My husband bought and sold this one stock during 2018 from his small stock portfolio, just received a Schedule K-1 (Form 1065) today. Never have one before. It has instructions but I don’t understand them. I googled the subject, still confused and still not sure how to report it on my tax return (if we are supposed to). We use Turbo Tax since our return is quite simple.
Various numbers are reported on this form, Loss, Interest Income, Dividends etc etc. According to IRS site, Schedule K-1 information may have to go on Schedule E or D?
Can someone familiar with this schedule give me some directions as to what to do?
Turbo Tax will walk you through it (at least the desktop version will – don’t know about the online version). It asks you to check which boxes have entries on the K-1 and it transfers them to the appropriate place on your 1040.
It’s unusual that you would get a K-1 from a stock you bought and sold on the market. K-1s are reports you get from pass-through entities – partnerships, S corporations, certain kinds of trusts. There are a few publicly traded partnerships that would issue K-1s. Is it one of those?
The K-1 should come with line-by-line instructions telling you where in your tax return or schedules you should put the information in each box. Turbo Tax can handle that well, but you may have to upgrade to one of the premium editions to do it.
You will probably need to put the basic income or loss on line 17 of the new Schedule 1, and also on a Schedule E. (Sorry!) If it’s a loss, you will have to determine if you can take the loss notwithstanding passive loss limitations. (The K-1 may give you a clue, like saying “non-passive loss.”) If there is capital gain or loss involved, say hello to Schedule 1 line 13 and Schedule D. (Sorry again!)
If you do go with Turbo Tax, you will probably find that your tax return has bloomed into any number of meaningless additional schedules with bits of information from the K-1 on them that don’t actually mean anything for your taxes. But sitting here, without knowing anything about your situation or what’s on the K-1, I can’t tell you which things it’s safe to ignore.
I initially read through the package and started to panic, my bad, I have just reviewed the entire thing, and yes,it has instructions on of the back pages (which I missed lol), it does have the form # and schedules listed, or See Partner’s instruction.
I am going to let Turbo Tax walk me through it. I do have the premier version.
Yes, this K-1 is reporting your husband’s pro-rata share of the income generated by a partnership, as reported on the partnership’s own tax return (their form 1065). TurboTax will ask about this in the “Business Items” section of the income interview. Everything you will need should be right there on the K-1…
Yes, there are several (many?) stocks that trade like stocks but generate a K-1 at tax time due to their organizational structure. I guess they are partnerships, or Master Limited Partnerships (MLP). And yes, it is a PIA. I got stuck with them a couple of these - in my IRA no less, where it typically wouldn’t even matter. I sold them just to avoid the hassle of a K-1. KKR changed their organization so they will no longer generate a K-1, so I kept that stock.There was one year when I did my taxes and I included a “distribution” with my dividends and filed my taxes. Then I got the K-1 after filing my taxes (they often come out late, which increases the PIA factor) and I just ignored it. Never heard boo from the IRS.
Most oil and gas pipeline companies operate as a MLP. People own them for the income they generate. But some of the income is return of partnership income and not a dividend. Also it can be a return of capital involved as well.
If the K-1 is available on taxpackagesupport.com or partnerdatalink.com (these are websites maintained by the big accounting firms that do the tax returns), there will be a file you can download to import the K-1 data directly into TurboTax.
The issue with reporting income from a K1 is that Turbo Tax requires you to upgrade to their Premier package, obviously for a fee. That is probably why you cannot see where to enter it in Turbo Tax. As soon as you upgrade to Premier it is right there as a line item in the Income section and they walk you through it
I have used the Premier version since Turbotax introduced it a couple of years ago, I have one old building for years that is a rental, been doing schedule E, the Deluxe version can handle it, but I take the easy way out and spend a little more for the Premier. I am stupid when it comes to any computer stuff…
I read somewhere that Schedule K-1 is supposed to be sent out by March 15, but I just got it yesterday (April 3), luckily I haven’t filed my tax yet.
I used Premier once. I disliked it. It may be useful if I have more complex business income. With the simple K-1 I get, it was more nuisance than help.
It’s likely a PTP (publicly traded partnership). It’s not necessarily as simple as reporting them in the correct line. For instance, if there is a loss, PTPs have different rules from most passive losses - they can only be offset against income from the same PTP (or when you dispose of the PTP). Also when you sell a PTP you have to adjust the cost basis to reflect activity while you held the PTP - income, losses, distributions - there is a page in the K1 that shows the adjustments you should make to the basis when you have sold some.
Also they are often multi state and you need to find the page that lists the income by State and find your state and report that.
I personally avoid them like the plague. I’ve seen enough clients have to pay taxes on large amounts of debt forgiveness reported as income on the PTP to be quite wary of them. (Not investment advice - I just think they’re a huge PITA)
When an IRA holds a PTP there are actually times when you may have to report income. It’s to do with unrelated business income that may be reported on the K1. I’ve actually never seen one like that in an IRA but I know they’re out there.
@allyphoe - thanks … you’re less clueless than I … while I muddle through TT & search the internet for answers … can you share which tax software readily imports K-1 information?