Definition of Schedule K-1:
An Internal Revenue Service (IRS) form used to report income, credits, deductions and other claims for a company formed as a partnership. A Schedule K-1 is filed for each partner participating in the company, whether the partners role is passive or active.
The tax code in the United States allows the use of certain pass-through taxation, which shifts tax liability from the entity (trust, corporation) to the individuals who have an interest in it. This is where the Schedule K-1 comes in.
A Schedule K-1 is a tax document used to report the incomes, losses, and dividends of a business's partners or an S corporation's shareholders. The Schedule K-1 document is prepared for each individual partner and is included with the partner’s personal tax return. An S corporation reports activity on Form 1120S, while a partnership reports transactions on Form 1065.
How to use Schedule K-1 in a sentence?
- The Schedule K-1 requires the partnership to track each partner’s basis in the partnership.
- Business partners or S corporation shareholders use Schedule K-1 to report their incomes, losses, and dividends.
- A partner can earn several types of income on Schedule K-1.
Meaning of Schedule K-1 & Schedule K-1 Definition