How to File Form 1065 for a Partnership

All the Information You Need for Your LLC or Partnership

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Partnerships have specific tax reporting requirements that are different from other businesses. are a two-step process: The partnership must report its income, and the partners must report and pay taxes on their share of that income

If you are the person responsible for income taxes for a partnership, you probably already have a tax preparer to help you with this return. Or maybe you are planning to use a tax preparation software program that has a partner version. In either case, it's a good idea to gather up the documents you need to prepare this partnership tax return.

Having these documents before you begin lessens the work and time (and money) spent on a tax preparer and it reduces the hassle of stopping and starting your return. First, a brief overview of a partnership tax return, then a list of documents you need. 

How Partnerships File Federal Income Taxes: Form 1065

 is the US Return of . Form 1065 is used by partnerships and multiple-member Limited Liability Companies (LLCs) to report federal income taxes. No tax is calculated or paid from Form 1065. Any tax due is paid by the partners or LLC members. A multiple-member LLC is taxed as a partnership.

A partnership pays income tax through the returns of its partners, allocating a share of income or loss to each partner according to the . The partnership files an information return on Form 1065, then gives each partner  showing his or her share of income/loss for the year.

Information for Multiple-Member LLCs Filing as Partnerships

If your business is an LLC with multiple members, and you have not  or S corporation, you'll be filing taxes as a partnership. From the standpoint of the IRS, you are filing your business tax return as a partnership. 

Documents Needed for Your Partnership Tax Return and Schedule K-1 Forms

To start out your preparation for filing Form 1065, you need several year-end financial statements. Give your tax preparer a  statement, showing your partnership  (or loss) including the specific sources of revenue, and all  of the partnership/LLC for the year and a  for the partnership at the beginning and the end of the year. The beginning year balance sheet must match last year's end-of-year balance sheet.

Before you take your partnership tax information to a tax preparer, gather together the following information:

Information about the partnership, including the , , and the date the partnership was started.

 used by the partnership: . This information is important in figuring out when income and expenses should be recorded. 

returns, and allowances: allowances includes discounts and complimentary (free) products and services. 

If you sell products, you need to provide information for calculating . This information includes the value of inventory at the beginning and end of the year, and the cost of inventory purchased during the year, plus other components of inventory.

Information on Expenses of the Partnership

Most business expenses are deductible, so it's important to include every expense, including:

  • of employees, but not partners.
  • Guaranteed payments to partners
  • Repairs and maintenance expenses
  • Rent
  • , paid by the partnership, not including federal income tax. 
  • Interest paid
  •  for the year. like business equipment and vehicles bought during the year need to meet IRS requirements to be depreciated. 
  • Retirement plans for partners and employees, that may reduce income taxes due. 

Information on Your Business Assets

You need to provide information on your  including business vehicles, for depreciation purposes.

Information Needed for Schedule K-1 Forms

Schedule K-1 provides information about the partnership and the partners, including taxable income of partners from passive activities and other activities, qualified dividends, net , and income from other activities.

Before preparing this form, your tax preparer needs a copy of your partnership agreement to provide information on the distributions of shares or money to partners, and allocation of income/loss to partners. 

You also need a list of partners and their partnership type (general or limited).  

The most important piece of information you need is Information on distributions and contributions by partners for the tax year, including the total amount of all partner capital accounts at the beginning and the end of the year and increases and decreases (including distributions).