A K-1 is a tax form that reports your share of income from a partnership, S corporation, or trust
A K-1 form (officially Schedule K-1) reports your portion of business income, losses, deductions, and credits from a partnership, S corporation, limited liability company (LLC), or trust. You receive it from the business or trust itself, not from the IRS. The business files its own return showing total income and deductions, then breaks down each owner's or beneficiary's share on individual K-1 forms sent to them.
Unlike a W-2, which shows wages you earned as an employee, a K-1 shows your stake in the business's profit or loss. You use the K-1 to report that income on your personal tax return, even if you did not receive cash. This matters because the IRS taxes you on your share of business earnings whether or not the business paid you out.
The K-1 is not a final tax bill. It is a reporting document that tells you what to report and helps the IRS match what you claim against what the business reported. You will still owe tax on that income, and you may owe self-employment tax as well.
Key Takeaways
- A K-1 reports your share of income or loss from a partnership, S corporation, LLC, or trust, and you must report it on your personal tax return.
- The business or trust sends you the K-1 by March 15 (or later if they received an extension), and you use it to complete your own return.
- You owe tax on your K-1 income even if the business did not pay you cash, because the IRS taxes you on your ownership share of earnings.
- K-1 income is usually subject to self-employment tax if you are an active partner or S corporation shareholder, which increases what you owe.
Who sends you a K-1 and when
The business or trust that you own a piece of sends you the K-1. If you are a partner in a law firm, a member of an LLC, a shareholder in an S corporation, or a beneficiary of a trust that earned income, you will receive one. The entity files its own return with the IRS and sends copies of the K-1 to each owner or beneficiary.
The important date is March 15 for most partnerships and S corporations, though businesses that received a filing extension may send them later. Trusts have different important date depending on their type. You should receive your K-1 by mid-March in most cases, which gives you time to file your own return by April 15. If you do not receive it by early April, contact the business directly — the IRS does not send K-1s.
The form comes in two parts: one copy goes to you, one goes to the IRS. The IRS uses its copy to cross-check your personal return, so reporting the K-1 income correctly matters.
What information appears on a K-1
The K-1 has multiple boxes, each reporting a different type of income or deduction. Box 1 shows your share of ordinary business income or loss. Other boxes break out capital gains, dividend income, interest, rental real estate income, and various deductions. Some boxes are blank because not all businesses have all types of income.
The form also shows your ownership percentage and your basis — the amount you have invested in the business. Basis matters because it limits how much loss you can deduct in a given year. If you have a $50,000 basis and the business loses $80,000, you can only deduct $50,000 of your share that year.
The K-1 will also note whether you are a general partner, limited partner, or other type of owner. This affects whether you owe self-employment tax on your share of income. A limited partner in a partnership, for example, does not owe self-employment tax on most partnership income, while a general partner does.
How to report K-1 income on your personal return
You report K-1 income on Schedule E (Supplemental Income and Loss) of your Form 1040. You transfer the income and loss figures from the K-1 to the corresponding lines on Schedule E, then carry the total to your main return. If the K-1 includes capital gains or other special income, those go on different schedules.
The IRS receives a copy of your K-1 directly from the business, so the numbers you report should match exactly. If they do not match, the IRS will send you a notice asking for an explanation. Mismatches happen often and are usually resolved quickly, but it is simpler to report the K-1 as issued.
If the K-1 contains an error, ask the business to issue a corrected form (called an amended K-1). Do not guess or adjust the numbers yourself. Once you have the corrected K-1, file an amended return if needed.
Self-employment tax on K-1 income
Most K-1 income is subject to self-employment tax, which covers Social Security and Medicare taxes for self-employed people. If you are a general partner or an active S corporation shareholder, you owe self-employment tax on your share of business income. The rate is 15.3 percent (12.4 percent for Social Security, 2.9 percent for Medicare), though you can deduct half of it.
Limited partners and passive investors usually do not owe self-employment tax on partnership income, though they may owe it on may provide payments (a salary-like draw from the partnership). S corporation shareholders do not owe self-employment tax on distributions, only on wages the corporation pays them.
Self-employment tax is calculated on Schedule SE and added to your income tax bill. It is separate from income tax but due at the same time. If you expect to owe a large amount, you may need to make quarterly estimated tax payments during the year.
What happens if you do not receive a K-1
If you owned a stake in a business or trust that earned income and did not receive a K-1 by mid-April, contact the business first. They may have sent it to an old address, or they may have missed the important date. Ask them to send a copy or issue a corrected one.
If the business will not send you a K-1 or claims you are not may have access to to one, you still owe tax on your share of income if you actually owned a stake. You can report what you believe you are owed on Schedule E with an explanation, though this often triggers an IRS notice. It is better to resolve the dispute with the business before filing.
If a business failed to file its return or send K-1s to owners, you can report that to the IRS, but that does not change your own tax obligation. You still owe tax on your income share.
K-1 versus other business income forms
A Schedule C is used for sole proprietorships and single-member LLCs where you are the only owner. You report all business income and expenses directly on your personal return. A K-1 is used when there are multiple owners or when the business is structured as an S corporation or trust.
A W-2 is used for wages you earned as an employee. It shows income tax and payroll taxes already withheld. A K-1 shows your ownership share of business profit, and no tax is withheld — you owe it when you file your return.
A 1099-NEC or 1099-MISC is used for independent contractor income. It reports what you were paid for services, not your ownership stake in a business. If you are a partner or S corporation shareholder, you receive a K-1, not a 1099.
Frequently Asked Questions
Do I owe tax on K-1 income if I did not receive cash from the business?
Yes. The IRS taxes you on your share of business earnings whether or not the business distributed cash to you. If the business retained earnings to reinvest or pay down debt, you still owe tax on your portion. This is called "phantom income" and is common in partnerships and S corporations.
Can I deduct losses shown on my K-1?
You can deduct losses up to your basis in the business. Basis is the amount you have invested plus any loans the business owes you. If the business lost $100,000 and your basis is $60,000, you can deduct $60,000 this year and carry the remaining $40,000 forward to future years when your basis increases.
What if the K-1 shows different numbers than what the business told me?
Ask the business to explain the difference. The K-1 is the official document for tax purposes, so report what it shows. If you believe it is wrong, request a corrected K-1 before you file. Do not adjust the numbers on your own return.
Do I need to file a return if my only income is from a K-1?
Yes, you must file a return to report K-1 income. Even if the amount is small, the IRS expects to see it reported. The business filed a return showing your share, and the IRS will cross-check your personal return against it.
Is K-1 income subject to estimated tax payments?
If you expect to owe more than $1,000 in tax for the year, you should make quarterly estimated payments. K-1 income is not subject to withholding, so you are responsible for paying tax throughout the year rather than waiting until April.