Partnership tax filings are pushing 4 million per year. They are the fastest-growing form of business entity. Approximately 70% of partnerships are limited liability companies, and 50% are real estate entities.
Partnerships do not pay tax. They instead pass their income and losses through to their owners, who are called partners or members. The partnership tax return, IRS Form 1065, is simply an information-reporting document.
Partners receive a Schedule K-1 that reports their share of entity income or loss and reports other information that the partner may need to properly report his or her share of the partnership’s income.
Over the years, the volume of information reported on a K-1 form has dramatically increased. What used to be shown on lines on the form has now expanded to include boxes. Boxes can convey more information because the number in the box may be accompanied by a lettered code that identifies what it is.