Form 1065: Partnership Income Guide and Filing Requirements

Form 1065, the U.S. Return of Partnership Income, is the IRS tax return partnerships use to report business income, gains, losses, deductions, and credits. Partnerships themselves typically do not pay federal income tax; instead, profit or loss passes through to partners, who report their share on individual returns using Schedule K-1.

Key takeaways

• Partnerships file a single Form 1065 and provide each partner a Schedule K-1 showing their share of income, deductions, and credits.
• Due date: the 15th day of the third month after the partnership’s tax year ends (March 15 for calendar-year partnerships).
• Extensions: file Form 7004 to request an automatic extension (usually six months).
• Penalties apply for late filing and are assessed per partner for each month the return is late—check current IRS guidance for the applicable rate.

Who must file

Form 1065 is required for:
* Domestic general partnerships and limited partnerships.
* LLCs classified as partnerships for federal tax purposes.
* Foreign partnerships with U.S. source income (some small foreign partnerships may be exempt if U.S. income is below certain thresholds).
* Certain nonprofit religious organizations classified under 501(d).

Exception: A partnership generally does not need to file if it had neither income nor deductible expenses or credits during the tax year.

What information Form 1065 requires

Partnerships must assemble year-end financial information, including:
* Employer Identification Number (EIN) and business start date.
* Number of partners and each partner’s identifying information and percentage ownership.
* Profit and loss statement (revenues, expenses, net income).
* Balance sheet at the beginning and end of the year (when required).
* Details on credits, deductions, capital accounts, and distributions.

Common supporting forms and schedules that may be needed:
* Schedule K-1 (one for each partner)
* Schedules L, M-1, and M-2 (when applicable)
* Form 4562 (depreciation and amortization)
* Form 1125-A (cost of goods sold)
* Form 4797 (sales of business property)
* Copies of any Forms 1099 issued by the partnership
* Form 8918 (material advisor disclosure), Form 114 (FBAR) and Form 3520 (foreign trust or gift reporting), if applicable
* Farming partnerships may need owner tax-return information

How to file

• File electronically (recommended) or by mail using the IRS address for partnership returns.
• Include a Schedule K-1 for each partner when filing.
• If you cannot file by the due date, submit Form 7004 to request an extension (typically an automatic six-month extension). The extension must be timely filed to be valid.

Penalties for late filing

The IRS imposes penalties when Form 1065 is not filed by the due date (including extensions). Penalties are generally calculated per partner for each month or fraction of a month the return is late. Because penalty amounts change, consult current IRS instructions for the exact rate.

Common questions

What’s the difference between Form 1065 and Schedule K-1?
* Form 1065 is the partnership’s tax return summarizing overall activity. Schedule K-1 reports each partner’s share of that activity for inclusion on their individual tax return.

Do partnerships that had no income still file?
* Generally, yes—partnerships should file Form 1065. However, if the partnership had no income and no deductible expenses or credits during the year, filing may not be required. Check IRS guidance for your situation.

Conclusion

Form 1065 is essential for reporting partnership tax activity and allocating income or loss to partners through Schedule K-1. Partnerships should gather complete financial records, meet filing deadlines (or timely request extensions), and verify any additional reporting requirements to avoid penalties.

Sources: IRS Instructions for Form 1065 and Form 7004.