What Is Form 1065: U.S. Return of Partnership Income?
Form 1065: U.S. Return of Partnership Income is a tax document issued by the Internal Revenue Service (IRS) used to declare the profits, losses, deductions, and credits of a business partnership. In addition to Form 1065, partnerships must also submit Schedule K-1, a document prepared for each partner.
Form 1065 provides the IRS with a snapshot of a company's financial status for the year. The partners must report and pay taxes on their shares of income from the partnership on their individual tax returns and must pay income tax on their earnings regardless of whether earnings were distributed.
- IRS Form 1065 is used to declare profits, losses, deductions, and credits of a business partnership for tax filing purposes.
- Form 1065 is filed by domestic partnerships, foreign partnerships with income in the U.S., and nonprofit religious organizations.
- Partnerships must also submit a completed Schedule K-1 for each relevant partner.
Who Must File Form 1065?
All partnerships must file Form 1065: U.S. Return of Partnership Income. This includes a general partnership, a limited partnership, or a limited liability corporation (LLC) classified as a domestic partnership and headquartered in the U.S. The IRS defines a partnership as two or more people carrying a trade or business together.
Partnerships and LLCs are pass-through entities, where profits and losses pass through directly to the partners or LLC members. Individual partners report and pay taxes on their share of the business income on their personal tax returns using Schedule K-1 and then file this form with their personal tax returns, IRS Form 1040. The partnership or LLC then files a single IRS Form 1065, but the business does not pay the income tax.
Foreign partnerships with income in the U.S. must also file Form 1065, however, foreign partnerships earning less than $20,000 in the country or partnerships that receive less than 1% of their income in the U.S. may not have to file.
Nonprofit religious organizations classified as 501(d), also file this form. They must show that profits were given to their members as dividends, regardless of whether the dividends were distributed.
How to File Form 1065
A domestic partnership commonly files Form 1065: U.S. Return of Partnership Income by the 15th day of the third month following the date its tax year ended, usually by March 15th of each year. Businesses commonly submit through online tax filing services or by mail.
Form 1065 requires partnerships to gather important year-end financial statements, including a profit and loss statement that shows net income and revenues, deductible expenses, and a balance sheet for the beginning and end of the year.
The form must include the Employer Identification Number (EIN), or Tax ID, the number of partners in the business, and start dates for the inception of the business. Form 1065 also requires information about the partners and their stake in the company by the percentage of ownership.
Before completing Form 1065, filers will find the information required from the following:
- Form 4562: Depreciation and Amortization
- Form 1125-A: Cost of Goods Sold
- Form 4797: Sale of Business Property
- Copies of any Form 1099 issued by the partnership
- 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
Farming partnerships need a copy of Form 1040 individual tax return as well.
Where to Find Form 1065
All the pages of Form 1065 are available on the IRS website:
When to File Form 1065
For 2022 returns, Form 1065 must be filed by March 15, 2023, unless the business files for a 6-month extension using Form 7004, moving the deadline to September 15th.
What Is the Penalty for Failing to File Form 1065?
A late filing penalty is assessed against the partnership if the partnership fails to file Form 1065: U.S. Return of Partnership Income, by the due date, including the extension if requested. For returns due between 1/1/21 and 12/31/22, the penalty is $210 per applicable partner. That number increases to $220 per partner for returns due after 1/1/23.
Do I Need to File a 1065 If My Partnership Did Not Have Income?
Every domestic partnership must file Form 1065 unless it does not receive income or does not incur any expenditures treated as deductions or credits for federal income tax purposes.
What Is the Difference Between a K-1 and Form 1065?
A K-1 document is prepared for each partner, shareholder, or beneficiary. A partnership then files Form 1065, the partnership tax return that contains the activity found on each partner's K-1.
The Bottom Line
Form 1065: U.S. Return of Partnership Income is a tax document issued by the IRS used to declare the profits, losses, deductions, and credits of a business partnership. In addition to Form 1065, partnerships must also submit a Schedule K-1 prepared for each partner. Form 1065 is due to the IRS by the 15th day of the third month following the date the tax year ended for the business. For business activity in 2022, the due date is March 15, 2023.