goes on Schedule E, page 2, of Form 1040.

Are K-1 distributions taxable?

Generally not, up to your basis in the partnership. Distributions above basis are taxed as gains.

When should I receive my K-1?

By March 15 for a calendar-year partnership, or September 15 if the partnership extended its return.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IRS: Partner's Instructions for Schedule K-1 (Form 1065)
  2. IRS: Instructions for Form 1065 (2025)
  3. IRS Publication 541: Partnerships
  4. IRS Publication 925: Passive Activity and At-Risk Rules

Rules and fees change. If you are reading this long after September 30, 2026, confirm the figures with the source before you rely on them.

Federal tax formsForm 1065: the partnership returnBusiness tax by entity typeHow to pay yourself from an LLCFreelancers and self-employedSelf-employment tax explained

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This guide is general information. It is not tax or legal advice for your situation.