The K-1 is a form that reports your share of income from a partnership, S corporation, or trust
A K-1 form (officially Schedule K-1) tells you how much income, loss, deductions, and credits you earned from a business entity that did not pay you as a regular employee. Instead of a W-2 (which reports wages), you get a K-1 because you own a piece of the business or are a beneficiary of a trust. The business itself does not pay income tax on its profits — you do, based on your K-1 share.
The entity that issued your K-1 files its own tax return (Form 1065 for partnerships, Form 1120-S for S corporations, Form 1041 for trusts). That return shows the total income and deductions. Your K-1 extracts your personal portion and sends it to you and the IRS. You then report those numbers on your own tax return.
You must receive your K-1 by March 15 if the entity is a partnership or S corporation, or by March 31 if it is a trust. The entity is required to send it to you; if you do not receive one by those dates and you know you should have, contact the business owner or trustee directly.
Key Takeaways
- A K-1 reports your share of business income or loss from a partnership, S corporation, or trust — not wages from an employer.
- The business or trust files one tax return; your K-1 shows only your portion, which you report on your personal return.
- K-1 income is subject to self-employment tax if you are a partner or S corporation owner, even if the business made no profit.
- You must report K-1 income on your tax return whether or not you received cash distributions from the business.
- important date are March 15 for partnerships and S corporations, and March 31 for trusts; contact the entity if you do not receive yours by then.
Who issues a K-1 and why
Any business structured as a partnership or S corporation must issue K-1 forms to its owners. A trust that has beneficiaries also issues them. These entities are called pass-through entities because the income passes through to the owners' personal tax returns instead of being taxed at the business level.
A sole proprietor (someone who runs a business alone) does not receive a K-1 — they report business income directly on Schedule C. A C corporation does not issue K-1s either; it pays corporate income tax, and shareholders only report dividend income on their personal returns.
If you own part of a rental property held as a partnership, manage a family business with others, or are named as a beneficiary in a trust, you will receive a K-1. Even if you did not actively work in the business or receive any money that year, you still get one if you own a stake or have a beneficial interest.
What information appears on a K-1
The K-1 has two main parts. The top section identifies the business or trust, your name and tax ID, and your ownership percentage or beneficiary status. The bottom section lists specific income and deduction items in numbered boxes.
Box 1 shows your share of ordinary business income or loss. Box 2 shows net rental real estate income or loss. Boxes 3 through 12 report other types of income: interest, dividends, royalties, capital gains, and so on. Boxes 13 through 20 list deductions and credits that pass through to you, such as charitable contributions, foreign tax paid, or investment interest expense.
Not every box will have a number. A partnership that earned only wage income and had no capital gains will leave most boxes blank. A trust with significant investment income will fill in more. Read only the boxes that contain amounts; the rest do not explore to your return.
How to report K-1 income on your tax return
You report K-1 income on Schedule E (Supplemental Income and Loss) if the K-1 comes from a partnership, S corporation, or rental real estate trust. If the K-1 comes from a non-rental trust or estate, some items go on Schedule E and others go directly on Form 1040 or other schedules, depending on the type of income.
The instructions that come with your K-1 tell you which line of which form to use for each box number. For example, Box 1 (ordinary business income) typically goes on Schedule E, line 28. Box 5 (interest income) goes on Schedule B. Box 11 (capital gains) goes on Schedule D. Follow the K-1 instructions exactly; do not guess.
If you received a K-1 from multiple entities, you file a separate Schedule E for each one, then combine the totals on Form 1040. The IRS receives a copy of your K-1 from the business, so your reported numbers must match what the entity filed.
Self-employment tax and K-1 income
If your K-1 comes from a partnership or S corporation where you are an owner (not just an employee), you owe self-employment tax on your share of the income. Self-employment tax covers Social Security and Medicare; it is roughly 15.3 percent of your net earnings.
The K-1 instructions will tell you which boxes are subject to self-employment tax. Generally, Box 1 (ordinary business income) is subject to it. Box 2 (rental income) usually is not, unless the rental property is a working farm or you are a real estate professional.
You calculate self-employment tax on Schedule SE using the income from your K-1. Even if the business had a loss and you owe no income tax, you may still owe self-employment tax if you had other income. Consult a tax professional if you are unsure whether your K-1 income is subject to self-employment tax.
What to do if your K-1 numbers seem wrong
If the K-1 you received does not match what you expected, or if you think the business made an error, contact the business owner, partnership manager, or trustee first. Ask them to explain the numbers or provide a breakdown of how your share was calculated. Many errors are straightforward misunderstandings about how income was allocated.
If you and the entity disagree on the amount, you have the right to file your own return with the numbers you believe are correct. However, the IRS will compare your return to the K-1 the entity filed. If they do not match, the IRS may contact you to ask why. Be prepared to show documentation of your ownership stake, capital contributions, or the terms of your agreement with the other owners.
If the entity filed a corrected K-1 (marked as an amended form), you must file an amended return (Form 1040-X) to report the corrected numbers. Do not ignore a corrected K-1; the IRS will see it and expect your return to reflect it.
K-1 forms for trusts and estates
If you are a beneficiary of a trust or estate, you may receive a K-1 (Schedule K-1 for beneficiaries of estates and trusts, also called Form 1041-B). This form works similarly to a business K-1 but reports income the trust earned and allocated to you.
Trust K-1s are more complex because trusts can distribute income, retain income, or pass through capital gains and losses. Your K-1 will show your share of each type. Some items are taxed to you whether or not you received cash; others are taxed only if you received a distribution.
The trustee or estate executor is responsible for sending you the K-1 by March 31. If the trust or estate owes you money or you are unsure how much you should have received, ask the trustee for a detailed accounting. Trusts are required to provide this information to beneficiaries.
Frequently Asked Questions
Do I have to report K-1 income if I did not receive any money?
Yes. K-1 income is reported whether or not the business distributed cash to you. The business may have retained earnings for reinvestment or to cover expenses. You still owe tax on your share of the income, and you may owe self-employment tax as well. This is one of the key differences between K-1 income and W-2 wages.
What if the K-1 I received does not match the copy the IRS has?
Contact the entity that issued it when ready and ask them to file a corrected K-1. Once they do, you must file an amended return (Form 1040-X) to match the corrected numbers. If you do not correct it, the IRS will likely send you a notice asking why your return does not match their records.
Can I deduct losses shown on my K-1?
You can report K-1 losses on your tax return, but your ability to deduct them depends on your ownership stake and involvement in the business. Passive activity loss rules may limit how much you can deduct in a given year. A tax professional can tell you whether your loss is deductible or must be carried forward.
What happens if I do not receive my K-1 by the important date?
Contact the business owner or trustee and ask for it. If they do not send it within a few days, you can file your return without it and attach a statement explaining the delay. However, you will still owe tax on the income once you receive the K-1, so file an amended return as soon as you have it.
Is K-1 income the same as dividend income?
No. K-1 income is your share of the business's actual earnings, whether or not the business paid you. Dividend income is a distribution of corporate profits paid to shareholders. K-1 income is also subject to self-employment tax if you are a partner or S corporation owner, while dividends are not.