What Is Form 1065?
Form 1065, or the US Return of Partnership Income, is the tax form for partnerships to file so they can report their gains, losses, income, deductions, and credits. It ensures partnerships meet their tax obligations and helps the IRS track the entity’s business activities. It’s due by March 15, 2025, for the 2024 tax year.
Who Needs to Fill It Out?
Any domestic partnership, regardless of whether they have income for the current tax year, must fill out and submit Form 1065. Limited partnerships and LLCs taxed as partnerships must also submit it. You may also need to fill it out if you belong to a nonprofit religious organization that’s a 501(d) entity.
Note that foreign partnerships won’t necessarily be exempt from filling out this form. You’ll likely need to complete Form 1065 if you have income coming from US sources, regardless of who your partners are.
If you’re an S-corporation and not a partnership, you’ll complete Form 1120-S to report business income and deductions.
How Does Form 1065 Work?
Partnerships don’t directly pay taxes on their income. Instead, profits and losses go directly to the involved partners. This is because partnerships are structured as “pass-through entities.”
The partnership prepares Form 1065 to summarize its financial situation. It also prepares supplemental Schedule K-1 forms for each partner, which show each partner’s individual share of income, deductions, and other tax-related items.
After preparing Schedule K-1s, the partnership distributes them to each partner and files a copy with the IRS. The partners use their Schedule K-1s to report their share of the partnership’s income on their Form 1040. K-1s are due to partners on the same day that Form 1065 is due: March 15, 2025.
Schedule K
Partnerships also complete Schedule K on their 1065, which summarizes the partners’ distributive share items in one place.
Other Forms & Schedules for Form 1065
Depending on the complexity of your partnership, you may need to fill out other schedules and forms in addition to Schedules K and K-1. For example, you may need the following:
- Schedule K-2: Provides international tax information related to foreign activities; required for partnerships with foreign income, credits, or deductions.
- Schedule K-3: Expands on Schedule K-1 by reporting international tax details to individual partners.
- Schedule L: Reports the partnership’s balance sheet, showing its financial position at the beginning and end of the year.
- Schedule M-1: Reconciles differences between the partnership’s book income and tax income (often due to depreciation or other adjustments).
- Schedule M-2: Tracks the changes in the partners’ capital accounts throughout the year.
- Schedule M-3: Required for large partnerships (total assets of $10 million or more) to provide a more detailed reconciliation of book and tax income.
- Form 8805: Used for foreign partners to report their share of US income and any withholding tax paid on their behalf.
How to Fill Out Form 1065
This form for partnerships may seem long, but it’s relatively easy to complete when you follow these steps.
1. Gather Required Information
Begin by collecting the required information to help you fill out Form 1065. With this information in hand, you can speed up the filling out process, as you won’t have to constantly look through your files. Some of the information you’ll need to collect includes:
- partnership’s employer identification number (EIN)
- business details (legal name, address, principal activity, and business code)
- financial statements (profit and loss statement, balance sheet)
- records of partner contributions, distributions, and ownership percentages
- payroll and expense details
- copies of Forms 1099 and W-2 (if applicable)
2. Enter Details Into the Top Section
Complete the top section of the form to provide preliminary information about your partnership. This includes your partnership’s full legal name and address, principal business activity and code, EIN, accounting method, and total assets.
3. Record Income (Lines 1-8)
Enter the gross receipts or sales from business operations in line 1a. Then, subtract the returns and allowances to get the balance, entering it in line 1c.
You can also enter the Cost of Goods Sold (COGS) using Form 1125-A if needed, calculate gross profit, and include income from other sources, such as rental income. Provide the total income in line 8.
4. Report Business Deductions (Lines 9-22)
Use lines 9 through 22 to report business deductions, including salaries and wages, guaranteed payments to partners, depreciation, and employee benefits. Total all deductions and calculate the ordinary business income or loss by subtracting total deductions from total income.
5. Complete the Tax & Payment Section (Lines 24-32)
Use lines 24-27 to enter any applicable taxes, interest, and penalties. Then, enter either the overpayment or the amount owed, depending on whether the sum of lines 29 and 30 is larger or smaller than line 28.
6. Fill Out Schedule B (Other Information)
Answer Yes or No to various questions about your partnership. For example, you’ll clarify:
- elections made under Section 754
- partnership’s involvement in foreign transactions
- ownership of 50% or more by an entity
- requirement to file Forms 1099, 1042, or 5471
7. Attach Schedules & Sign
Complete Schedule K-1 for each partner to show their share of income, losses, and deductions. You may also need to fill out other schedules, including Schedule L for balance sheets, Schedule M-1 to reconcile book income versus tax income, and Schedule M-2 to show changes in the partners’ capital accounts.
A partner or LLC member must sign and date the return.
What Happens After Filling Out Form 1065?
When you finish filling out Form 1065, you must submit it properly to the IRS. You can file by mail if you have 100 partners or less, but any partnership with more than 100 partners must electronically file.
If you send it in by mail as a partnership with 100 or fewer partners, be sure to send it to the correct office. The right office depends on your business’s location and the value of your partnership’s total assets at the end of the tax year. You can check the IRS’s form instructions for the correct address.
Fillable Form 1065
You can quickly fill out Form 1065 using our fillable form tool. Input your details and save the document for printing when you’re ready. The partnership’s managing member must sign before it goes to the IRS.
Frequently Asked Questions
Can I get an extension for filing Form 1065?
Yes. You can fill out and submit Form 7004 to request a six-month extension for filing Form 1065. If the IRS approves your request, the new due date is September 16, 2025, instead of March 15, 2025.
Does every LLC have to file Form 1065?
If the LLC is classified as a partnership, it abides by normal partnership tax rules, meaning it must file Form 1065.
What’s the penalty for not filing Form 1065?
The partnership must pay a $220 per partner penalty for each month the Form 1065 remains unfiled. The penalty can only last a maximum of 12 months.
Do a husband and wife LLC have to file Form 1065?
An LLC owned by a husband and wife is typically treated as a partnership, meaning they have to file Form 1065. This form may not apply to them if they conduct business in a community property state or qualify for and apply to have their business categorized as a qualified joint venture.
