DEFINITION of 'Form 1065'

Form 1065 is a tax document used to report the profits, losses and deductions of business partnerships. In addition to Form 1065, partnerships must also submit Schedule K-1, a document prepared for each individual partner. Schedule K-1 identifies the percentage share of profit and loss assigned to each partner, both at the beginning of the reporting period and at the end. Partnerships themselves do not pay income tax, so Form 1065 is just for informational purposes.


All domestic partnerships and Limited Liability Corporations (LLCs) classified as domestic partnerships must submit Form 1065. The Internal Revenue Service (IRS) defines a partnership as two or more people who carry on a trade or business together. Each person involved contributes something in terms of money, skill or property, and they each expect to share in the endeavor's profits and losses. Domestic simply refers to the fact that the partnership is based in the United States.

Foreign partnerships with income in the United States must also file Form 1065. As of 2016, there are some limited exceptions for foreign partnerships earning less than $20,000 in the United States or partnerships earning less than 1 percent of their income in the United States. They may not have to file.

Finally, non-profit religious organizations must report their income and losses on Form 1065. These organizations must show that any profits generated were given to their members as dividends, whether or not the dividends were distributed.

Information on Form 1065

Form 1065 requests a great deal of information about the partnership's annual financials, including gross receipts or sales as well as deductions and expenses such as rent, wages to employees, bad debts, interest on business loans, and other costs of doing business. The form also requires information on the partners involved, and their stake in the company.

In order to complete Form 1065, filers need information from the following forms: 4562, 1125-A and 4797. They also need copies of any 1099 forms issued by the partnership. In some cases, filers need Form 8893, Election of Partnership Level Tax Treatment; Form 8918, Material Advisor Disclosure Statement; Form 114 Report of Foreign Bank and Financial Accounts Disclosure Statement; Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts; and Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. Farming partnerships need a copy of Form 1040 as well.

Income Tax

Form 1065 does not determine how much tax a partnership owes. Rather, it shows the IRS a snapshot of the company's financials for the year. However, the partners involved in the partnership must report their share of income from the partnership on their individual tax returns, and they must pay income tax on that. Partners must pay income tax on their earnings whether or not they draw the money out of the company.

  1. IRS Publication 541

    A document published by the Internal Revenue Service (IRS) that ...
  2. Schedule K-1

    A tax document used to report the incomes, losses and dividends ...
  3. Partnership

    A business organization in which two or more individuals manage ...
  4. Limited Partnership - LP

    Two or more partners united to conduct a business jointly, and ...
  5. Publicly Traded Partnership - PTP

    A business organization owned by two or more co-owners, that ...
  6. General Partner

    Owners of a partnership who have unlimited liability. A general ...
Related Articles
  1. Taxes

    What's the Purpose of IRS Form 1065?

    Business partners need the information on this form to complete their own tax returns. Here are the details.
  2. Small Business

    What is a Partnership?

    A partnership is an organization where two or more owners operate a business.
  3. Small Business

    MLPs and Limited Partnerships: How They Differ

    Limited partnerships and master limited partnerships have one difference that makes all the difference.
  4. Taxes

    How A Schedule K-1 Works

    Schedule K-1 is a U.S. tax document used to report income, losses and dividends.
  5. Taxes

    6 Tax Forms for Investors Who Have Money Abroad

    If you're a U.S. citizen or resident, and you own assets in other countries, you might need to file these six forms with the government.
  6. Insights

    Limited Liability Partnership (LLP): The Basics

    LLPs are a flexible legal and tax entity that allows partners to benefit from economies of scale by working together while also reducing their liability for the actions of other partners.
  7. Taxes

    How Private Equity and Hedge Funds are Taxed

    Private equity and hedge funds offer an appealing tax structure for those who can afford to invest in them. Here's why.
  8. Taxes

    Explaining Tax Returns

    A tax return is the form or forms used to file income taxes with the IRS.
  9. Small Business

    Which Type of Organization Is Best For Your Business?

    Learn the differences between the types of business organizations so you can determine how to best structure your business for tax and liability limitations.
  10. Managing Wealth

    What New IRS Rules Will Do to Partnerships, LLCs

    The pending IRS rule changes for partnerships and LLCs could drastically curtail the way assets within them are valued and taxed. Here's why.
  1. What's the difference between limited liability partnership and general partnership?

    Learn the differences between general partnerships and limited liability partnerships; each type has unique traits, benefits ... Read Answer >>
  2. What are Schedule K-1 documents used for?

    The Schedule K-1 is a tax document issued for an investment in partnership interests. The purpose of the Schedule K-1 is ... Read Answer >>
  3. What's the difference between general, limited and joined venture partnerships?

    Read about some of the important differences between general partnerships, limited partnerships and joint venture arrangements ... Read Answer >>
  4. Which terms should be included in a partnership agreement?

    Understand what specific terms should be included in a business partnership agreement and how each affects the partners in ... Read Answer >>
  5. Can I buy insurance to reduce unlimited liability in a partnership?

    Find out why it is important to safeguard your general partnership in the even that one member becomes disabled, dismembered ... Read Answer >>
Hot Definitions
  1. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  2. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  3. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  4. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  5. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  6. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
Trading Center