What is Form 1065: Instructions, How to Fill Out and File

Vivien Thuri

25.02.22 (updated more than 1 year ago)

6 minute read

IRS Form 1065 is the US tax return for specific types of businesses such as partnerships and LLCs.

According to the IRS, the number of 1065 Forms being filed has increased since 2011, with an average annual percentage increase of 2.2% between 2012-2018.¹

With this increasing number your business might be one of the many, who needs to file a 1065 Form.

Tax season can be demanding, so it’s essential that you have a transparent, easy way of managing payments to the IRS.

Table of Contents
What is Form 1065? Who needs to file Form 1065? How to file Form 1065? How to fill out Form 1065?

What is Form 1065?

A 1065 Form is the annual US tax return filed by partnerships. It is used to report the partnership’s income, gains, losses, deductions, and credits to the IRS.

A partnership does not pay tax on its own income but instead “passes through” any profits or losses to its partners on a Schedule K-1.

💡 What is a Schedule K-1?
A Schedule K-1 is used to report a partner's share of a partnership's profits or losses.² The partnership files a copy of each Schedule K-1 with the IRS. The partnership also needs to provide its partners with a copy so they can include their portion of the profits or losses on their own tax return. For example, if the partnership earns $100 in income and has 10 equal partners, each K-1 will have $10 in income on it that each partner needs to include on their own tax return.

💡 What is a Schedule K-1?

A Schedule K-1 is used to report a partner's share of a partnership's profits or losses.² The partnership files a copy of each Schedule K-1 with the IRS.

The partnership also needs to provide its partners with a copy so they can include their portion of the profits or losses on their own tax return.

For example, if the partnership earns $100 in income and has 10 equal partners, each K-1 will have $10 in income on it that each partner needs to include on their own tax return.

Who needs to file Form 1065?

A 1065 Form needs to be filled out by any domestic partnership, including limited liability corporations (LLC) that are headquartered in the United States.³

The Form must also be filled out by foreign partnerships that are earning money in the United States.

💡 What is a partnership?
The IRS defines a partnership as a “relationship” between two or more people that carry out business or trade together, and each person contributes money, labor, or skills. Profits and losses are shared with partners, as well as the tax obligation because partnerships are not taxable themselves. Each partner’s share of the partnership income is added to his or her other taxable income.

The IRS includes many kinds of partnerships in this definition, such as:

limited partnership,
syndicate,
joint venture,
other organizations that aren’t a corporation³

As a partnership, you can find all the information you need on the IRS website on where to file your 1065 Form.

If you are a partner in a partnership, you should expect to receive a Schedule K-1 from the partnership so you can include your portion of the partnership's profits or losses on your own tax return.

How to file Form 1065?

Partnerships are required to file Form 1065 by the 15th day of the 3rd month following the date the tax year ended unless an extension is filed.⁴

For example, a calendar year partnership must file its 1065 by the 15 March of the following year.

However, if the partnership were to file an extension before 15 March³ using Form 7004, the return obligation would be extended 6 months.

If the return and/or the extension is not timely filed, the partnership may incur a late fee.⁵-⁶

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A commonly asked question is where to file a 1065 Form.

How you file the 1065 Form will vary based on how you file your tax return. You can choose to e-file it using the IRS online system, which may be the easiest option.

You can also mail the 1065 Form depending on the revenue earned and the state in which the Form is being filled to a 1065 mailing address.

You can find a list here from the IRS of where to mail 1065 Forms.

A tax advisor will also have tax return software to ensure proper filing of a partnership tax return.

How to fill out Form 1065?

Form 1065 typically has five main pages in total that must be filled out.

Let’s go through some of the general information that’s needed for each page and the kinds of information you’ll need to provide.

businessman-filling-out-tax-forms

|| If you’re unsure about how to fill the Form or what’s required of you, you can have a tax professional complete and submit the Form on your behalf.||

1065 Form: Page 1

Page 1 consists of basic information about your partnership, such as:

Tax year
Partnership name and address
Principal business activity, product or service, and business code number
Business tax ID
Date the business started
Total assets of the partnership at the end of the year
The type of return your filing and the accounting method used by the business
The number of Schedule K-1s you’ll be attaching

Once that’s complete, you will need to enter information in three categories:

Income
Deductions
Tax and payments

You’ll need to use your partnership’s financial documents and other tax information in order to provide:

Total income
Total deductions
Ordinary business income loss
Total balance due
Any prepayments you’ve made for taxes based on the information provided
Amount owed if you’ve prepaid less than what your tax bill is amounting to
Overpayment if you’ve prepaid more than what your tax bill is amounting to

After completing the first page, make sure to review the information and then sign and date.

|| If you are unsure what items are eligible for a tax deduction, please contact a tax advisor||

1065 Form: Page 2

Page 2 of the 1065 Form or Schedule B is titled as “Other Information.” The section asks for more information about the partnership itself.

Page 2 of the 1065 Form mostly has yes/no questions, and you may need to provide some additional information depending on how you answer some of the questions.

Page 2 of the 1065 Form covers:

The type of business entity
How the partnership is divided, in percentages
Any debt the partnership has
Involvement in foreign financial accounts
Investments the partnership may have

1065 Form: Page 3

Page 3 of the 1065 Form is a continuation of the technical information asked on page 2.

Page 3 will ask you about:

Any property relating to the partnership
Foreign partner information (if any)
Other tax obligation forms that may be relevant

1065 Form: Page 4

The Schedule K will start from the 4th page of Form 1065. The Schedule K is the total amount of taxable items that will be passed through to the partners.

The Schedule K part of the 1065 Form will ask you about:

Income loss
Deductions
Net earnings loss from self-employments
Any applicable credits
Foreign transactions
Alternative minimum tax items
Any additional income and expenses

💡 What is a Schedule K?
Please note that a Schedule K is not the same as a Schedule K-1. A Schedule K is a summary of the partnership’s distributable income and expense items. A Schedule K-1 is each partner’s share of those items. The sum of the Schedules K-1 should equal the totals reported on the Schedule K. All Schedules K-1 are attached to the Form 1065 when a Partnership files its tax return and they must also be sent to each partner.

💡 What is a Schedule K?

Please note that a Schedule K is not the same as a Schedule K-1.

A Schedule K is a summary of the partnership’s distributable income and expense items. A Schedule K-1 is each partner’s share of those items.

The sum of the Schedules K-1 should equal the totals reported on the Schedule K.

All Schedules K-1 are attached to the Form 1065 when a Partnership files its tax return and they must also be sent to each partner.

1065 Form: Page 5

The final page of the 1065 Form is page 5, which includes analysis of loss, Schedule L, Schedule M-1 and M-2 for you to fill out about your partnership using its financial statements.

Whether or not you need to fill out Schedule L will depend on how you answer certain questions earlier in the Form.

According to the IRS, if you answered ‘Yes’ to question 4 in Schedule B - Schedule L, M-1 and M-2 don't need to be filled out.⁴

If you do need to fill out this page Schedule L and M-2 looks at the partnership’s assets, liabilities and capital in further detail.

Schedule L is where you will report the Partnership’s balance sheet.
And Schedule M-2 is to record the Partners’ capital accounts.

The Schedule M-1 records the tax adjustments the partnership makes. Typically, partnerships will hire tax professionals to help calculate their correct tax.

If the partnership’s total assets on Schedule K exceed $10 million, then a Schedule M-3 will need to be filed rather than a Schedule M-1. It has the same purposes but asks for much more detail.

|| Remember, if you’re unsure about how to fill out Form 1065 or the information included in the Form, it’s always best to work with a tax professional that can guide you on the best steps and how to fill out the Form correctly. ||

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Read on and learn more about taxation in the US
Business Tax Deadline 2022: When Are The Business Tax Filing Deadlines? US Taxes: A Gide for Global Citizens in 2022

All sources:

All sources checked 22 February 2022

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