A:

The Schedule K-1 is a tax document issued for an investment in partnership interests. The purpose of the Schedule K-1 is to report your share of the partnership's income, deductions and credits. It is issued around the same time as Form 1099 and serves a similar purpose for tax reporting.

While a partnership is generally not subject to income tax, you are liable for tax on your share of the partnership income, whether or not it's distributed. This tax document is commonly issued by investors when they invest in limited partnerships (LPs) and some exchange-traded funds (ETFs), such as those that invest in commodities.

The Schedule K-1 tends to have a reputation for being one of the last tax documents to be received by the taxpayer when gathering all of their tax documents to file the federal return. To add insult to the wait, the Schedule K-1 can be quite complex and require multiple entries on the taypayer's federal return, including such entries on the Schedule A, Schedule B, Schedule D and in some cases Form 6781.

Take a look at our article 10 Steps To Tax Preparation for some tips to help you file your tax return.

This question was answered by Steven Merkel.

Hot Definitions
  1. Marginal Utility

    The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important ...
  2. Contango

    A situation where the futures price of a commodity is above the expected future spot price. Contango refers to a situation ...
  3. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  4. Acid-Test Ratio

    A stringent indicator that indicates whether a firm has sufficient short-term assets to cover its immediate liabilities. ...
  5. Floating Exchange Rate

    A country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that ...
  6. Taxes

    An involuntary fee levied on corporations or individuals that is enforced by a level of government in order to finance government ...
Trading Center