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Form 1065, U.S. Partnership Return of Income,
is filed for partnerships. This is called an information return
instead of a tax return because the amount of tax due is not figured on
the return. It shows the ordinary income or loss of the
partnership. The amounts reported on Schedule K are apportioned
among the partners according to the partnership agreement. Each
partner's share is shown on a K-1. There will be a K-1 issued for
each partner. The partner will report the amounts from the K-1 on
his or her individual income tax return (Form 1040). The resulting
ordinary income or loss is apportioned among the partners. They
will pay tax on their distributive share of the profit (whether or not
it is actually distributed) or deduct their distributive share of the
loss (subject to certain limitations) from their other income.
A partnership is usually required to have the same tax year a the
majority of its partners. Since most partners are on a calendar
year, most partnerships will have a calendar year also. The
partnership return, Form 1065, is due the 15th day of the fourth month
after the close of the tax year. This is April 15th for a calendar
year partnership. The partners tax returns (form 1040) are also
due April 15th. This poses a problem since the partners need information
from the Schedules K-1 before they can complete their Form 1040.
It is better if Form 1065 is completed well in advance of April 15th.
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