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Form 1065: Partnership Tax Return Guide

Form 1065 (U.S. Return of Partnership Income) is a tax document used to report the profits, losses, deductions, and credits of a business partnership. This comprehensive guide will help you understand filing requirements, deadlines, and common considerations for your partnership tax return.

Overview

A partnership is not subject to income tax at the entity level. Instead, each partner reports their share of the partnership's income or loss on their individual tax return. Form 1065 serves as an information return to the IRS, detailing the partnership's financial status and distribution of profits and losses.

Key Information

Who Must File

  • Domestic partnerships
  • Foreign partnerships with U.S. income
  • Limited liability companies classified as partnerships

Due Dates

  • Calendar year partnerships: March 15
  • Fiscal year partnerships: 15th day of 3rd month after year end
  • Extension available: 6 months (Form 7004)

Filing Requirements

Basic Requirements

  • Complete financial information for tax year
  • Partner information and allocation percentages
  • Income and expense statements
  • Balance sheet details
  • Supporting schedules

Required Schedules

  • Schedule K-1: Partner's Share of Income
  • Schedule L: Balance Sheets
  • Schedule M-1: Reconciliation of Income
  • Schedule M-2: Analysis of Partners' Capital

Partnership Tax Calculator

Common Mistakes to Avoid

Filing Errors

  • Missing or incomplete Schedule K-1s
  • Incorrect tax basis calculations
  • Inconsistent partner allocations
  • Late filing without extension

Documentation Issues

  • Insufficient record keeping
  • Missing partnership agreement updates
  • Improper expense categorization
  • Incomplete basis tracking

Form 1065 Section Guide

Income Section (Lines 1-11)

Details all sources of partnership income including:

  • Gross receipts or sales
  • Cost of goods sold
  • Gross profit
  • Ordinary income from other partnerships
  • Interest and dividend income

Deductions Section (Lines 12-21)

Covers all allowable business deductions:

  • Salaries and wages
  • Repairs and maintenance
  • Bad debts
  • Rent
  • Taxes and licenses
  • Interest expenses

Tax and Payment Section (Lines 22-30)

Final calculations and payment information:

  • Total income/loss calculation
  • Tax payments and credits
  • Balance due or overpayment
  • Penalties and interest

Additional Resources

IRS Publications

  • Publication 541: Partnerships
  • Instructions for Form 1065
  • Publication 535: Business Expenses

Related Forms

  • Form 7004: Extension Request
  • Schedule K-1: Partner's Share
  • Form 1040: Individual Return
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